NEW DELHI: Despite a policy directive by the Narendra Modi Government to focus on export-led growth to help push India’s GDP to $5 trillion, India’s sales abroad are showing signs of stress, in part due to a global slowdown combined with ongoing trade wars and increasing competition by rivals including China.
“In June, for the first time in nine months, we saw India’s exports contracting … a slowdown in global economy combined with protectionist measures in our key markets and increased competition from China which is looking to offset its losses from its trade war with the US pulled us down,” said Prof N R Bhanumurthy of the National Institute of Public Finance & Policy.
The sudden contraction even as Commerce and Finance Ministry are putting together an action plan to push India’s exports could mean re-working trade strategy. Mandarins fear duty walls India has been building to protect domestic manufactures may have to be traded to gain market access abroad.
India’s exports shrank 9.71% last month to $25.01 billion in June with key sectors such as petroleum, gems and jewellery, rice, ready-made garments and engineering goods registering steep falls. The biggest fall was in petroleum products by 32.85 per cent mainly on account of a technicality. The Jamnagar refinery was shut for a while.
However, a near 11 per cent fall in demand for gems and jewellery is being blamed on global slowdown while the rest is being blamed on increasing competition from rival countries.“We are seeing protectionist walls being built by a large number of countries besides the US which recently shut down our duty free trade window,” said a Commerce Ministry official, adding, “we need to counteract that.”
However, the problem for India is that it too has been raising tariff on imports to help Indian industry, something which is being raised by foreign diplomats and trade negotiators whenever India protests against measures which hit Indian trade. “So our tariff walls may have to be lowered as part of trade negotiations.”
Officials said that China, which also saw its exports contracting in the wake of a trade war with the US, is getting better traction in exports to markets where India has been doing well including in new markets like Africa and Latin America.
“China is already our competitor in many markets across the globe and this competition is intensifying as they try to make up for losses in exports to the US,” pointed out Prof Biswajit Dhar of the JNU, former Director-General of Research and Information System for Developing Countries.
Key sectors in free fall
India’s exports shrank 9.71% last month to $25.01 billion in June with key sectors such as petroleum, gems and jewellery, rice, ready-made garments etc registering steep falls.