Exports have been down for the last six months and exports demand govt intervention
GN Bureau | June 17, 2015
Finance minister Arun Jaitley has left for the US on Tuesday to hold multi-city economic road shows to sell India’s growth story after vigorously defending his cabinet colleague Susham Swaraj, who is at the centre of Lalit Modi controversy. Jaitley has a quite a job on his hands as India’s exports declined a steep 20.19% in May to $22.35 billion, the sixth consecutive month of contraction.
His work is cut out as the US is the largest market for Indian exports while it ranks sixth in terms of FDI between FY01 and FY15. In FY15, India had a trade surplus of $20.5 billion with the US while FDI from there stood at $1.82 billion.
The exports have been on the downslide for the last six months due to a softening of crude oil, metal and other commodity prices, besides weak demand in major overseas markets such as China, the Opec and euro zone, a relatively stronger rupee and domestic bottlenecks.
On imports front, the underlying weakness in the domestic manufacturing sector and tepid domestic demand has resulted in imports declining by 16.52% in May, a 15-month low (the lowest since 17% contraction in February 2013). It was for the sixth consecutive month that imports remained in the negative territory.
This means a trade deficit of $10.4 billion, the third consecutive month it remained above the $10-billion mark, marginally down from $11.79 billion in March (which was the highest since November 2014) and $11 billion in April.
Meanwhile, the Federation of Indian Export Organisations (FIEO) on Tuesday urged the central government to check sharp decline in merchandise exports as it expressed concern over the widening trade deficit.
"The continuous negative growth in exports since December 2014 is a serious concern for all stakeholders, as the decline has exasperated to 20 percent till date this month," FIEO president SC Ralhan said in a statement.
He said emerging economies particularly of Asia are contracting due to slowing down of China, adding that Indian exporters are losing out their competitiveness due to high logistics cost and ground level transaction costs.
On the hand, industry body Assocham said given the current trend, exports touching even the $300 billion mark this fiscal would be a tall order. Exports had missed the target of $340 billion last fiscal and could touch only $310.5 billion.
"Decline in exports of engineering goods, gems and jewellery, organic and inorganic chemicals, drugs and pharmaceuticals, leather and leather products, electronic goods and plastics and linoleum are of equal concern as these sectors have either shown further dip or have moved into negative territory," Ralhan said.
Adding to the woes, the services sector had also declined in exports and imports by 5 percent and 20 percent in April of 2014-15 compared to the like period in 2013-14.
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This piece is based on a previous article by the authors published in Geoforum [Elsevier] in May 2019: available online: https://www.sciencedirect.com/science/article/pii/ S0016718519300764?via%3Dihub
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