India’s shipments were down for the 11th straight month in October, with merchandise exports declining 17.53% to $21.35 billion from $25.89 billion worth of goods sold abroad during the corresponding month of last year.
India’s big dream of doubling exports of goods and services and achieving an ambitious target of $900 billion by financial year 2020 is at risk, thanks to a global economic slowdown, structural challenges of the global trade and infrastructure issues in the domestic economy, Infoline News Service reported.
India’s exports hit the $470 billion in financial year 2015 but this year the slowdown in global demand scenario and a dip in prices of petroleum products have dented external trade volumes.
There have been projections every now and then that India’s export will outpace China’s between 2025 and 2050. That target would have come nearer by now as the Chinese economy is in the doldrums while India has been trying to spread its wings rapidly, discovering newer markets for its goods and services.
But the global economic slowdown has hampered that progress. While a sharp fall in crude prices has strongly dented India’s refinery products exports, a race for currency devaluation triggered by China’s yuan devaluation has also distorted the external trade equation, disrupting India’s progress on this front.
However, global financial majors such as HSBC feel the next few years should carry the global economy into the next wave of globalization, critically underpinned by sophisticated and pervasive digital technology which would reduce international trade barriers, improve communication between cultures, level out the playing field for entrepreneurs and startups, and form the foundation for an ‘always-on’ global economy. And India is poised to gain big market share in such an environment.
In recent times, the global cyclical slowdown and the new Trans-Pacific partnership have cast a long shadow on India’s external trade. Falling trade intensity of global growth is the external structural constraint while declining competitiveness, infrastructural bottlenecks and labor market rigidity are domestic. The government has been trying to work on some of these areas to ease the situation, but the fruits of the same are unlikely to show up anytime soon.
Rating agency Crisil says beyond the cyclical factors, some structural elements too have been playing their part in slowing down India’s exports.
True, the Indian export destinations are not doing well, prices of many export items have fallen, and the rupee has appreciated in real terms against a basket of 36 currencies. It pointed out that while the global real GDP growth improved from 3.2% in 2009-2011 to 3.4% in 2012-2014, India’s real growth of exports came down from 11.1% to 4.1%.
It said the decline in exports is more than that warranted by these factors. Falling competitiveness is another structural factor restricting export growth. For key export items such as gems and jewelry and textiles, India’s ‘revealed comparative advantage’ has come down over the years.
