In­dia’s Ex­port Com­pet­i­tive­ness at a Decade Low: Crisil

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In­dia’s com­pet­i­tive­ness in the labour in­ten­sive ex­port sec­tors has been on a de­clin­ing path in the last decade and needs sig­nif­i­cant struc­tural re­forms that need to be ad­dressed, rating agency Crisil said in a re­port.

Crisil an­a­lysed the com­pet­i­tive­ness of the labour in­ten­sive ex­port sec­tors namely, gems and jew­ellery, leather and leather prod­ucts and ready­made gar­ments which showed that these are be­come less com­pet­i­tive over the last decade.

“It is dis­qui­et­ing that In­dia’s ex­port growth is de­cel­er­at­ing at a time when the global en­vi­ron­ment is be­com­ing more con­ducive for trade. The rea­son is not cur­rency strength, but weak­en­ing com­pet­i­tive­ness. This needs to be re­versed if In­dia has to see sus­tain­able, em­ploy­ment-gen­er­at­ing ex­ports growth,” Crisil said.

In­dia’s ex­ports have fallen de­spite a favourable global trade en­vi­ron­ment. The In­ter­na­tional Mon­e­tary Fund (IMF) ex­pects global growth to rise to 3.6% in 2017 from 3.2% in 2016.

“Global mer­chan­dise trade is ex­pected to grow stronger at 4.2%, boost­ing trade in­ten­sity of growth for the first time in six years. Yet, 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,”the rating agency said.

While In­dia’s ex­port growth is 9.5% in this fis­cal so far, for Viet­nam, South Korea, and In­done­sia it was way higher at 23.8%, 18.4% and 17.8%, re­spec­tively.

Crisil’s analy­ses re­vealed that the com­pet­i­tive­ness of these labour in­ten­sive sec­tors, was al­ready on the de­cline since 2006 which was fur­ther im­pacted by de­mon­eti­sa­tion last Novem­ber and the im­ple­men­ta­tion of GST last year

Be­tween 2006 and 2016 the com­pet­i­tive­ness of the gems and jew­ellery sec­tor has de­clined from 6.38 points to 3.96, leather and leather prod­ucts from 3.12 to 1.79 and ready­made gar­ments from 2.43 to 2.22 points, ac­cord­ing to Crisil.

“The 2006-2016 decade saw RCA markedly di­min­ish for three of these sec­tors, with de­mon­eti­sa­tion and GST im­pact­ing fur­ther. So while pol­icy dis­rup­tions have been tran­si­tory, there are struc­tural is­sues dog­ging In­dia’s ex­port com­pet­i­tive­ness,”it added.

In­dia’s cur­rent ac­count deficit (CAD) climbed to a four-year high of $14.3 bil­lion in the first quar­ter of this fis­cal, or 2.4% of gross do­mes­tic prod­uct (GDP) mainly be­cause trade deficit bal­looned to a four-year high of $41.7 bil­lion com­pared with $19 bil­lion in the cor­re­spond­ing quar­ter of fis­cal 2017 as ex­port growth at 9.1%, im­port growth was way faster at 34.6%.

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