INDIA IS NOT MAKING ENOUGH FOR ITSELF
By Nantoo Banerjee
Notwithstanding the GDP growth projection of 7.5 per cent for the current fiscal, India’s $350-billion export manufacturing is fast shrinking. The export downtrend continued for 11 months in a row toll October. There is no immediate sign of improvement. Making in India does not seem to make much sense at least for Indian exporters at this moment. With export orders shrunk and prices falling in the global market, India’s export manufacturers are in a quandary. The loss of exports during this financial year could be close to $80-90billion. The export earnings could at best reach $270 billion. This could mean a massive loss of production and jobs in the export sector. The country would be lucky if it ends 2015-16 with a 20 per cent loss of export earnings compared to the last year.
Unfortunately, around 45 per cent of India’s exports are from medium and small industries. The export woes may have already cost at least 2,00,000 people their jobs. Since most well-distributed small enterprises have less than 20 people on their rolls each, there is no trade union to focus the attention of their plight before the government and the nation. India’s traditional export market in Europe and the USA have set series of restrictions on imports from India – from commodities, carpets and garments to petro-products and pharmaceuticals. India’s exports of goods shrank by nearly a quarter in September from a year ago. Although Asia’s third largest economy is mostly driven by domestic demand, exports play an important role to cover about 70-75 per cent of its import cost.
“We see no signs of revival in exports in the near future,” said Ajay Sahai, director general of the Federation of Indian Export Organisations. “We will be lucky if exports could even touch $265 billion to $270 billion for the whole year.” For reasons best known to themselves, policy makers don’t seem to be much concerned about the export decline since, thanks to massive drop in the global prices of crude oil – India’s largest item of import — the trade deficit has narrowed this year. The trade deficit could have narrowed further or even disappeared if India did not indulge in higher import of gold and export dumping into India by countries like China fighting their own domestic economic slowdown.
In fact, India’s trade deficit with China widened to $21.6 billion in the first five months of the current fiscal year, from $20.3 billion a year ago. India’s exports to Europe fell 10.9 percent to $21.2 billion in the same period. Exports to the United States fell 3.8 percent to $17.5 billion. There have been big decline in the export value of oil products. Income from textile exports has also contracted. India should be worried about the recent agreement among United States, Japan and 10 other Pacific Rim nations, the Trans Pacific Partnership that will, in all certainty, affect prospects for its exports, particularly of textile and leather products which are produced predominantly by the country’s medium and small scale enterprises.
Exports of India’s 20 major commodities showed a big drop. The country’s merchandise exports fell a steep 17.5 per cent annually to $21.35 billion in October. Exporters want the government intervention immediately to salvage the situation. However, the government does not seem to be quite ready to intervene as it may not be quite sure about how to intervene within the WTO restrictions. Ironically, the government is also not doing what it could do more easily or subtly to restrict import dumping. It could at least curb the gold import immediately which is pumping out the precious foreign exchange to please the rich. Gold import is unnecessarily widening the trade deficit. Only a small portion of gold goes into the production of jewellery for export.
India’s large jewellery makers, mostly based in Gujarat and Maharashtra, find selling their products in the domestic market more profitable and easy than exporting abroad. In a way, this could explain partly why export of gems and jewellery from India dipped by about 18.33 per cent to $18.09 billion during April-October on account of a sharp rise in return of consignments among others, including fall in prices. The outbound shipments were worth $22.15 billion during the first seven months of last fiscal 2014-15, as per the provisional data of the Gems and Jewellery Export promotion Council (GJEPC). The export rejection rate is particularly high. During first seven months of the current financial year, export consignments worth $4 billion from India were reportedly returned as compared to $1.78 billion during April-October 2014. One can’t be too sure if this was by design. Making and selling in India of gold jewellery seem to be making more sense to the trade than exporting the products. (IPA Service)