India’s exports are under tremendous pressure. The country has set itself a target of doubling its exports of goods and services to $900 billion by 2020, from $470 billion in the past financial year.
But this “might prove a tad too ambitious if the current cyclical slowdown lasts and structural issues are not addressed”, according to a recent report by Crisil Research, which is part of Standard & Poor’s, PTI reported.
India’s merchandise exports fell by 18.5% in dollar terms to $174.3 billion in the first eight months of this fiscal year, which runs between March 2015 to this April, government figures show.
India’s biggest exports include petroleum products, gems and jewelry, and textiles and clothes.
“Falling competitiveness is one of the structural factors restricting export growth,” it says. “For key export items such as gems and jewelry, and textiles, revealed comparative advantage has come down over the years. Non-tariff barriers such as high transaction costs and infrastructure deficit, too, create hindrance as India continues to lag most Asian peers on these parameters.”
There are global factors at work which are partly to blame, as the world’s economic recovery and trade growth remain slow. Lower oil and other commodity prices have had a significant impact.
“Small wonder India’s export performance has suffered,” Crisil says. “Export destinations are not doing well, prices of many export items have fallen, and the rupee, too, has appreciated in real terms against a basket of 36 currencies. But our analysis shows the decline in exports is more than that warranted by these factors.”
It explains that while global real GDP growth picked up from 3.2% in 2009 to 2011 to 3.4% in 2012 to 2014, India’s real growth of exports plummeted from 11.1% to 4.1%.
Almost half of all India’s exports are sent to countries in Asia and the next biggest market for its goods is Europe. Economic weakness in these areas is taking its toll.
