Steady growth of exports — merchandise and services — in the first nine months of FY 25 to touch $ 602.6 billion indicates India’s resilience in the midst of global headwinds of economic and trade policy uncertainties, said the Economic Survey 2024-2025.

However, challenges remained due to elevated geo-political risks, high freight costs, and imposition of climate change related non tariff measures by the European Union in the form of the Carbon Border Adjustment Mechanism (CBAM) and European Union Deforestation Regulation (EUDR).

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The CBAM and EUDR were expected to affect $9.5 billion of India’s exports to the EU, which amounted to 9% of India’s exports to the world or 12.9% of India’s exports to the EU.

Further, there was an indication of preference for bilateral trade between countries with similar geopolitical stances, i.e., friend-shoring and nearshoring. There was also an increasing concentration of global trade to favour significant trade relationships.

“The evolving global trade dynamics, marked by gradual shifts towards greater protectionism, require assessing the situation and developing a forward-looking strategic trade road map. By adapting to these trends and leveraging its strengths, India can accelerate its growth and enhance its presence in global trade.”

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Proactive approach

To strengthen its competitiveness and further integrate into global supply chains, India should focus on reducing trade related costs and enhancing export facilitation to create a more vibrant export sector. This proactive approach will help India continue to thrive in an ever-changing global market, the Survey added.

Total imports during April-December 2024 reached $682.2 billion, registering a YoY growth of 6.9%. A more significant increase in overall imports compared to exports led to a rise in the overall trade deficit from $69.7 billion during April-December 2023 to $79.5 billion in the corresponding period of FY25.

Regarding short, medium and long-term measures, the Survey said that the evolving trade stance of a few major economies could affect key Indian export sectors such as chemicals, machinery, textiles, and electronics. It was essential to diversify the export markets, focus on increasing the market share, and position itself as a strategic partner in high-value sectors like biotechnology and semiconductors.

“Strategic technology partnerships would provide opportunities for enhanced cooperation in key areas such as space, semiconductors, quantum technologies and advanced telecommunications.”

The CBAM and EUDR posed twin challenges for countries such as India. There was a need to achieve higher levels of economic development and deal with climate change mitigation and adaptation, the Survey opined.

Farmers ride on a cart loaded with grass in a village on the outskirts of Jalandhar, Punjab on January 31, 2023. According the Economic Survey, the performance of the agriculture and allied sector had been buoyant over the past several years due to the measures taken by Centre to augment crop and livestock productivity
| Photo Credit: AFP

The Economic Survey noted that the agriculture sector in the country grew by 3% in 2021-22, lower than an average growth of 4.6% in the last six years. In 2020-21, the growth in this sector was 3.3%. In 2016-17, the growth rate was 6.8%, followed by 6.6% in 2017-18, 2.1% in 2018-19 and 5.5% in 2019-20. The Survey said private investment in agriculture increased to 9.3% in 2020-21. The public investment, however, remained at 4.3%, the same as 2019-20. In 2011-12, the public investment in agriculture was 5.4%.

The survey, tabled in both the Houses of Parliament on Tuesday, said the performance of the agriculture and allied sector had been buoyant over the past several years due to the measures taken by Centre to augment crop and livestock productivity, ensure certainty of returns to the farmers through price support, promote crop diversification, improve market infrastructure through the impetus provided for the setting up of farmer-producer organisations and promotion of investment in infrastructure facilities through the Agriculture Infrastructure Fund. The survey also hailed schemes such as the Pradhan Mantri Kisan Samman Nidhi for helping farmers.

Climatic issues

The survey said the country rapidly emerged as the net exporter of agricultural products. “In 2020-21, exports of agriculture and allied products from India grew by 18% over the previous year. During 2021-22, agricultural exports reached an all-time high of US$ 50.2 billion,” the survey said.

The survey said there was a sustained increase in the foodgrain production in the country, but expressed concern at the climatic issues that impacted agriculture. “As per Fourth Advance Estimates for 2021-22, the production of food grains and oil seeds has been increasing Year-on-Year. Production of pulses have also been notably higher than the average of 23.8 million tonnes in the last five years,” the survey said adding that changing climate had been impacting agriculture adversely.

“The year 2022 witnessed an early heat wave during the wheat-harvesting season, adversely affecting its production. The year experienced a decline in the sown area for paddy cultivation too in the Kharif season due to delayed monsoons and deficient rainfall,” it noted.

The survey concluded that the performance of the agriculture sector remained critical to the growth and employment in the country. “Investment in the sector must be encouraged through an affordable, timely and inclusive approach to credit delivery,” it said. A focus on the horticulture sector and the thrust towards allied activities had diversified farmers’ income making them more resilient to weather shocks, the survey pointed out.

“A greater focus on the development of the food processing sector can reduce wastage/ loss and increase the length of storage, ensuring better prices for the farmers,” it added.