BUSINESS

India’s export push to face headwinds

Choppy seas:India’s goods exports for 2017-18 may fall below $300 billion, says Mr. Deora.  

India’s efforts to increase exports could face several external and domestic challenges in the coming year.

“(In 2018), global trade may not perform as strongly as in 2017,” Standard Chartered cautioned in a recent note to clients. “Asia, the region most open to trade, cannot count on the same degree of external support that it received in 2017.”

Among the many factors, the bank listed multiple political event risks — including in the Middle East and Europe (‘possible polls in Germany and the Brexit negotiation process’) — which could knock the markets, and global growth, off track in 2018.

Earlier this month, the Centre announced incentives to the tune of Rs. 8,450 crore in its mid-term review of Foreign Trade Policy to help increase exports of goods and services, particularly from labour-intensive segments and small firms as well as to boost job creation and value-addition in the country. The announcement came in the backdrop of India’s shipments contracting in October — the first after 14 successive months of positive growth — in the impact of the Goods and Services Tax (GST).

The Centre also informed Parliament recently that it “has been actively engaging in regional and bilateral trade negotiations with a view to diversifying and expanding the markets for its exports as well as ensuring access to raw materials, intermediates and capital goods for stimulating value added domestic manufacturing.” Citing the “current protectionist environment”, it said building a ‘brand India’ would be a key measure to push India’s export of goods and services.

Working capital issues

Though exports posted a healthy 30.5% growth in November, a Nomura report said “growth in labour-intensive exports (leather products, ready-made garments) remains weak, possibly because of working capital issues due to delayed GST refunds.” While trade data reflected a solid export rebound, with imports remaining elevated, the current account deficit (CAD) could widen to 2-2.5% of GDP in Q4 from 1.2% in Q3. The CAD may widen to 2% of GDP in 2018 from 1.5% in 2017, mainly due to higher oil prices, it observed.

Ramu. S. Deora, a non-official member of the Board of Trade, said India’s goods exports for 2017-18 is likely to be below $300 billion,much lower than the $314.4 billion in 2013-14 and $310.3 billion in 2014-15. In 2016-17, the country’s goods exports were $275.8 billion.

He, however, said measures, including lower interest rates, incentives for small firms to take part in global exhibitions as well as reducing their tax burden would boost exports.

These steps, along with expediting GST refunds and improvement in logistics, could further boost exports.