These two crucial exports depend on the state of the world economy. For example, the demand for gems and jewelry would naturally drop in times of economic crisis, as consumer confidence is low. But thanks to the stock market rally, if wealth increases, it will induce an increase in demand for luxury goods. However, in the current context, even excluding these two components – petroleum products and precious stones and jewelry, the country’s export performance is still impressive and on the rise. It is powered by agricultural products like grains, jute and other fibers, electronics, specialty chemicals, iron ore, metal products, and textiles and clothing. Of course, you need to look at the data in more detail to understand areas of maximum potential and growth dynamics.

The engine of economic growth can be driven by four demand engines, or rather four sources of spending. These are consumers, investments (i.e. demand from building new factories), government spending (on things like highways or the rural jobs program), and exports (i.e. i.e. foreigners’ expenditure on Indian goods and services). Currently, as the country grapples with the second wave of Covid, consumer and investor sentiment is low. This has been confirmed by the latest Reserve Bank of India report, as well as inquiries from various chambers of industry. One indicator of investment demand is the growth of bank credit, which barely reaches 5%. This would need to increase by around 25 percent to achieve healthy growth of 8 percent. Of course, “feeling” is as much a matter of psychology as it is of economics. It can turn positive fairly quickly with the right mix of policy, fiscal stimulus, progress in vaccinations, favorable monsoons, and picking up spending infra. If you look at the Indian stock markets, sentiment remains quite bullish there and the market is hitting new highs every week. Maybe the stock market is anticipating a strong economy a year from now. But the stock market rally is also due to excessive liquidity induced by a liberal monetary policy led by the Reserve Bank of India. With so much liquidity and money supply growing, that should fuel a stock rally. It’s important to note that when the stock market zooms in, it increases the wealth of those on the higher end of the income spectrum. This could in fact worsen inequalities, since the incomes of the poor are still stagnating due to the economic crisis.