India’s exports have been playing a key role in driving gross domestic product (GDP) growth this fiscal at a time when private consumption and investment are struggling to change course. Last fiscal, when GDP contracted in the pandemic’s wake, net exports was the largest positive contributor to GDP growth. Particularly, goods exports, with a share of ~12% in GDP, was among the first to cross pre-pandemic levels, in the third quarter of fiscal 2021 itself.

Exports were a positive surprise in October after a somewhat disappointing performance in September. Not only did merchandise exports surge 43% onyear in October, they also rose 14% on-month. In the first seven months of this fiscal, merchandise exports have grown 55% on-year (and 26% over the corresponding period in 2019). The government’s target of $400 billion exports this fiscal is in sight now and requires a growth of 18% on-year between November and March.

Buoyed by the upturn, the government is now aiming at $1 trillion goods exports by fiscal 2028. That goal needs a reality check.

There are three factors that make us cautious. One, Indian exports are highly sensitive to global growth shocks. Currently, they are riding the global growth wave and with ebbing of global growth the export performance will also slow. Two, high commodity prices have lifted the value of exports disproportionately. In volume terms, the performance trails pre-pandemic levels. Three, exports continue to face risks such as supply-chain disruptions, material shortages, impact of the delta variant, and medium-term scarring of global potential output.

In 2011, buoyed by the surge in demand after the Global Financial Crisis, India had raised its exports target to $500 billion by 2014. We are yet to reach there.

To boot, the emerging global environment is set to become more challenging. Achieving the $1 trillion target by fiscal 2028 will, therefore, require a quantum lift in competitiveness and trade facilitation.