1. Goods exports grew 6%, imports 16.5% in 2022-23
Monthly exports contracted for the fourth time in six months this March with a 13.9% drop amid faltering global demand; the goods trade deficit for 2022-23 rose almost 40% from previous year
India’s goods exports declined for the second successive month in March, falling a sharp 13.9% to $38.38 billion, while imports dipped 7.9% to $58.11 billion.
Total goods exports in 2022-23 rose 6.03% to $447.46 billion, while the import bill surged by a steeper 16.5% to $714 billion in 2022-23.
The goods trade deficit rose almost 40% to over $266 billion in 2022-23, compared to $190 billion in 2021-22. However, using estimates for services exports during March for which final data will only be available in May, the Commerce and Industry Ministry pegged the total trade deficit for the year at $122 billion, 46% higher than the $83.5 billion gap in 2021-22.
“Despite the global headwinds, we have surpassed our 2022-23 target of $750 billion dollars to hit $770.18 billion, which is $94 billion higher than last year’s record exports,” Commerce Secretary Sunil Barthwal said, using services exports estimates combined with the actual numbers for goods exports. “Services exports have grown 13.84% to an estimated $322.72 billion,” he added.
Oil, electronics lead
India’s uptick in outbound shipments was largely led by petroleum, up 27% to $94.5 billion, followed by electronics goods that rose 7.9% to $23.6 billion.
The other three of India’s top five export items registered insignificant growth: rice (up 1.5%), chemicals (1%), and drugs and pharmaceuticals (0.8%). Petroleum exports now account for 21.1% of total exports, up from 16% in 2021-22.
Engineering goods, India’s mainstay in goods exports in recent years, shrank 5.1% to $107 billion, bringing down their share in total exports from 26.6% to 23.9%.
Non-oil exports, in fact, contracted 0.5%, and if electronics exports were excluded too, goods shipments were 2.8% lower than 2021-22, which economists called a red flag.
“Slackening external demand amid the global slowdown in the second half last year, along with the moderation in global commodity prices hurt non-oil exports and these concerns are set to exacerbate this year,” Aditi Nayar, chief economist at ICRA, said. This could lead to a deeper contraction in merchandise exports in 2023-24, affecting manufacturing output and dragging down GDP growth, she added.
“Important segments like engineering and gems and jewellery witnessed negative growth and we may expect further slowdown in exports,” Madan Sabnavis, the Bank of Baroda’s chief economist, said.
Moreover, with the rupee seeing an appreciating tendency, the currency advantage will be weaker for exporters. Imports may slow a little as domestic growth slows down, but could keep putting pressure on the deficit, which could increase if oil prices harden, he cautioned.
Russian imports surge
Fuelled by discounted oil shipments, India’s imports from Russia grew almost 370% to over $46 billion in 2022-23. Russia’s share in imports leaped from 1.6% in 2021-22 to 6.5% last year, making it the fourth largest import source nation for India, behind China, the UAE and the U.S.
China’s share of goods imports dipped to 13.8% in the year gone by from 15.4% in 2021-22, officials said. However, imports from the country still grew 4.2% to reach $98.5 billion last year, while exports to China fell 28% to just $15.3 billion. Indian shipments to China now account for just 3.4% of total exports, from over 5% in 2021-22.
Coal, oil imports up
While petroleum imports jumped about 30% to nearly $210 billion in 2022-23, coal imports grew at a faster 57% to almost touch $50 billion. Gold imports, on the other hand, fell around 24% to $35 billion as global prices for the metal surged and the rupee turned weaker.
The U.S. remained India’s top export destination, followed by the UAE, while the Netherlands emerged as the third largest goods buyer, displacing China to the fourth position in 2022-23.
With the government setting a $2 trillion target for goods and services exports by 2030 under the new Foreign Trade policy, the apex exporters’ body FIEO sought marketing support to sell their wares around the world and an exemption from the Goods and Services Tax levied on freight for goods shipments.
2. BBC India’s ‘foreign exchange violations’ under ED scanner
ED has reportedly asked for submission of documents.
The Enforcement Directorate (ED) has initiated an inquiry into the British Broadcasting Corporation (BBC) India under the Foreign Exchange Management Act (FEMA) for suspected violations.
It is learnt that the agency has also asked some BBC India officials to submit the documents which it has to scrutinise as part of the proceedings. On Thursday, one official appeared before the investigators.
The move came about two months after the Income-Tax Department in February surveyed the Delhi and Mumbai offices of the BBC, and allegedly uncovered multiple irregularities, including non-payment of tax on certain remittances that were not disclosed to the authorities as income in India.
The surveys were carried out weeks after the BBC had released a two-part documentary India: the Modi Question, related to the 2002 Gujarat riots and situation of minorities in India. The I-T Department had then said that the income/profits shown by various group entities was not commensurate with the scale of operations in India.
“During the course of the survey, the Department gathered several evidence pertaining to the operation of the organisation which indicate that tax has not been paid on certain remittances,” said the agency.
As alleged by the Department, services of seconded employees (staff internally transferred on a temporary basis) had been used, for which reimbursement was made by the Indian entity to the foreign entity concerned. “Such remittance was also liable to be subject to ‘withholding tax’ [the amount employer deducts from the employee’s salary and pays to the government as the individual’s tax liability], which has not been done…the survey has also thrown up several discrepancies and inconsistencies with regard to Transfer Pricing documentation,” it had said.
3. ‘Lok Ayukta cannot probe selection of poll candidates’
A Division Bench of the Kerala HC has come up with the ruling in connection with 2014 LS polls; case relates to the selection of Bennet P. Abraham as the LDF candidate in Thiruvananthapuram
A Division Bench of the Kerala High Court has held that the Lok Ayukta cannot investigate matters relating to selection of candidates by political parties for contesting elections.
A Bench comprising Chief Justice S. Manikumar and Justice Murali Purushothaman made the ruling recently while allowing a petition filed by CPI leader Pannian Ravindran challenging the Lok Ayukta order holding that the complaint seeking a probe into the selection of Bennet P. Abraham as Left Democratic Front (LDF) candidate in the Thiruvananthapuram constituency in the 2014 Lok Sabha elections was maintainable.
The complainant, Shamnad A., alleged that Mr. Abraham was selected on receiving illegal gratification by party leaders.
The Bench observed that the selection of candidates was an internal affair of the political party and the party selected its candidates as per its constitution, political principles, policies, winnability, etc. “Once the candidate is set up by the political party, then, on the date of poll, the public exercise their electoral right for any of the candidates in the fray. Therefore, we are unable to subscribe to the view of the Lok Ayukta that selection of candidate by a political party is a matter in which the public or the community at large has an interest,” the court observed.
When the petition came up for hearing, Ranjith Thampan, senior counsel for the petitioner, contended that allegations levelled by the complainant against the CPI State leaders would not amount to maladministration and the complaint in respect of selection of candidate for election to the parliamentary constituency was not maintainable.
4. OPINION-01: Is the current regulatory system equipped to deal with AI?
Facial recognition technology.
The growth of Artificial Intelligence (AI) technologies and their deployment has raised questions about privacy, monopolisation and job losses. In a discussion moderated by Prashanth Perumal J., Ajay Shah and Apar Gupta discuss concerns about the economic and privacy implications of AI as countries try to design regulations to prevent the possible misuse of AI by individuals and governments. Edited excerpts:
Should we fear AI? Is AI any different from other disruptive technologies?
Ajay Shah: Technological change improves aggregate productivity, and the output of society goes up as a result. People today are vastly better off than they were because of technology, whether it is of 200 years ago or 5,000 years ago. There is nothing special or different this time around with AI. This is just another round of machines being used to increase productivity.
Apar Gupta: I broadly echo Ajay’s views. And alongside that, I would say that in our popular culture, quite often we have people who think about AI as a killer robot — that is, in terms of AI becoming autonomous. However, I think the primary risks which are emerging from AI happen to be the same risks which we have seen with other digital technologies, such as how political systems integrate those technologies. We must not forget that some AI-based systems are already operational and have been used for some time. For instance, AI is used today in facial recognition in airports in India and also by law-enforcement agencies. There needs to be a greater level of critical thought, study and understanding of the social and economic impact of any new technology.
AS: If I may broaden this discussion slightly, there’s a useful phrase called AGI, which stands for artificial general intelligence, which people are using to emphasise the uniqueness and capability of the human mind. The human mind has general intelligence. You could show me a problem that I have never seen before, and I would be able to think about it from scratch and be able to try to solve it, which is not something these machines know how to do. So, I feel there’s a lot of loose talk around AI. ChatGPT is just one big glorified database of everything that has been written on the Internet. And it should not be mistaken for the genuine human capability to think, to invent, to have a consciousness, and to wake up with the urge to do something. I think the word ‘AI’ is a bit of a marketing hype.
Do you think the current regulatory system is equipped enough to deal with the privacy and competition threats arising from AI?
AS: One important question in the field of technology policy in India is about checks and balances. What kind of data should the government have about us? What kind of surveillance powers should the government have over us? What are the new kinds of harm that come about when governments use technologies in a certain way? There is also one big concern about the use of modern computer technology and the legibility of our lives — the way our lives are laid bare to the government.
AG: Beyond the policy conversation, I think we also need laws for the deployment of AI-based systems to comply with Supreme Court requirements under the right to privacy judgment for specific use-cases such as facial recognition. A lot of police departments and a lot of State governments are using this technology and it comes with error rates that have very different manifestations. This may result in exclusion, harassment, etc., so there needs to be a level of restraint. We should start paying greater attention to the conversations happening in Europe around AI and the risk assessment approach (adopted by regulators in Europe and other foreign countries) as it may serve as an influential model for us.
AS: Coming to competition, I am not that worried about the presence or absence of competition in this field. Because on a global scale, it appears that there are many players. Already we can see OpenAI and Microsoft collaborating on one line of attack; we can also see Facebook, which is now called Meta, building in this space; and of course, we have the giant and potentially the best in the game, Google. And there are at least five or 10 others. This is a nice reminder of the extent to which technical dynamism generates checks and balances of its own. For example, we have seen how ChatGPT has raised a new level of competitive dynamics around Google Search. One year ago, we would have said that the world has a problem because Google is the dominant vendor among search engines. And that was true for some time. Today, suddenly, it seems that this game is wide open all over again; it suddenly looks like the global market for search is more competitive than it used to be. And when it comes to the competition between Microsoft and Google on search, we in India are spectators. I don’t see a whole lot of value that can be added in India, so I don’t get excited about appropriating extraterritorial jurisdiction. When it comes to issues such as what the Indian police do with face recognition, nobody else is going to solve it for us. We should always remember India is a poor country where regulatory and state capacity is very limited. So, the work that is done here will generally be of low quality.
AG: The tech landscape is dominated by Big Tech, and it’s because they have a computing power advantage, a data advantage, and a geopolitical advantage. It is possible that at this time when AI is going to unleash the next level of technology innovation, the pre-existing firms, which may be Microsoft, Google, Meta, etc., may deepen their domination.
How do you see India handling AI vis-à-vis China’s authoritarian use of AI?
AS: In China, they have built a Chinese firewall and cut off users in China from the Internet. This is not that unlike what has started happening in India where many websites are being increasingly cut off from Indian users. The people connected with the ruling party in China get monopoly powers to build products that look like global products. They steal ideas and then design and make local versions in China, and somebody makes money out of that. That’s broadly the Chinese approach and it makes many billion dollars of market cap. But it also comes at the price of mediocrity and stagnation, because when you are just copying things, you are not at the frontier and you will not develop genuine scientific and technical knowledge. So far in India, there is decent political support for globalisation, integration into the world economy and full participation by foreign companies in India. Economic nationalism, where somehow the government is supposed to cut off foreign companies from operating in India, is not yet a dominant impulse here. So, I think that there is fundamental superiority in the Indian way, but I recognise that there is a certain percentage of India that would like the China model.
AG: I would just like to caution people who are taken in by the attractiveness of the China model — it relies on a form of political control, which itself is completely incompatible in India.
How do you see Zoho Corporation CEO Sridhar Vembu’s comments that AI would completely replace all existing jobs and that demand for goods would drop as people lose their jobs?
AS: As a card-carrying economist, I would just say that we should always focus on the word ‘productivity’. It’s good for society when human beings produce more output per unit hour as that makes us more prosperous. People who lose jobs will see job opportunities multiplying in other areas. My favourite story is from a newspaper column written by Ila Patnaik. There used to be over one million STD-ISD booths in India, each of which employed one or two people. So there were 1-2 million jobs of operating an STD-ISD booth in India. And then mobile phones came and there was great hand-wringing that millions of people would lose their jobs. In the end, the productivity of the country went up. So I don’t worry so much about the reallocation of jobs. The labour market does this every day — prices move in the labour market, and then people start choosing what kind of jobs they want to do.
The primary risks which are emerging from AI happen to be the same risks which we have seen with other digital technologies, such as how political systems integrate those technologies.