Global growth is forecast to slow from 6.0 per cent in 2021 to 3.2 per cent in 2022 and 2.7 per cent in 2023 according to the International Monetary Fund (IMF).
The global trade volume grew by 4.8 per cent in 2022, on top of an impressive recovery of 9.7 per cent in 2021, as per the World Trade Organisation (WTO) statistics.
The global merchandise trade in value terms rose year-on-year (YoY), by 22.2 per cent in 2021, reversing the deceleration observed in the previous three years.
During the H1 of 2022, the trade-in value terms grew by 32 per cent compared to the corresponding period of 2019.
Merchandise Export
India achieved an all-time high annual merchandise export of US$ 422.0 billion in FY22.
Service Trade
India maintained its dominance in the world services trade in FY22. Despite pandemic induced global restrictions and weak tourism revenues, India’s services exports stood at US$ 254.5 billion in FY22 recording a growth of 23.5 per cent over FY21 and registered a growth of 32.7 per cent in April-September 2022 over the same period of FY22.
FTA
India has so far concluded 13 FTAs and 6 Preferential Trade Agreements (PTAs).
The most recent in the list are the India-UAE Comprehensive Economic Partnership Agreement (CEPA) which was signed on 18 February 2022 and officially entered into force on 1 May 2022 and the India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA), which was signed on 2April 2022 and entered into force on 29 December 2022.
Further, India is presently engaged in FTA negotiations with some of its trading partners, notable among these FTAs are – (i) India-UK FTA, (ii) India-Canada CEPA/ Early Progress Trade Agreement (EPTA), (iii) India-EU FTA.
CAD
India’s external sector has been facing considerable global headwinds reflecting the geopolitical developments.
India’s current account balance (CAB) recorded a deficit of US$ 36.4 billion (4.4 per cent of GDP) in Q2FY23 in contrast to a deficit of US$ 9.7 billion (1.3 per cent of GDP) during the corresponding period of the previous year.
The widening of the current account deficit (CAD) in the second quarter of FY23 was mainly on account of a higher merchandise trade deficit of US$ 83.5 billion and an increase in net investment income outgo.
Net services receipts increased from US$ 51.4 billion in H1FY22 to US$ 65.5 billion in H1FY23, primarily on account of robust computer and business services receipts.
Remittances are the second largest major source of external financing after service export, which contribute to narrowing the CAD and has always been a stable constituent of the BoP.
Capital Account
Foreign investment, consisting of Foreign Direct Investment (FDI) and foreign portfolio investment (FPI), is the largest component of the capital account.
On a BoP basis, the net capital inflows declined to US$ 29.0 billion in H1FY23 from US$ 65.0 billion19 in H1FY22 primarily driven by the FPI outflow of US$ 14.6 billion in Q1FY23.
Net FDI inflows at US$ 20.0 billion in H1FY23 were comparable with US$ 20.3 billion in H1FY22.
In terms of FDI inflow, Singapore was the top investing country with a 37.0 per cent share, followed by Mauritius (12.1 per cent), UAE (11.0 per cent), and the USA (10.0 per cent).
Foreign Reserve
India’s foreign exchange reserves stood at US$ 532.7 billion as of end-September 2022, covering 8.8 months of imports.
