Merchandise Exports Scaling New Heights

The Merchandise Industry of India
India's share in global merchandise exports has rapidly increased to a record-high value. The country has become a focal point for the fashion industry, reflecting a rapidly growing middle-class population and an increasingly powerful manufacturing sector. These factors, coupled with robust economic fundamentals and advancing technology, have enabled India to become the top merchandise exporter globally. The country's merchandise exports hit a record-high value of US$ 40.38 billion in March 2022, increasing 14.53% year-on-year from US$ 35.26 billion.

Merchandise Exports from India (US$ Billion)

Source: Ministry of Commerce and Industry (India merchandise exports and imports data)

India is projected to record the fastest growth among its counterparts. It's economic growth is expected to be the fastest in the world at around 8-8.5% in 2022-23, with the country set to evolve from a strong sourcing hub to a large consumer market beyond the western world.

Expected Economic Growth (India Vs. Other Countries)

Source: World Bank

India's Merchandise Exports
India's annual merchandise exports surged 43.18% year-on-year from US$ 291.81 billion to a record-high value of US$ 417.81 billion in FY 2021-22. Growth in exports could be attributed to a 4.28% increase in the value of non-petroleum exports to US$ 33.00 billion in March 2022 compared to March 2021. The top 10 essential commodity groups – engineering goods, petroleum products, gems and jewellery, organic and inorganic chemicals, pharmaceuticals and drugs, electronic products, ready-made garments (RMG) of all textiles, cotton yarn, plastic, and linoleum and rice – accounted for 81% of total exports in 2021-22.   

Source: Ministry of Commerce and Industry

Make in India Movement
The Make in India initiative, launched in 2014, has played a crucial role in facilitating investments, promoting innovation, driving the overall development, creating a state-of-the-art infrastructure, and making India a major hub for manufacturing, innovation, and design. Under the Make in India initiative, the government has been implementing various schemes to promote the development of world-class infrastructure facilities for manufacturing units in the country.

The Foreign Direct Investment (FDI) policy under the Make in India initiative is also expected to drive growth and promote domestic exports. As per this policy, the central government approved 100% FDI under an automatic route in many sectors to boost exports. Moreover, the government implemented the Production Linked Incentive (PLI) scheme to strengthen the textile industry. The PLI scheme for the textile industry, announced during the Union Budget 2021-22, aims to maximize the country's domestic production and create over new job opportunities within the sector and also in the supporting industries. The Make in India initiative is also expected to empower women, boosting women's contribution to the economy.

The Make in India initiative has made cross-border trading hassle-free, as described below:

• The Central Board of Excise and Customs (CBEC) implemented the Indian Customs Single Window Project (ICSWP) to promote and facilitate trading; the ICSWP enables traders to easily lodge their custom-related clearance documents. The government also launched PCS1x, which aims to combine 27 maritime participants on one platform.
• Mandatory documents needed for customs purposes and for facilitating trade have been decreased to three.
• A web-based platform, e-Sanchit, was launched to allow traders to report all documents digitally.
• A computerized risk management system was implemented to enhance transparency and decrease custom inspections.

Government Initiatives

The Merchandise Exports from India Scheme (MEIS), launched in 2015, is considered a game-changer for the Indian merchandise industry. The scheme is mainly designed to reward exporters for offsetting infrastructural inadequacies and associated expenses. Furthermore, the Duty Credit Scrips and items imported or domestically procured against them will be freely transferable. The following are some uses of the Duty Credit Scripts:

• Essential customs duty payments and extra custom duty as specified in the Customs Tariff Act of 1975 for importing inputs like capital goods
• Payments of exercise duty on domestic procurement of goods

The MEIS primarily aims to expand the country's exports of goods and products. Despite the onset of the COVID-19 pandemic, India's merchandise exports crossed the US$ 400 billion mark for the first time during 2021-22. This can be considered a crucial milestone in India's journey to becoming self-reliant. Until March 2022, Taiwan, Korea, Australia, Bangladesh, Poland, Brazil, Belgium, Saudi Arabia, Indonesia, Japan, Italy, Turkey, the US, Canada, South Africa, Nigeria, Egypt, the Netherlands, and Mexico were the only countries to achieve export-related targets; countries such as China, France, Israel, Nepal, Sri Lanka, and Vietnam achieved 90-100% of their combined export targets. The government of India has been putting in considerable efforts to deliver an investor-friendly environment and infrastructure and provide the necessary infrastructure by implementing export-oriented policies.

Since 2014, the government of India has taken several steps to increase the country's exports, including:

• Launching the MEIS and Services Exports from India Scheme (SEIS) to improve the export of goods and services, respectively (the Duty Credit Scrips announced under these schemes were made completely transferable)
• Conducting a mid-term review of the Foreign Trade Policy (FTP) in 2017 and implementing corrective actions
• Extending the FTP by a year, up to March 2022 (due to the pandemic)
• Creating a new logistics division in the commerce ministry for developing the logistics sector
• Launching several schemes to enhance exports

The Road Ahead
Amid the recovery in the global demand after the Covid-19 pandemic, India's merchandise exports have been reviving rapidly in the past few months, supported by the recovery in global demand. External trade recovered sharply during 2021-22. Capital flows remained strong, leading to the rapid growth of foreign exchange reserves. The export revival was also due to robust government initiatives. The merchandise sector of India is expected to rise sharply in the coming years and will be a crucial contributor to India's US$ 5 trillion economy goal. Furthermore, continuous efforts have been made to enhance the country's domestic capacity by developing close collaborations with the industries to unleash India's competitive advantages. The PLI scheme is also expected to play a crucial role in making India a global export powerhouse.