‘Export growth slowdown disquieting’

GST disruptions transitory but structural issues need to be addressed: Crisil

It is disquieting that India’s export growth is decelerating at a time when the global environment is becoming more conducive for trade, according to Crisil.

Though the IMF expects global growth to rise to 3.6% in 2017 from 3.2% in 2016 and global merchandise trade is expected to grow stronger at 4.2%, boosting trade intensity of growth for the first time in six years (that is world trade growth being higher than world GDP growth), India’s exports have not been able to take as much advantage of the stronger trade growth unlike many of its Asian peers like Vietnam, South Korea and Indonesia, according to a Crisil statement.

“... the subdued export performance in recent months cannot be attributed to unfavourable currency competitiveness,” it said, adding a relatively stable rupee and improving global growth suggest that domestic developments might have had a greater role to play in the current export growth slowdown — in particular the disruption caused by Goods and Services Tax (GST) implementation. “This is evident in the low export growth in sectors such as gems and jewellery, textiles, and leather.

“Incidentally these sectors are also the most labour-intensive. So, employment in these sectors could have faced a setback,” Crisil added.

Structural issues

Disruptions due to GST are transitory but structural issues plaguing these sectors need to be addressed to boost their competitiveness in the global market, it said.

The competitiveness of these labour-intensive sectors has been on a sequential decline, according to the rating agency, adding that “high export growth, particularly in the labour-intensive sectors, is vital to sustain growth that is employment intensive.”

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Printable version | May 28, 2020 7:35:44 AM |

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