The State Bank of India on Tuesday said there’s a need to jump start domestic consumption for India to achieve sustained growth even as export growth shows a definitive uptick.
It said for the 18 year period ended FY21, the weighted contribution of exports was 28% and of consumption was 69% while for the seven-year period ended FY21, their weighted contributions were 7% and 71%, respectively.
“It has to be kept in mind that primary engine of growth for India remains domestic consumption and unless that improves it is difficult for India to achieve sustained growth,” said Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI.
Among export sectors, it said ships and boats, aircrafts and ceramics have potential and focus on these can yield positive result.
Led by engineering goods, petroleum products, gems & jewellery, textiles and garments and organic & inorganic chemicals, India’s merchandise exports in April-July were $130.53 billion, up 73.51% over $75.22 billion in the year ago period and up 21.82% over $107.15 billion in the same period in 2019-20.
As per the report, the biggest contribution to exports has been of petroleum products- 1.5% in FY97, 21% in FY14, 9% in FY21 and recovered to 14% in the current fiscal.
Stating that the impact of international crude oil prices has always been a big factor in the way India’s crude oil exports, SBI said as the world slowly moves towards cleaner sources of fuel, India needs to chart a plan to gradually bring its share down.
“This can only be possible if other manufactured exports improve,” the bank said.
While chemicals and pharmaceuticals, electrical and mechanical machinery and appliances, vehicles, articles of iron and steel, plastics have grown “fairly steadily” and increased their share in the overall exports, Ghosh said there is no big segment which has shown such growth as petroleum sector had done in the past.
Over the years, certain agri based and labour intensive products like residues and wastes from food industries, animal fodder, coffee, tea, mate and spices, carpets and footwear have exited the export list whereas aluminium and its articles, ships, boats and floating structures exports have grown rapidly and are now part of the top exports, according to the report.
Similarly, furskins and artificial fur, arms and ammunition, furniture, aircraft and space craft and zinc and its articles have shown rapid growth but their share in overall exports is still very low as they started from a very low base.