Introduction
India’s nominal gross domestic product (GDP) at current prices is estimated to be at Rs. 232.15 trillion (US$ 3.12 trillion) in FY2021-22. India’s trade and external sector had a significant impact on the GDP growth as well as expansion in per capita income. According to the Ministry of Commerce and Industry, India’s overall exports between April 2021 and December 2021 were estimated at US$ 301.3 billion (a 49.6% YoY increase). Whereas overall imports between April 2021 and December 2021 were estimated at US$ 443.82 billion (a 68% YoY increase).
Capital Inflows
As of January 28, 2022, foreign exchange reserves in India stood at US$ 634.287 billion.
External Sector
Recent developments in the external sector are as follows:
- In March 2022, India extended a US$ 1 billion line of credit to Sri Lanka with the aim to help Sri Lanka acquire essential commodities.
- In January 2022, India extended a US$ 500 million line of credit to Sri Lanka with the aim to help the country meet its fuel purchases.
- In January 2022, Mr. Pravind Kumar Jugnauth, Prime Minister of Mauritius, and Prime Minister of India Mr. Narendra Modi jointly unveil India-assisted projects in Mauritius which included the US$ 527 million line of credit.
- In January 2022, India and the United Kingdom conducted their first round of Free trade agreement negotiations both the countries reflected their shared ambitions to boost trade.
- In November 2021, India and the United States had their 12th Ministerial-level meeting of the India-United States Trade Policy Forum (TPF) both the countries expect a boost in economic relations with the bilateral merchandise trade crossing the US$ 100 billion mark between January- September 2021.
- In October 2021, the Government of Dubai and the Government of Jammu and Kashmir signed a Memorandum of Understanding (MoU) towards the development of the real estate, industrial parks, and super-specialty hospitals worth Rs. 28,400 crores (US$ 3.80 billion).
- In September 2021, India and the US introduced the ‘Climate Action and Finance Mobilisation Dialogue (CAFMD)’ to strengthen bilateral ties and boost climate initiatives and economic development.
- In September 2021, Defence Minister, Mr. Rajnath Singh, announced that India and Australia plan to explore new areas in the fields of artificial intelligence (AI) and unmanned vehicles.
- In September 2021, India and the US signed a project agreement for an air-launched unmanned aerial vehicle.
- In September 2021, the Union Cabinet approved a Memorandum of Understanding (MoU) between the Geological Survey of India (GSI), India, and the Joint Stock Company Rosgeologia, Russia, for collaboration in the field of geoscience.
- In September 2021, India and Germany had discussions to strengthen their cooperation in handling the circular economy, waste management and issues related to climate change.
- In August 2021, the Union Cabinet approved an MoU between the Institute of Professional Accountants of Russia (IPAR) and the Institute of Chartered Accountants of India (ICAI) to strengthen bilateral alliance for advancements in accounting knowledge, professional accountancy training, technical research, professional ethics and professional & intellectual development.
- In July 2021, the Union Cabinet approved a Memorandum on Cooperation (MoC), between the Japan Fair Trade Commission (JFTC) and Competition Commission of India (CCI), to encourage and strengthen alliance in the area of competition law & policy.
- In June 2021, India and Bhutan signed an MoU for developing alliances in the area of the environment.
- In June 2021, the Export-Import Bank of India (Exim Bank) announced that it extended a line of credit (LOC) worth US$ 100 million to the Sri Lankan government to fund solar energy sector-related projects.
- In June 2021, India and Australia announced a collaboration in cyber-enabled critical technologies, emphasizing the need to boost critical information security infrastructure such as 5G telecom networks.
- In May 2021, Shahi Litchi, the season’s first consignment from Bihar was exported to the UK, boosting exports of GI-certified products.
- In May 2021, India and Israel signed a three-year work program (2021-2023) for cooperation in agriculture and to strengthen bilateral alliances.
- In May 2021, India and Oman renewed memoranda of understanding (MoUs) in areas of military and maritime collaboration.
- In May 2021, Alankit Imaginations Ltd. collaborated with Digital Swiss Gold (DSG) to allow users to trade in gold digitally in Switzerland.
Foreign Trade Policy
Recent developments in foreign trade policy are as follows
- In April 2022, India and the EU agreed to launch the EU-India Trade and Technology Council and planned to sign a free trade agreement by next year.
- As of April 2022, India signed 13 Free Trade Agreements (FTAs) with its trading partners including major trade agreements like the India-UAE Comprehensive Partnership Agreement (CEPA) and the India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA).
- In April 2022, the merchandise exports were at US$ 38.19 billion, registering an increase of 24.22% as compared to the same period in the previous year. With the upcoming trade policy 2021-26, the government plans to increase merchandise exports with emphasis on the higher share of MSMEs.
- Foreign trade policy 2021-26 is expected to focus on MSMEs and new export potential. In March 2021, the central government announced plans to establish a new mechanism to increase import screening to protect domestic manufacturers. Details of the new screening process would be available in the foreign trade policy 2021-26, which is expected to commence next month.
- The available data would help domestic manufacturers analyze the market potential of such goods.
- The foreign trade policy 2021-26 is also expected to boost MSMEs and e-commerce exports and identify new sectors to boost domestic export.
- On December 2, 2020, a meeting of the Board of Trade (BOT) was held under the chairmanship of the Commerce and Industry Minister Mr. Piyush Goyal. The focus of the meeting was on the new Foreign Trade Policy (2021-26), and outlining policies and steps to drive domestic production and exports. Mr. Piyush Goyal said, “We look at a single window that can help us improve the ease of doing business. People worldwide should trust that they can come and buy property, get all the required approvals, participate in India's trade and industry, expand the manufacturing side and the network of services.”
- In the mid-term review of Foreign Trade Policy (FTP) 2015–20, the Ministry of Commerce and Industry enhanced the scope of Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS), increased MEIS incentive raised for ready-made garments and made-ups by 2% and raised SEIS incentive by 2% and increased the validity of Duty Credit Scrips from 18 months to 24 months. In April 2020, the Government extended FTP for one more year, up to March 31, 2021.
Road Ahead
India is presently known as one of the most important players in the global economic landscape. Its trade policies, Government reforms, and inherent economic strengths have attributed to its standing as one of the most sought-after destinations for foreign investments in the world. Also, technological, and infrastructural development being carried out across the country augurs well for the trade and economic sector in the years to come.
The Government of India has been working on striking important deals with the Governments of Japan, Australia, and China to increase contribution towards the economic development of the country and growth in the global market.
India has the potential to increase its goods and services export to Australia to US$ 15 billion by 2025 and US$ 35 billion by 2035.
Note: Conversion rate used for February 2022 is Rs. 1 = US$ 0.013
