In 2023, India's merchandise exports are expected to contract by 5.3%, aligning with global trends, as reported by a trade policy think tank. Despite this, the electronics segment has shown noteworthy performance, suggesting that support measures could potentially benefit other key sectors as well.

The United Nations Conference on Trade and Development predicts a 5% global contraction in exports, influenced by China's 5.2% decline in merchandise exports from January to November.

According to the Global Trade Research Initiative (GTRI), India's merchandise exports are projected to decrease to $429 billion in 2023 from $453 billion in 2022, representing a 5.3% fall. Imports, on the other hand, are expected to decline by 7% to $669.6 billion. Services exports have seen a year-on-year increase of 10.5% to $333.6 billion, while services imports remained stable at $176.4 billion. Overall, the services sector contributed to a 1% growth in India's total exports, reaching $763 billion.

With a greater decline in imports compared to exports, the overall trade deficit (merchandise and services) is projected to decrease from $141.3 billion to $82.8 billion.

Within India's export basket, 78% of products by value are anticipated to decline by 11.6% in 2023 to $320 billion. This decline is attributed to weak global demand and India's gradual loss of competitiveness in labour-intensive sectors, according to GTRI's analysis.

Certain high-priority items, including engineering and petroleum products, which constitute nearly 50% of total exports by value, experienced a decline in 2023. Other affected sectors include chemicals, gems and jewellery, textiles and garments, leather, handicrafts, carpets, and some agricultural products.

Despite these challenges, smartphones emerged as a success story for India in 2023, with exports projected to surge to $13.9 billion from $7.2 billion in 2022. This significant increase contributed to the overall growth of electronics exports, reaching $26.8 billion, a growth of 26.2%. Notably, there was a 25% increase in the import of electronic components to $30 billion in 2023, impacting the imports of finished electronic products.

The success in the electronics sector highlights the early achievements of the production-linked incentive (PLI) scheme, indicating a strengthening of India's electronics manufacturing capabilities, according to Ajay Srivastava, co-founder of GTRI.

Recognising the need for a similarly focused strategy to revive exports in labor-intensive sectors, Srivastava suggests a horizontal scheme that provides a 2-3% incentive to every firm in the sector to address some of the cost disadvantages faced by small firms. However, he notes that PLI may not be suitable for product categories like textiles, leather, and handicrafts, where diverse firms produce similar products, potentially putting non-recipients at a disadvantage.