Editorial     

Published: Nov 30, 2022
Updated: Nov 30, 2022

Exports, the Cinderella child

It is really unfortunate that at a time when the Indian currency is fast depreciating against the US dollar and their respective currencies and trade deficits are widening, overall Indian exports have recorded a sharp 16.7 per cent fall during October 2022. If trade and industry circles’ opinon is any guide, there are no possibilities of any improvement in exports during November and December.

According to data released by the Ministry of Commerce and Industry, India’s merchandise exports declined by about 16.7 per cent at $ 29.78 billion, touching a 20-month low, while imports slowed to 5.38 per cent for an eight-month low of $ 56.69 billion. As a result, the trade deficit (the gap between exports and imports) widened to the sharpest seen since June 2020. The gap between exports and imports in October is 66 per cent higher than $17.87 billion in October a year ago.

According to official data, exports from key sectors, including engineering, readymade garments, gems and jewellery, and plastics and linoleum fell by over 20 per cent in October while cotton yarn and jute goods exports slumped by over 40 per cent as demand slowed in India’s major markets amid high inflation and fears of a recession. Outbound shipments of iron ore fell by 90 per cent in value terms in October, led by a steep decline in international prices.

Besides slowing demand, factors which also contributed to the marked double-digit fall in exports include export restrictions by India on segments like wheat, steel, iron and petroleum products.

The dismal external environment could mean tough times for the Indian economy. What with the rupee’s value on the decline, the trade deficit widening and the foreign exchange stock dwindling, there was an urgent need to give a boost to exports. However, in October, just the opposite has happened and exports have sharply fallen.

Of course, neither is the global economic outlook cheerful. The World Trade Organisation has maintained that global trade growth may slow to just 1 per cent in 2023 from 3.5 per cent in 2022 amid elevated global uncertainties. But it would be ridiculous if the government took consolation in the declining global trade. How can one forget that though world trade growth is expected to slow down from 3.5 per cent in 2022 to just 1 per cent in 2023, North America, West Asia and Latin America are doing very well. India should analyse the factors that help these countries push up their exports and learn from their performance.

Ridiculously again, a government spokesman attributed the steep fall in exports in October to the festive holidays. According to him, during the Diwali and Dusshera festivals, the industrial wheels slow down as workers remain absent from work. Are these festivals unexpected? Can we not plan accordingly? Last year too these festivals came along, but this October there has been a steep fall in exports as compared to October 2021.

If the export performance is so dismal in October 2022, the global economic prospects going ahead are highly disappointing and external headwinds could impact India’s overall economic growth going forward. The need of the hour is to look at the positive opportunities that lie ahead for India. For example, China, the largest exporter in the world, is facing serious problems on the economic and political front. Why are systematic and effective steps not being taken to penetrate those markets where Chinese exports are on the decline?

Again, why should exports be banned where domestic supplies are sufficient — for example, steel. Moreover, why are no steps being taken to promote exports where there is tremendous scope – for example, speciality chemicals. Though speciality chemicals are a base for excellence in so many areas, why has the sector not received adequate attention? There is no planning or necessary execution at the government level, especially for this sector which is in a position to earn substantially higher foreign exchange through bumper exports.

It is an established fact that new geographic markets offer business opportunities to create new revenue streams. India should strive to diversify markets by entering new markets. The government should take steps to promote exports in new geographies. But sadly, the Indian government is spending more time on political agendas rather than paying serious attention to economic issues.