Fitter distant shores, better export hopes

The 20-country Eurozone has slipped into a mild recession. But the broader EU has avoided the technical definition by an uptick in economic output in January-March. The US appears even more insulated by its tight jobs market and strong consumer spending. China, too, has delivered better-than-expected growth in the first quarter of 2023. IMF’s latest baseline projection is that world economic growth will dip from 3.4% in 2022 to 2.8% in 2023, before climbing to 3% in 2024. Advanced economies are expected to grow half as fast as last year with consumption being squeezed by higher cost of credit and inflation. IMF sees global inflation easing from 8.7% in 2022 to 7% in 2023. But most countries are unlikely to reach their target rates before 2025.

Against this backdrop, India has set itself a target of $2 trillion in goods and services exports by 2030, which requires annual growth of over 14% in the next seven years. This figure is considerably higher than the current nominal world GDP growth projection of 9.8%, a number that will decline as inflation stabilises. It is also a big jump over India’s export performance over the previous nine years, when growth was less than 6% against an official target of over 11%.

Structural changes in the world economy, as well as within India, could bring the new set of export targets within reach. India has positioned itself to gain from a ‘reshoring’ trend of companies trying to source everything from clothes to computer chips closer to home. It is offering itself as an alternative manufacturing base to China in a growing list of industries through investment incentives. Public investment in infrastructure and logistics could facilitate manufacturing exports on a broader level than direct subsidies that are being contested in WTO. Sharper focus on early harvest bilateral agreements with leading trade partners upends the questionable gains of joining regional trade blocs. Finally, India has built enviable digital infrastructure to set itself up as a key exporter in the virtual economy.