Go beyond borders to grow beyond borders

The recent data on exports and foreign investment has enthused many market analysts. Exports surpassed pre-pandemic levels owing to the rapid economic recovery in key industrial nations with strong trade ties. Similarly, foreign investment inflows were at a record high in FY 2020-21, and the momentum continued even in the April-June quarter of FY 2021-22 due to global liquidity and low bond yields.

Could exports and investment-backed by foreign capital be the knights in shining armour to support the economic recovery?

We believe that they may in the short run, but may not be sufficient to cover the low domestic consumption, which accounts for close to 60 percent of our total GDP. The share of exports in GDP has been relatively low and has been decreasing since 2013. Also, a very small proportion of foreign investments is getting utilised in investment and asset creation.

In our latest economic report, titled, “Go beyond borders to grow beyond borders”, we discuss India’s integration with the world through the twin channels of trade and capital flows, policies that have enabled the integration, and possible measures that are imperative for increasing export and channelling foreign investments into capital formation.