Trends in

Global Trade
JASJEET SINGH
Agenda
 Why Trends Matters?

 Benefits of Diversifying Exports

 Recent Events Impacting India’s Foreign Trade

 Direction of India’s Foreign Trade

 Composition of India’s Foreign Trade

 Global Trade Dynamics

 Future of India’s Foreign Trade

 Why Trends Matter for Policy
makers (and us)?
 Estimate the demand for key products in world markets
 To plan economic engagements like whether to sign an FTA or not
 To decide on areas for inviting investments in critically important technology

 Factor the ‘barriers to trade’ like cost of compliance which effect balance of imports and exports

 Understand domestic ecosystems in other countries such as export subsidies, benefits and incentives

Decision makers need to factor these elements to pave the way for expansion and diversification of trade in growing
markets and product segments
Benefits of Diversifying Exports
(and imports)
 Having a variety of products towards the export composition provides a hedge towards price variations and shocks
in specific product markets

 Better cope up with internal economic meltdowns and lack of demand in a country by shifting attention to other
countries

 Export diversification with more technically advanced products or newer products can open new business
opportunities and help deal with competitors
 Diversifying export market and
deepening composition of exports
 Export Diversification
 Across Products
 Across countries
 Across tradeable services

 Output Diversification
 Across business sectors

 Technological innovations, diffusion and diversification

 Newer Products
 Alternate Cheap Products

 Quality Upgrading
 Existing Products
Recent Events affecting India’s
Foreign Trade - I
India’s trade witnessed a huge jump in 2000-2010 due to the following reasons:

 The Policy of SEZs was introduced

 Global economic boon from 2004-2008
 Export basket became diversified with exports to almost 182 countries
 Foreign exchange earnings from services exports coupled with an increasing value of remittances
 Sub-prime crisis could not wither the confidence of Indian economy
 FTAs were negotiated for e.g., India-Sri Lanka FTA became operational
Recent Events affecting India’s
Foreign Trade - II
In the decade of 2010-2020 India’s export could not register a jump, stuck at $300 billion bracket, many years even lower

 Exports could not register a jump as one of India’s most important markets, the United states was still recovering
from the shock of sub-prime crisis
 The European market also witnessed a recessionary trend due to green economic crisis. BREXIT has further vitiated
the atmosphere in EU
 Proliferation of non-tariff barriers increased cost of compliance and cost of trade
 Indian products were priced out in the competitive markets of ASEAN, Far East and China
 FTAs did not translate into economic gains. Realizing there are significant challenges of technology, scale etc. policy
makers have been hesitant to enter Regional Comprehensive Economic Partnerships even after seven years of trade
Negotiations
 Import substitution became a buzz rather than a balancing act
Direction of India’s Foreign Trade
 India today is the eighteenth largest economy in terms of exports and tenth largest in terms of imports in the world
 Reform measure introduced since 1991
 State run economy is now a more market driven economy
 The rise of services trade in India
 Expansion of Asian countries as markets
 Deeper trade basket of India
 Demographic dividend
 Role of WTO in providing a fair market
 Key destination of India’s exports are the United states, the United Arab Emirates, China, Hong Kong and Singapore. The
one’s highlighted in bold are not the end the destination but used by India as thoroughfare
 Composition of India’s Foreign
Trade
 India’s largest exportable product in 2018 was mineral fuels with a share of 15% of India’s exports

 India’s export basket of drug and pharma has expanded faster than precious stones and gems

 India is improving its competitiveness not only in products of iron and steel but also in machinery appliances and
vehicles

 Share of apparels has reduced in overall India’s exports but cotton exports are growing

India’s main exports are largely import dependent. Out of the top 10 products in India’s export basket, India has negative
balance of trade in six of them.
 India needs to devise a two-tier plan, first to replace some of the imports which can be substituted like electrical machinery and
equipment and scale up production capacity agricultural incentives to scale up production of edible crops
Global Trends
In the last decade, trade has grown in length and complexity as companies expanded around the world in pursuit of margin
improvements.
◦ Increasing customer service levels, rising operating costs as 2 of the top concerns (fig 1) for Executives and CEOs.
◦ The recent pandemic and its impact on companies’ trade may have been unpredictable but it has brought to the forefront value
chain gaps which existed but were always considered as part of a trade-off

Fig 1. Top 3 concerns for SC over the next 3 years, Source: Bain consulting study in 2012 Fig 2. Risk exposure by Industry, Source Mckinsey in 2021
Mitigating Shocks
 Identifying new trade routes and business models % of respondents who agreed trade strategy needs to change

 Diversifying Manufacturing centers

 Bringing more visibility into value chains

Future of India’s Foreign Trade
 Develop in house capabilities, technical know how to manufacture steel and variety of grades of
steel
 Reduce import dependance for pharma excipient and APIs

 Reinvigorate textile, clothing and apparel

 Give competitive edge to leather and accessories

 Leverage strong ecosystem of vehicle manufacturing for light and heavy commercial vehicles

 Supply value added agro products

 Maintain and expand into all services sectors

It ain’t what you don’t know that
gets you into trouble. It’s what
you know for sure that just ain’t
so.

- MARK TWAIN