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Informist, Monday, Jul 22, 2024

 

* Must generate local resources for invest, growth priority

* See mini, major geopolitical conflicts in coming decades

* Geopolitical conflicts 2024 may lead to supply disruption

* Geopolitical tension 2024 may raise commodity prices
* Geopolitical row 2024 may stall monetary policy easing
* Geopolitical tension 2024 may revive price pressures

* Geopolitical tension 2024 may influence RBI policy stance
* Global trade outlook for 2024 remains positive
* Geopolitics puts ceiling on external deficit, financing
* Geopolitical fragmentation may hit India external sector
* Geopolitical conflicts to influence capital flows

* Global uncertainties pose risk to export demand

* Global uncertainties may pose risk to import costs

* Free trade pacts to better India exports' global mkt share

* Econ ties with China continue to be extremely complex

* May not be prudent to think we can take over China in mfg

* Geopolitical issues pose risks to India external sector

* Policy uncertainty poses risk to India external sector

* High protectionism may weigh on trade recovery going ahead

* Trade policy changes by partners can affect India exports

* Global demand for India services sector exports here to stay

* Need to improve export competitiveness in many product areas

* Stronger regional trade ties to curb global demand shocks

* Growing exports to be tougher on geopolitical issues
* Growing exports to be tougher on protectionism

* Outlook for remittance in India for 2024 is strong

* Shocks in commodity prices may impact India's trade gap

* Trade gap to fall more as output linked-sops increases

* Becoming global mfg base to lower India trade gap

* Easing trade environment to aid India exports 2024, 2025

* Global commodity price concern pose risk to services demand

* Trade policies must weigh security issues with econ impact

* India has huge potential to become large agri exporter

 

NEW DELHI - Global demand for India's services exports is here to stay even though a weakening of global trade had weighed on such exports during 2023-24 (Apr-Mar), according to the Economic Survey 2023-24. "While merchandise exports are likely to increase with improving growth prospects in AEs (advanced economies), services exports are also likely to witness a further uptick," the survey, tabled in Parliament today by Finance Minister Nirmala Sitharaman, said. 

 

However, in the short run, the tentative global economic outlook and commodity price uncertainties present a serious challenge to input costs and demand for services exports, the report said. 

 

Sustaining positive demand trends and effectively managing rising costs and competitive pressures will be critical for the services sector's continued growth and resilience in the upcoming year, according to the report. "The post-pandemic dynamism shown by the economy and the services sector, in particular, should help transcend these uncertainties and challenges," it said. 

 

Talking about India's overall exports, the report said that the recently signed Free Trade Agreements are expected to increase the global market share of the country’s exports. "India needs to focus on improving its competitiveness in many product areas. For example, India has tremendous potential in becoming a large global exporter in agricultural commodities," it said.

 

Further, fostering stronger regional trade ties and adding more markets for Indian goods will help mitigate global demand fluctuations. However, growing India's exports of goods and services will be a stiffer challenge than before as global economic growth is likely to be buffeted by geopolitical tensions and protectionism, the report said. The adverse trade environment seen in 2023 is expected to ease somewhat this year and next, and in turn, boost goods trade in 2024 and 2025, it said.

 

"Product safety and quality consciousness in the private sector and policy stability in the public sector are obvious starting points to turn the challenge into an opportunity," it said.

 

The report cautioned that changes in trade policies by major trading partners or geopolitical developments can affect India's export opportunities and market access. It further said that India's trade policies need to be a mix that straddles security concerns with economic considerations.

 

The report highlighted that the dynamics of India-China economic relations continue to be extremely complex and intertwined, and it may not be the most prudent approach to think that India can take up the slack from China vacating certain spaces in manufacturing. 

 

The report noted that a moderation in merchandise imports and rising services exports have improved India’s current account deficit. "Amongst services exports, software/IT services have driven an increase in overall exports; at the same time, business services exports have also been rising, supported by India emerging as a hub for Global Capability Centres," it said.

 

In 2023-24, India's current account deficit was $23.2 bln, 0.7% of GDP, sharply down from $67.0 bln, 2% of GDP, in 2022-23. India's current account was in a surplus of $5.7 bln in Jan-Mar, recovering from a deficit of $1.3 bln recorded a year ago.

 

In the coming years, India's trade deficit is expected to decline further as the production-linked incentive scheme is expanded and India creates a globally competitive manufacturing base in several product categories, the report said. However, increased fragmentation along geopolitical lines and renewed thrust on protectionism may distort merchandise trade growth, impacting India's external sector, it said. Rising protectionism is a risk that could undermine trade recovery in 2024 and 2025, it said.

 

Fluctuations in commodity prices, especially for critical imports like oil, metals, and agricultural products, can impact India's trade balance. However, the outlook for remittance in India for 2024 is strong, with the expectation that remittance growth will moderate to 3.7%, taking remittance levels to $124 bln in 2024, as per the report.

 

While global trade growth slowed in 2023, the outlook for the same for 2024 remains positive, the report said. "Global trade moderated due to rising geopolitical tensions, cross-border restrictions and slower growth in advanced economies. The muted trade growth occurred despite the easing of supply chain pressures," it said.

 

The report mentioned that the chances of geopolitical disturbances and conflicts have only gone up in recent times, and the risks to the performance of India's external sector are on the downside due to the persistence of current geopolitical tensions and policy uncertainty.

 

While minor and significant geopolitical conflicts are likely in the coming decades, any escalation in the same in 2024 may lead to supply dislocations and higher commodity prices. It can also influence the Reserve Bank of India’s monetary policy stance, revive inflationary pressures and stall monetary policy easing with potential repercussions for capital flows, the report said. 

 

"Global uncertainties raise question marks on export demand and the domestic cost of production due to dependence on critical imported inputs like coal, petroleum, steel and machinery," it said. 

 

End

US$1 = 83.66 rupees

 

Reported by Pratiksha

Edited by Vandana Hingorani

 

 

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