India’s exports in tune with global demand: FIEO

Contrary to popular perception, a study has found that exports from India are in sync with global demand and as such significantly raising India’s exports may be a difficult task.

Analysing India’s exports, the Federation of Indian Export Organisations (FIEO) has pointed out that more than 50 per cent of India’s exports — across the top 200 product lines — are part of 58 per cent of global imports of the same products.

Therefore, at an aggregate level, exports from India square with global trends in imports, FIEO has said, adding that, this represents a long-term trend.

The findings go against the long-held view that India’s exports suffered from low growth due to their not being aligned with the global import demand. The same argument had been made earlier this year in a report on the sector by HAC Prasad, senior economic advisor at the finance ministry.

“We have requested the government to provide additional support to these 200 product lines,” said Ganesh Kumar Gupta, president, FIEO.

The product lines include items such as milled rice, unprocessed diamonds, animal meat, apparel, footwear, automobiles, and iron products.

However, India’s global export share across these lines is only 1.43 per cent. An increase of share by even 0.50 per cent would add to over $80 billion to exports, Gupta added.

The issue has been part of discussions between the government and exporters on the Foreign Trade Policy (FTP) for 2015-20, which is currently undergoing its mid-term review.

India’s share in overall world exports remains minuscule, accounting for only 1.6 per cent in 2015, while China’s was 13.8 per cent. The report targets a 5 per cent share in the medium term. “For this, exports should reach $882 billion by 2020, which means the export growth rate needs to be around 27 per cent compounded annually (CAGR) in the five years (20162020), assuming global growth continues at the present CAGR of 1.5 per cent (2010-15).” the report by Prasad had said.

A 27 per cent growth rate is also imperative for achieving the government’s target of exporting goods worth $900 billion by 2020 under the FTP.

However, FIEO has raised doubts whether this can be achieved.

“With global trade growth forecasts still slow at 2.4 per cent, I’m expecting a compound growth rate of 15 per cent annually for India’s exports,” FIEO Director General Ajay Sahai said.

This would allow exports to reach $700-750 billion by 2020, he added

Discussions on the FTP include issues raised by exporters regarding the treatment of current incentive schemes for exporters under the upcoming goods and services tax (GST) regime.

Exporters are now allowed duty-free imports of goods used for manufacturing export products. However, under the GST, they would have to pay the duty upfront and apply for refunds later.

While the government had earlier promised the duty would be refunded within the first seven days of submitting the complete application, it later added a further step of acknowledging each claim within three days after that.

Commerce and Industry Minister Nirmala Sitharaman had said that provisions had been made for additional refunds to the tune of 6 per cent interest if payments were late. The last 10 per cent of refunds would be subject to verification done by the revenue department.

However, Gupta said the interest on delayed payment would be paid only after 60 days.

A three-member committee including Commerce Secretary Rita Teaotia, the head of the committee on duty drawbacks, GK Pillai, and a finance ministry official will submit its findings to the GST Council, which will have the final say.

The other issue is that under the GST if exempt goods become inputs for products used finally for exports, export credits will not be provided for those products.