Exports decline but FDI has had a good growth story

Negative growth for the last five months may result in workers being sacked

GN Bureau | May 16, 2015


#FDI   #foreign direct investment   #exports   #layoff   #sacked   #workers   #investments  

Even as exports shrank by as much as 13.96 per cent in April to $22 billion making it the fifth consecutive month of contraction as the demand for Indian goods slumped due to the global slowdown, FDI (foreign direct investment) in India grew by about 40 per cent year-on-year to Rs 1.76 lakh crore in 2014-15.

The contraction in exports affects the economic growth rate of the country and there is a real danger that warning that the exporters could be forced to lay off workers if sales orders continue to decline over the next four to five months.

According to Federation of Indian Export Organisations (FIEO) "the prime reason continues to be softening of crude, metal and commodity prices. Equally worrying is negative growth in gems and jewellery, electronics and plastic goods."

The fall in order is from from buyers in the Middle East, Africa and Latin American countries.

FIEO president SC Ralhan said that negative growth in exports is continuing since December 2014 though the decline has come down from 21 per cent in March 2015 to 14 per cent in April 2015. The prime reason continues to be softening of crude, metal and commodity prices.

What is "worrying is the negative growth in gems and jewellery, electronics and plastic goods as domestic capacities are being augmented in these sectors", Ralhan added.

Imports declined as well by 7.48 per cent to $33 billion leaving a trade deficit of $11 billion in the month under review, according to the data released by the commerce ministry.

Oil imports dipped 42.65 per cent during April to $7.44 billion. Gold imports surged by 78.33 per cent year-on-year to $3.13 billion in April on declining prices and easing of restrictions.

However, there is good news on FDI inflow. The FDI in India grew by about 40 per cent year-on-year to Rs 1.76 lakh crore in 2014-15. In 2013-14, the country had attracted Rs 1.26 lakh crore FDI. India attracts maximum FDI from Mauritius, Singapore, the Netherlands, Japan, and the US.

The Foreign Investment Promotion Board (FIPB) had received 350 proposals and 241 were cleared.  The government has relaxed FDI norms in various sectors, including insurance, railways and medical devices, to boost FDI in the country.

According to the data of Department of Industrial Policy and Promotion (DIPP) the top 10 sectors that receive maximum foreign investment include services, automobiles, telecommunication, computer software and hardware and pharmaceuticals.

Healthy inflow of foreign investments into the country helped India’s balance of payments (BoP) situation.

India is estimated to have a requirement of around $1 trillion investment over five years to overhaul its infrastructure sector, including ports, airports and highways to boost growth.

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