JOIN USThe slow rise in August export numbers raises concerns on persistent structural impediments to growth. August exports registered the slowest growth in the current fiscal at 2.4 per cent year-on-year or close to $27 billion. This is from the average 10 per cent growth witnessed in the last three months.
The repeated duty bombardments on gold have not yielded results on the ground as gold imports have more than doubled after the low base benefiting gold imports wore off in August. And, weak recovery in the Americas and emerging economies, Chinese imports slowing down and flagging European demand are not the right elixirs for Indian exports at this point in time. Gems and jewellery exports have been particularly hit as growth declined 10.31 per cent in August, but high-growth industries like pharmaceuticals, readymade garments, chemicals, iron ore, and labour-sensitive commodity segments like coffee and tea have recorded export growth on renewed demand from Middle Eastern, European and African markets.
Diminishing competitiveness in China, growth of Indian generics research and availability of cheap skilled labour will provide further impetus for India to expand its pharmaceuticals exports. A recurring placebo for the merchandise deficit comes from the oil import bill falling nearly 15 per cent in August thanks to global prices hovering in the region of $100 a barrel. This has led to merchandise trade deficit falling to a 4-month low of $10.8 billion. However, non-oil imports like coal and silver continue to be areas of concern despite the fall in imports.
As things stand, exporters are rightly expecting more government measures to boost exports. Core imports are expected to pick up going ahead, and hence, the growth momentum in exports needs to rise to keep merchandise trade deficit in check. Exports account for just 25 per cent of the GDP and there is scope to rebalance away from domestic economy towards exports. The government should consider reintroducing interest subvention on exports effective April 2014 as uncertainty has impacted MSME exporters whose operating costs have risen by 3 per cent, following interest subsidy not being passed on to them. The government also needs to allocate more funds to the Technology Upgradation Fund (TUF) which textile clusters have been clamouring for. With revival in this sector underway, there seems to be no hurdles in the way of the government revamping the working of TUF. Government is also expected to ramp up investments in sectors like power and transport, thereby, fuelling export demand for capital goods. This impetus must be maintained in the medium term.