Page 34 - Banking Finance December 2016

ARTICLE

INDIAN

EXPORTS- THE

CHALLENGE FOR

BANKERS AND A

WAY FORWARD

T he continuous decline in the exports from India come is also being adversely affected. Bankers are feeling

over the past more than a year and a half has
tremendous pressure on this front and finding it difficult to
been one of the major burning issues. A lot of
cope up with the situation of declining export credit, fall-
debates and discussions have taken place to find
out the real cause of this steady decline. In 2013-14, India's ing foreign exchange earnings and mounting NPAs.
Some might argue that this downfall in exports is the out-
total export was worth $314 billion and it declined to $310
come of weak global demand, and claim that everything is
billion in 2014-15 and further in 2015-16, it declined to $
261 billion. going to be perfect as and when world economic conditions
improve. According to the data released by the Interna-
There are some people who opine that it is the outcome of tional Monetary Fund, the total volume of global trade has
our exchange rate policy which makes Indian rupee over fallen by 0.62 per cent in 2015 and a similar trend is ex-
valued in terms of Real Effective Exchange Rate (REER). As pected to prevail in 2016.
a result it is having adverse effect on our exports and our
For the last few years, the growth in global trade is less
exports are becoming relatively costlier. Banks are not ex-
ception to it and their credit portfolio and non interest in- than that in global gross domestic product. Let us explore
what is the root cause of this decline in exports and what
About the author are the remedies available for future sustainable growth:

Deepak Nagar Exports growth and exchange rate:
Chief Manager Many policy thinkers argue that an overvalued rupee is
(Faculty Foreign Exchange) partially responsible for the recent decline in India's ex-
Union Bank of India
Staff College, Bengaluru ports. To understand the relationship between exports and
exchange rate, we need to look at the growth of India's

34 | 2016 | DECEMBER | BANKING FINANCE

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