The latest exports data released by the Central government has surprised many and for good reasons. During the five months of the current financial year, between April-August, exports from India was $ 59.48 billion, 8.36 per cent higher than last year's $ 50.26 billion in the same period.
The growth in exports in rupee terms in this period at 5.56 per cent, however, was lower. But despite a steep12 per cent appreciation in the value of rupee, which makes Indian exports more expensive, it is encouraging to see that exporters have been able to negotiate higher prices for their merchandise to offset appreciation in rupee to some extent.
But the worrying news is that despite a stronger rupee, the import bill is rising faster than before, widening the trade gap further. Imports during the April-August 2007 was $ 91.99 billion against $ 70.18 billion, registering a 31 per cent growth in dollar terms and 17 per cent growth in rupee terms.
As a result, the trade deficit (imports minus exports) has shot up to $ 32.50 billion which is equal to 8 per cent of the country's GDP. There is no doubt that all efforts must be made to narrow the disturbingly large gap between imports and exports.
Of course, our economy being robust and the financial system largely untouched by the subprime problems of the USA, inflow of dollars in the form of foreign investments in stock markets and in asset creation has been good.
There are many areas where we need an urgent and integrated approach to remove hindrances and irritants. Infrastructure like transport, power and ports must be de-bottlenecked so that exporters can deliver on time, every time.
To compete globally, specially with countries like China, south-east Asian countries and east European countries, our cost of production has to come down drastically. This, in turn, means we must have manufacturing facilities of global sizes for achieving maximum economies of scale.
Policies regarding cheaper credit, subsidies, tax breaks and reimbursement have to be simplified so that exporters, who work on small margins, do not face any liquidity problem. And, of course, we will have to bargain hard at the world trade forums to try and remove the artificial entry barriers erected by the developed countries to protect their own industries and prevent entry of our goods and services.
