The World Trade Organization’s Goods Trade Barometer says the global economy, hit by strong headwinds and weakening import demand, may see trade growth slowdown in the closing months of 2022 and into 2023.

What is Goods Trade Barometer?

• The Goods Trade Barometer was developed by the WTO to complement conventional trade statistics and forecasts.
• It is the world’s leading composite indicator that highlights the turning points in the global merchandise trade and provides forecasts of its likely trajectory in the near future.
• It is released on a quarterly basis based on the availability of data.
• It provides real-time data on the trajectory of merchandise trade relative to the current trends.
• Values higher than 100 indicates above-trend growth and the values less than 100 indicates below-trend growth.

Key trends

• In its recent release, it said trade growth is likely to slow down in 2022 and into 2023.
• Reflecting a cooling demand for traded goods based on actual trade developments through the second quarter of 2022, the current reading of 96.2 is below the baseline value index and the prior reading of 100.0.
• The downturn in the goods barometer is in line with the earlier forecast which predicted a merchandise trade volume growth of 3.5% in 2022 and a revised lower estimate of 1% for 2023.

Impact on India’s trade balance

• With a likely fall in export earnings, and no decrease in imports of essential items like crude oil and capital goods, India’s trade deficit is set to widen.
• The projection is that the country’s current account trade deficit is expected to be around 3% of GDP for FY23.
• Foreign exchange reserves which have already depleted by over $100 billion over the last year are likely to shrink further.

What does a slowdown mean for India?

• India is not an export-led economy. In FY22, 21.5% of Indian GDP depended on exports.
• However, in view of the poor performance of the country’s major market destinations such as the US and China, Indian exports are bound to suffer.
• During the subprime crisis which engulfed the entire world, India’s export-oriented sectors had to pay the price though the economy was to a large extent insulated due to a vibrant rural sector.
• But currently rural India is not in a strong position unlike in 2008-09.

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