India's ambitious goal of achieving $1 trillion in merchandise exports by the financial year 2025-26 (FY26) is facing significant headwinds and may be missed, according to a sobering analysis by the Global Trade Research Initiative (GTRI). The think tank's report highlights a worrying loss of momentum in export shipments, casting doubt on the feasibility of this key economic target.
Slowing Growth Puts Trillion-Dollar Dream in Peril
The report, released on May 13, 2024, paints a concerning picture. While India's merchandise exports saw a modest increase of 0.5% to reach $437.1 billion in the fiscal year 2023-24 (FY24), this growth rate is insufficient to propel the country to the $1 trillion mark within the next two years. To hit the target, exports would need to grow at a staggering compound annual growth rate (CAGR) of 51% over FY24 and FY25, a pace deemed unrealistic by trade experts.
The slowdown is not just a future projection but a present reality. The growth in exports has decelerated sharply from the impressive 14.8% increase recorded in the previous fiscal year (FY23). This loss of steam is attributed to a combination of global and domestic factors, including weak demand in key international markets and competitive pressures.
Sectoral Weaknesses and Rising Imports Widen Trade Gap
GTRI's analysis identifies specific sectors where performance has been particularly weak. Exports of key products like petroleum, jewellery, and chemicals have either stagnated or declined. This sectoral sluggishness undermines the broader export engine. Concurrently, merchandise imports have also dipped by 5.9% to $675.4 billion in FY24, but this decline was not enough to prevent the trade deficit from swelling.
The overall goods trade deficit expanded to $238.3 billion in FY24, up from $212.9 billion in the prior year. This widening gap adds pressure to the country's current account and complicates the overall trade balance picture. The report suggests that without a dramatic and sustained reversal in export trends, the government's target will remain out of reach.
Challenges and the Path Forward
Achieving the $1 trillion goal would require more than just incremental improvements. The GTRI report implies that it demands a fundamental leap in export competitiveness and market diversification. The current global economic environment, marked by geopolitical tensions and slowing growth in advanced economies, presents additional external hurdles.
For policymakers and industry, the findings serve as a critical alert. The report underscores the need for:
- Enhanced support for underperforming export sectors.
- Aggressive pursuit of new free trade agreements to open markets.
- Measures to improve the cost and ease of doing business for exporters.
- Focus on moving up the value chain in traditional export goods.
While India's services exports continue to be a strong performer, the goods export target is a separate and formidable challenge. The GTRI analysis concludes that without immediate and robust corrective actions, the dream of becoming a $1 trillion goods exporter by FY26 is likely to remain unfulfilled, with significant implications for the nation's broader economic ambitions and job creation goals.
