India’s merchandise export outlook 2024

The year 2024 looks promising for India’s merchandise exports despite geopolitical uncertainty and rising shipping costs from the Red Sea crisis. India’s Commerce Minister Mr. Piyush Goyal expressed confidence that India may manage to close the financial year 2023-24 with the same level of merchandise exports as last year despite exports falling 6.5% during April-November 2023.

The hope of revival in merchandise exports stems from the expectation that the global economy may recover in 2024 after slowing down in 2023, major central banks led by the US Federal Reserve may reduce interest rates in the current year and the US economy may dodge the widely expected recession.

On the domestic front, India is widely expected to conclude negotiation of trade agreement with Oman, UK and European Free Trade Agreement (EFTA) group of countries, which may open market access for Indian exporters to these countries on concessional duty. There is also expectation that the government may expand the scope of the current Production Linked Incentive (PLI) scheme from the existing 14 sectors to more manufacturing sectors to promote Make in India.

In the case of agriculture, government may review the existing export restrictions or ban on onion, sugar, rice and other agro commodities depending on the evolving demand-supply situation in the local market.

Traders may also watch the outcome of India’s negotiations with European Union to minimize the adverse impact of the Carbon Border Adjustment Mechanism (CBAM) on Indian exports. Currently, Indian exporters of steel, fertilizers, cement and other commodities have to comply with the carbon emission disclosure norms of the European Union under the CBAM.

We expect India’s electronics exports to continue its growth in the coming year as well, led by shipment of smartphones. Indian exporters to Australia and UAE may also benefit from the free trade agreement with these countries.

Engineering sectors, which contributes around 25% to the overall merchandise exports, has fallen 1.8% during April-November 2023. Out of 34 sub-sectors in the engineering industry, 16 have witnessed contraction in exports during this period. In future, we may expect uptick in export orders in the engineering sector amidst pickup in global economic recovery.

According to the broking firm SMIFS Limited, India’s chemical sector has a promising outlook as global companies prefer to outsource manufacturing to Indian suppliers because of Indian companies’ proven cost and quality advantage.

According to the first advanced estimate of GDP released on January 5, 2024, India’s overall exports (both goods ad services) is expected to grow 4% in rupee terms in 2023-24, compared to an impressive growth of 23% in the previous year.

On the whole, India’s merchandise exports may recover in 2024 because of pickup in global demand, reversal of tight monetary policy stance by global central banks and favourable domestic policies.

World Trade Organization , Research and Information System for Developing Countries (RIS) , ICRIER , NITI Aayog Official , Department of Science and Technology