|TPP or bust!|
|Saturday, 24 October 2015 00:00|
That’s the real antidote to India’s falling exports
Thanks to the current account deficit (CAD) remaining under control—Q1FY16 CAD was a mere 1.2% of GDP—despite exports contracting for the tenth straight month, India’s policy establishment seems to have been lulled into a false sense of complacency.According to a news report in Mint this week, the PMO has asked the commerce ministry why it needs to give interest subsidies for exporters when RBI has cut rates and when the rupee has depreciated. Apart from the fact that what matters is relative depreciation vis-a-vis competitor exporters, the real big worry is that the global export game has changed forever. During 2004-08, when global GDP was growing at around 5% per annum, global trade was growing at roughly double the pace at 9-10%; now exports are growing slower than GDP—mostly that’s a China phenomenon since, with more backward integration, China imports less per unit of export, and now even its exports are collapsing. The picture is worse in value terms—this year, while global exports are projected to rise 3%, they are expected to fall 11.2% in value terms; for 2016, while volumes are projected to rise 3.9%, the growth is a mere 2.7% in value terms. Given this, it’s hardly surprising then that India’s September exports contracted 24.3% yoy and, within this, petroleum fell 60.4%, engineering goods 22.8%, readymade garments 12% and even gems & jewellery 18.8%.