A ‘positive and solid’ difference awaits exports in 2017

Source: Business Standard, Dec 18, 2016

New Delhi: The lacklustre show of exports for almost past two years is no deterrent for the government, which is confident that it will see a “positive and solid difference” in 2017.

“I look at the new year which is going to definitely see positive and solid difference in exports compared to the previous years when we have been really very slow. I hope newer market should emerge,” Commerce and Industry Minister Nirmala Sitharaman told PTI.

The minister’s optimism came against the backdrop of a positive growth recorded by the exports in the last three months.

Since December 2014, exports fell for 18 straight months till May 2016 due to subdued global demand and slide in oil prices. Shipments started witnessing growth only in June this year, but again entered the negative zone in July and August. In September, October and November, it registered growth though.

According to the commerce ministry’s latest data, exports in November grew 2.29 per cent to $20 billion.

Exporters, too, expressed optimism for shipments in the new year.

Federation of Indian Export Organisations (FIEO) said that out of the 30 key product groups, close to 20 are exhibiting positive trends in the past couple of months.

“If such a trend continues, we can achieve $280 billion or even more in exports in the current fiscal,” FIEO President S C Ralhan said.

There is a word of caution. He felt that poor demand pick-up, slump in commodities prices, currency war may become more prominent in posing a greater challenge to exports in 2017.

To be sure, improvement in out-bound shipments will depend largely on demand revival in global markets. Experts say the uncertain global economic recovery may pose challenge to the country’s export sector.

The major markets for Indian exporters – the US and Europe – are yet to show strong signs of demand revival. The two regions account for over 30 per cent of the shipments.

Global economy is not going to grow. The world market is nervous,” said Biswajit Dhar, professor at the Jawaharlal Nehru University, adding that demonetisation will also impact exporters, particularly from the MSME sector. This sector contributes about 45 per cent to India’s total exports.

Exports are expected to remain in depression for the first half of this fiscal. The government would have to extend support to boost exports,” he said.

Labour-intensive sectors, including of handicrafts, have already flagged their concerns related to the impact of currency withdrawal.

Ease of doing business too is another key parameter for higher export numbers. Though the government has taken steps to improve that by reducing the number of documents required for import and export of goods, more is required.
The commerce ministry is working on a proposal to reduce

transaction cost for traders. It is in talks with the railway and finance ministries to lower high freight rates.

The worry is the World Trade Organisation (WTO) has slashed trade growth projections for 2017.

According to the multilateral body, global trade growth should hit 3.6 per cent in 2017, but the figure is still below the average 5 per cent since 1990.

The main reasons for the decline are fall in global demand and commodity prices, impacting terms of trade for exporters.

The drop in crude oil prices had resulted in consequent decline in prices as well as export realisations for petroleum products. These are major product items of exports for India.

Fall in demand of precious goods like pearls, precious and semi-precious stones, especially from oil producing countries, is also one of the key factors.

EU countries that account for nearly 16 per cent of India’s exports are facing problems of stagnation and deflation. The appreciation of the rupee against the euro has adversely impacted India’s exports to the EU bloc.

Almost all major currencies lost against the dollar in 2016, but the rupee’s decline has not impacted the country’s exports growth much.

India’s exports in the last five financial years have been hovering around $ 300 billion or less than that.

The shipments in 2015-16 stood at $261.13 billion. In 2014-15 and 2013-14, it was $310.33 billion and $314.4 billion, respectively. The figures for 2012-13 were $300.4 billion, after $307 billion in 2011-12.

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