What now, Mr Sharma? PDF Print E-mail
Wednesday, 15 August 2012 01:46
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Boosting exports needs a proactive trade minister

On the face of things, there’s precious little commerce & industry minister Anand Sharma can do to boost India’s dramatically falling exports—the 14.8% fall in July exports, the sharpest since August 2010, at one level, can be explained by the continuing crisis in Europe. After all, if Europe remains in a recession (IMF forecasts -0.3% output in 2012), and accounts for 19% of India’s exports, there’s bound to be a hit. Similarly, though the US is projected to grow faster than last year, it remains a bit touch and go—the US accounts for 15% of India’s exports. Indeed, the IMF’s forecast for global trade volumes growth in 2012 is just 3.8% this year as compared to 5.9% last year. But if India’s trade volumes are expected to grow in tandem with global volumes, why even have a trade minister? Apart from the opportunity that India’s dramatically small export basket provides in terms of market expansion, let’s not forget this was a period of a dramatic weakening of the rupee—so even if exports never rose, they should have stopped falling. Exports in January were $25.2 billion and these fell to $22.4 billion in July, while the rupee weakened from 49.7 to 55.5 against the dollar.

There are several things Sharma can do. There are, of course, the usual trade facilitation measures that need to be taken, to reduce costs for exporters. More than that, there are larger policies that the Cabinet clears, which Sharma needs to focus on. Banning agriculture exports is a knee-jerk Indian pastime, but the impact on exports is significant. Indeed, last year’s cotton exports ban led to supplies falling and so hit even garment exports! Similarly, part of the commerce and industry minister’s job is to ensure textile modernisation funds don’t get hit (as they have)—this and various SSI reservations, as well as the failure to convince the government to clear the MGNREGA-type labour proposal of textile mills, has ensured India’s textile exports continue to flounder. Details of Cabinet decisions are not made public, but the commerce minister needs to forcefully oppose moves that hurt his core constituency. While the Prime Minister promised $5 billion worth of credit lines to Africa last year and promised to help develop vital infrastructure there, what’s happened to that? Trade in countries where India has a low presence gets facilitated by credit lines, so a follow-up of this is vital. Similarly, while several FTAs have been signed with great fanfare, they haven’t delivered—Asean’s share in India’s export basket, at around 12%, is not too different from that of the UAE. Korea’s share of India’s exports basket has actually fallen since the FTA got signed. In the immediate term, there’s little any commerce minister can do to raise exports, but even medium-term exports won’t take off if such nuts-and-bolts issues are ignored. And let’s not forget IMF forecasts for trade volumes are different for advanced and developing economies—while advanced country exports are forecast to slow to 2.3% in 2012 from 5.4% in 2011, those for developing countries are projected to slow much less, to 5.7% in 2012 from 6.6% in 2011.


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