The second wave of the COVID-19 epidemic slowed India's economic recovery, which had appeared to be on pace until the start of this year after a remarkable year. Dwindling demand for sectors such as vehicles, luxury goods, and real estate has had a severe impact on India's GDP estimations owing to the pandemic-induced financial crisis.
In addition, because consumption and investment have been the primary drivers of growth in recent years in India, the country's economic revival will rely on demand generation through direct government fiscal intervention as well as government-assisted relief and support in the regulatory, fiscal, and monetary policy areas.
The global trading environment, on the other hand, is highly promising. Developed countries have boosted immunisation rates, which has resulted in fewer infections, hospitalizations, and Covid-related fatalities. They are loosening economic constraints at a faster rate than anticipated. The United States is on the verge of a boom, while China has already had a solid economic revival. The majority of East Asian and Western European countries have experienced a rapid economic recovery. As a result, global demand for consumer products, intermediates, and commodities is rapidly increasing, as seen by their rising prices. The majority of exporters are swamped with orders.
Freight prices have increased across the board for commodities transported by road, air, and sea. Transportation service demand-supply mismatches and container shortages exist. Containers take over a week to arrive, while shipping space takes over two weeks. Exporters and logistic service providers, on the other hand, have learned to plan ahead of time and reduce the risk of disruption.
The majority of exporters have been able to bargain with customers and obtain better pricing that accounts for rising logistics costs. Exporters of low-value commodities, on the other hand, are finding that customers in other countries are increasingly preferring geographically closer alternative sources with greater pricing and cheaper transit costs.
Exports can be facilitated by the government rapidly releasing lawful dues owed to exporters. The government removed the option of filing applications under the Merchandise Shipments from India Scheme (MEIS) for exports in 2019-20 and 2020-21 last year. MEIS applications for exports in 2019-20 were authorised to be filed earlier this month by the government.
For growth, reforms are necessary. While many of the pillars that have supported India's success remain in place, such as a young population, a large and diverse economy, a thriving entrepreneurial base, political and geopolitical stability, and strong policy frameworks, the country's economic recovery will be dependent on continued regulatory and fiscal reforms.
Policy interventions and fiscal mechanisms that boost consumption and demand while also providing jobs and economic growth, such as public-private investment and more global integration, will aid India's recovery and improve its economic competitiveness.
The World Bank recently approved a $500 million programme to assist India's small and medium-sized businesses. The move aims to give cash to viable small businesses affected by COVID-19 across the country, a total of 5,55,000 MSMEs. Such aid would help our country return to pre-crisis levels of production and employment, while also laying the framework for longer-term productivity-driven growth and job creation in the MSME sector.
After being severely damaged by the COVID-19 epidemic this year, the country's exports are expected to rebound in 2021 as global economic activity and demand pick up. However, the uncertain global trade climate caused by rising protectionism, which hurt exports in 2019, may hinder the country's outbound shipments in the next months.
Outbound exports are expected to begin growing at a healthy rate in April 2021, boosted by improved demand in both developed and developing countries, as well as effective COVID-19 vaccines that could help the world get back on track.
In 2020, the World Trade Organization (WTO) predicts a 9.2% drop in global merchandise trade volume, followed by a 7.2 per cent increase in 2021. These projections are subject to a great deal of uncertainty because they are based on a pandemic scenario and government measures.
Since 2011-12, India's exports have been hovering around USD 300 billion. In the 2019-20 fiscal year, it declined by almost 5% to USD 315 billion. Export promotion can help a country grow to manufacture, create jobs, and earn more foreign currency.
Pharma was one of the sectors that saw significant growth, as India served as the world's "pharmacy" in the fight against the COVID-19 epidemic. In addition to other life-saving medications, Indian pharmaceutical companies assisted in meeting the demand for paracetamol and hydroxychloroquine. Drug and pharma exports increased to US$ 2.04 billion in May, up from US$ 1.6 billion the previous month, according to the Pharmaceutical Export Promotion Council and the Ministry of Commerce.
Despite having a large local market, India's exports remain a significant development engine. As a result, appropriate steps must be taken to expand exports even more following the pandemic.
The Indian government has made several efforts to aid boost export growth throughout the years. For example, they simplified the existing FDI policy to make doing business easier and thereby attract more FDI. It also ratified the Trade Facilitation Agreement of the World Trade Organization (WTO). Over the last few years, such measures have proven to be effective in increasing exports.
There is still more work to be done, particularly in terms of improving India's export readiness to assist it to meet the expectations of the post-COVID world. India's average score on the Export Preparedness Index (EPI) 2020, which assesses the export ecology of Indian states and union territories, is 39 out of 100.
Lack of export infrastructure, fundamental trade assistance, and access to financial institutions and credit are some of the obstacles affecting export preparedness in numerous Indian states, according to the report. As a result, there is a lot of room to act on these challenges and help India grow.
The demand for high-quality products and innovative solutions will only increase as the world becomes more globalised. A greater emphasis on R&D will aid in moving up the value chain and delivering more premium, cutting-edge products and services that will improve India's and the world's quality of life.
Exports have the potential to be the basis that propels India's rise to economic powerhouse status. Indian exports are poised to rise steadily in the post-COVID world with the correct investments in regional infrastructure and a supportive policy environment.
Written By: Abhivyakti Mishra (firstname.lastname@example.org)
Edited By: Priyanshi Kapoor