Page 36 - Banking Finance December 2016

ARTICLE

Exports growth and global growth: is a need to build the primary infrastructure in terms of
better multi modal transportation for improved road con-
Indian exports appear to be highly dependent on global
nectivity to ports, rail heads, airports and inland waterways,
growth. Sharp fall in global growth after the financial crisis
faster throughput at ports and shorter dwell time, faster
led to a corresponding decline in India's exports. Therefore
movement of rakes by railways and quicker air cargo move-
ignoring global growth while examining the relationship
ment with all the related trade facilitation measures in
between export growth and exchange rate, does not give
place. In addition, the creation of a supportive infrastruc-
the correct picture.
ture for exports, including more laboratories for testing,
While the indirect cause for a slowdown in global trade is a more tool rooms and plant quarantine facilities, larger
slowing global economy, the breakdown of export numbers trade facilitation centers and enhanced cold storage facili-
shows that it is crude oil that has played a crucial role in ties for pharmaceutical and perishable goods.
exports decline. While the demand for petroleum products
was impacted by slowing demand, the sharp cut in crude In addition the rules regarding the movement of goods
oil price has also impacted the value of Indian exports. within the country, from one territory to another, must be
more liberal and business friendly. There is need for amend-
The other major component of Indian export, gems and ments in the laws, practices, regulations and taxation re-
jewellery, has been hurt by slowing consumption of discre- gimes of various states. It appeals for concerted action from
tionary items, and the export of machinery and capital relevant departments at the central and State government
goods is negatively impacted by lower capital expenditure, levels. The newly passed GST Bill may prove to be of great
especially in commodity exporting countries. help in this direction. The role of agencies involved in for-

eign trade should be more of trade facilitators rather than
Other factors and export growth:
that of controllers. Therefore equal emphasis should be on
India's exports are sensitive to relative price competitive- domestic reforms in addition to outer measures like vari-
ness and global demand. It supports the perception that ous trade agreements, to boost country's trade ecosystem.
the current decline in India's exports is caused by a fall in
global demand and loss in price competitiveness. This is Another factor behind the steep decline in India's exports
particularly true when our exports are supply-driven and not could be over-dependence on a few markets such as the
necessarily dependent on their demand in other countries. US and European Union countries which together account
In addition, some of the following factors may also have for 40 per cent share in India's total exports. It is particu-
some impact on overall Indian export growth and may not larly important in view of falling demand, stagnant growth
be ignored completely. and resultant aggregate demand in these countries. The
diversification of export markets is important in the con-
There is a strong inter-linkage between exports and imports
text of future sources of global aggregate demand and the
due to increasing dependency of export on imported inter-
changing dynamics of the global trading through mega re-
mediate inputs, like 'gems and jewellery' or 'oil' exports.
gional trade agreements.
Therefore exporters should discount the benefits available to
them by the measures which liberalise intermediate imports
On the internal front, India should emphasize on reforming
in order to boost exports and make it more competitive in
domestic policies and institutions dealing with macroeco-
the market. In addition, the issues such as lack of reforms in
input markets like those in land, labour, capital, logistics, nomic management (exchange rate, inflation and interest
rates), standards, intellectual property rights, trade facili-
which are hindering our producers to produce goods at com-
tation, and organisations vis-à-vis operational aspects of
petitive rates, should be addressed passionately.
trade and investment rules and regulations. On the exter-
Inadequate infrastructure and capacity building also pre- nal front, India should engage with those trade agreements
vents us from participating in the Global Value Chains (GVC) which would help in securing better market access and can
which plays an important role in developing world class in- diversify our exports and provide greater space for our pro-
frastructure to survive in the international markets. There ducers to participate in global production networks.

36 | 2016 | DECEMBER | BANKING FINANCE

Copyright@ The Insurance Times. 09883398055 / 09883380339