What drove India's exports to record $400 billion?

India’s annual merchandise exports have hit $400 billion for the first time, achieving the target set by the government 9 days ahead of schedule. The milestone comes even as Commerce and Industry Minister Piyush Goyal warned that the Russia-Ukraine war could lead to some disruption in trade. 

The government is confident of clocking $410 billion of exports by March 31, as India has been shipping out goods worth more than $1 billion a day.

Prime minister Narendra Modi was quick to hail the exporters. He praised the farmers, weavers, MSMEs, manufacturers and others for the success.

The $410 billion figure would be far higher than the previous record of $330 billion achieved in 2018-19 and 41% higher than the previous financial year, when India exported goods worth $291 billion. 

Goyal said that to achieve the target, a detailed strategy was in place, including specific country-wise, product-wise and export promotion council-wise targets, monitoring and course correction.

He said that higher engineering exports, apparel and garment export, indicate that the misconception of India being a major exporter of primary commodities is gradually changing. India is now exporting more and more value-added and high-end products, he added. 

Engineering goods, petroleum products, gems and jewellery, chemicals and ready-made garments of all textiles were the top five commodities exported from India.

Exports of engineering goods rose 32% in the first 11 months of this fiscal compared to the last financial year. It remained the biggest export item. Within this category, top exports were iron and steel, aluminium and aluminium products, electric machinery and motor vehicles. 

Exports of petroleum showed the sharpest jump of 114%, driven by a rise in crude oil prices. 

Meanwhile, agriculture exports hit a record, driven by commodities such as rice, marine products, wheat, spices and sugar, among others.

Despite the record export figure, India’s merchandise exports to GDP ratio has been on a declining trend. It stood at 10.94% in FY21, falling from 11.07% the previous year and 12.2% in FY19.

While this ratio will show an improvement this year, it will still be nowhere near the record seen more than a decade ago.

While the surging trend in exports is praiseworthy, the momentum is likely to sustain with proactive measures like the signing of Free Trade Agreements and expansion of the flagship export promotion scheme RoDTEP to sectors like iron and steel and pharma.