India’s exports may remain a weak link: CRISIL

The Dollar Business Bureau |

India’s exports are likely to remain weak due to subdued global growth, research firm CRISIL said in a report on the Indian economy – ‘Choosing trend over cycle’ released on Monday. The country’s exports as well as imports have fallen down which made the trade deficit remain mute so far, and CRISIL believes this could prove transient.

When there is structural weakness in the trade, imports would increase as domestic demand and investments upsurge, and commodity prices would stabilise. India’s target to double the exports of goods and services to $900 billion by FY 2020 from $470 billion in FY 2015 might prove a tad too ambitious if the current cyclical slowdown lasts and structural issues are not addressed, CRISIL said.

The government’s Make in India initiative, which aims to generate largescale employment and make the country a world-class exports hub, could also be left hobbled, it said. India’s exports have declined for the second fiscal on the trot now. There was a steep 15.9% decline in the exports during the last fiscal as per the Union Commerce Ministry data.

According to CRISIL, a subdued global environment and a sharp decline in commodity prices – especially oil – have been the main reasons for a decline in India’s exports. But it is also true that the decline has been more than warranted. While the world real GDP growth improved from 3.2% in 2009-2011 to 3.4% in 2012- 2014, the country’s real growth of exports came down from 11.1% to 4.1%.

As per the CRISIL report, among India’s top 10 export items, the country does not enjoy competitive advantage in three and has seen competitiveness decline in three others. The present government has been taking a number steps to create a level playing field, which was amply reflected in India’s improved competitiveness rankings in the last two years.

By not being a part of Trans Pacific Partnership (TPP), India risks losing out a significant chunk of its export market to its rivals. The country is negotiating few agreements bilaterally with the TPP members like Australia and Canada, which can secure preferential access for its exports. Similar agreements should be negotiated for the Regional Comprehensive Economic Partnership, the report said.

India also needs to invest in skilling its manpower and developing the infrastructure to be able to attract huge foreign investments and become an international exporting hub, the report further suggested.