WTO: World merchandise trade volume is expected to grow at 3% in 2022 and 3.4% in 2023(UPSC Current Affair)

Relevance: GS3 - Indian Economy and issues relating to Growth, Foreign Trade

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Why in the News?

• According to the recently released WTO Report, despite the pandemic the year 2021 was a record one for trade.
• According to the WTO, the World merchandise trade volume is expected to grow at 3% in 2022 and 3.4% in 2023.
• The world merchandise trade volume grew at twice the rate of world GDP at market exchange rates in the two decades before the global financial crisis.

What is the Status of India’s exports?

• In accordance with global trends, India has had a successful export run. India's commodities exports hit a new high of $419 billion, while services exports hit $250 billion.

What are the new opportunity areas?

• Agricultural commodity: The exporters including India are looking to tap into newer agricultural commodity export opportunities.
• In the backdrop of ongoing trouble in Ukraine and Sri Lanka, both major exporters of agricultural products, the new opportunities will rise in overall agriculture commodity exports.
• Wheat Export: The food security of Europe and Africa is dependent on wheat supplies from Russia and Ukraine. Therefore,Russia’s invasion of Ukraine has created new opportunities for India to wheat export in these new markets.
• Tea Export: Sri Lanka, the world's largest tea producer, is a prominent player in the global market. Tea Exports account for about 98% of its annual output.

India has newer export opportunities in tea and textile export.

• Textile and Garments: Sri Lanka is a major exporter of textile. Its production and export capability got harmed by protracted power outages and unstable economic conditions.Furthermore, large global clothing brands such as Zara and H&M are apparently eyeing India.
• Due to a Covid spike, Chinese manufacturers are closed, and Asian exporters such as Bangladesh, Vietnam, and Cambodia lack the capacity to fill the hole. India can thus seize this chance.

What are the challenges for India?

• The Trade to GDP Growth ratio may fall to 1.1:1 in 2022 and 2023 due to slower global growth, an adverse geopolitical tension, also coupled with the shadow of recurring pandemic waves and prolonged supply chain constraints.

What Measures to tap export opportunities in developed markets can be taken?

• Non-tariff barriers to agricultural trade should be addressed by the government, with a particular focus on harmonising sanitary and phytosanitary (SPS) rules. The government should take sector-specific steps and improve the supply chain traceability mechanism.
• For Tea Export:Traditional tea boards should be given more power and autonomy to optimise the sector's development, promotion, and research in order to support tea exports. The Tea Promotion and Development Act, as drafted, should be enacted.
• Supply chain constraints: India needs to integrate with global supply chains. Need to sign several trade agreements. In this regard, a new pro-trade policy should be implemented.
• Tariff Rationalisation: For India, tariff rates on intermediate inputs should be decreased to either nil or negligible. It will make India a desirable destination for gatherings.
• Labour Reform: India should build an enabling ecosystem that shifts its specialisation patterns toward labor-intensive processes and product lines. Reforms to the labour market must be implemented.
• FDI Reform:A proactive and persistent FDI policy is essential. Local enterprises can join global manufacturing networks thanks to foreign financing and technology transfer. Local businesses serve as subcontractors and suppliers of intermediate inputs to multinational corporations.
• Logistic Infrastructure: The government should address the problem of logistical impediments. Low levels of service connection costs (costs connected to transportation, communication, and so on) are required to strengthen their participation in GVCs, according to the Economic Survey 2019.