Q. Ex­ports have been sub­dued too, in some part due to global trade head­winds. Does In­dia need a dif­fer­ent strat­egy?

India Today - - COVER STORY -

A. N.R. BHANU­MURTHY

Many ar­gue that In­dia needs an ex­port-led growth strat­egy, and the pol­icy pre­scrip­tion for this is to al­low the ru­pee to de­pre­ci­ate. But this is an em­pir­i­cal question and the re­la­tion be­tween ex­ports and ex­change rate is not only am­bigu­ous but also varies with time. Right now, the em­pir­ics do not sug­gest such a strat­egy. The only thing one can do is to explore the sec­toral mea­sures to boost ex­ports and not the ex­change rate route.

AJIT RANADE

See answer to last question.

MAITREESH GHATAK

The fall in ex­ports started much ear­lier than the global trade head­winds. Be­tween 2014-17, ex­ports grew at an an­nual rate of 1.68%; in the two pre­ced­ing decades, the rate of growth was 13% and 14% re­spec­tively. Global head­winds are not help­ing, but then com­pa­nies af­fected by the US-China trade dispute are re­lo­cat­ing their sup­ply chains to Bangladesh and Viet­nam, and not In­dia.

D.K. JOSHI

In the past five years, In­dia’s ex­port slow­down has been steeper than the global aver­age. This can be at­trib­uted to de­clin­ing com­pet­i­tive­ness rel­a­tive to peers such as Viet­nam and Bangladesh. More re­cently, weak global growth and in­ten­si­fy­ing trade wars and in­ward­look­ing poli­cies have created new chal­lenges to grow­ing ex­ports. Glitches in the im­ple­men­ta­tion of the Goods and Ser­vices Tax also tem­po­rar­ily added to the ex­porters’ woes. How­ever, ris­ing trade ten­sions be­tween the US and China have opened the doors for other coun­tries to sub­sti­tute the ex­port goods im­pacted by tar­iffs. In­dia has al­ready seen some gains from China. Its ex­ports to China grew in tar­iff-hit prod­ucts such as cot­ton, or­ganic chem­i­cals and petroleum prod­ucts. How­ever, in the largest traded items be­tween the US and China—such as elec­tri­cal ma­chin­ery and equip­ment, and me­chan­i­cal ap­pli­ances— In­dia still lacks com­pet­i­tive­ness to scale up to required trade vol­umes. At­tract­ing for­eign investment in these sec­tors can help In­dia im­prove its com­pet­i­tive­ness. The US-China war is lead­ing to a shift of pro­duc­tion bases out of China and re­struc­tur­ing of sup­ply chains, paving the way for In­dia to plug into new net­works. In­dia must be proac­tive in reap­ing this op­por­tu­nity by tak­ing steps to im­prove com­pet­i­tive­ness, at­tract investment and ink new trade agree­ments.

R. NA­GARAJ

In prin­ci­ple, In­dia should be able to im­prove ex­ports as its share in global trade is mi­nus­cule, at less than 2%. How­ever, this may not be the op­por­tune mo­ment to tar­get ex­port growth as a trade war seems to be erupt­ing, on ac­count of Trump’s uni­lat­eral ab­ro­ga­tion of in­ter­na­tional trade rules, up­end­ing three decades of glob­al­i­sa­tion.

D.K. SRI­VAS­TAVA

The global econ­omy and world trade are evolv­ing into a new mode char­ac­terised by in­ward-look­ing poli­cies of the large de­vel­oped economies. In­dia needs to re­align its trade poli­cies and strat­egy to the chang­ing pro­file of world trade.

PRONAB SEN

Yes, of course. But this is not a new is­sue: it has been around for at least 5 years, but the gov­ern­ment does not think it nec­es­sary to do any­thing about it.

“IN PRIN­CI­PLE, IN­DIA SHOULD BE ABLE TO IM­PROVE EX­PORTS, BUT IT IS NOT AN OP­POR­TUNE TIME TO TAR­GET EX­PORT GROWTH AS A TRADE WAR SEEMS TO BE ERUPT­ING” —R. NA­GARAJ

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