Export outlook not so grim

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Bikky Khosla | 14 May, 2013
Our export target for the current financial year has been set at $325 billion, more than one-third lower than the $500 billion target fixed two years ago. The decision was taken, according to the government, considering the ongoing global demand slowdown. Last financial year, the target was $360 billion, but we achieved only $300.6 billion, lower even than the previous fiscal's $305.9 billion. So this time the Centre probably thought it would be better to keep expectations low than promise much.

There is no doubt that the global economy is not in right shape, with some of the world's largest economies performing weak, including the US recovering at an anaemic pace and the EU still reeling under recession, raising fears that the crisis would continue the rest of the year. Also, several emerging and developing economics have been facing challenges at this moment, with growth remaining low in China, Russia and India.

But this is only the one side of the story. Amid gloom, some positive signs have began to accumulate piece by piece. The US economy, for example, is recovering faster than it was earlier expected as reflected by some recent data on consumer spending, housing and autos showing strong rebound. There are also signs of improvement in parts of Latin America and the Caribbean, where growth has sped up from last year. In Asia, China is expected to quicken its growth to 8.2 percent this year while in Japan, some recent aggressive monetary policy measures have renewed faster recovery hopes. The IMF recently lowered its projections of global growth in 2013, but nonetheless predicted a better performance than in 2012.

So, our exporters need not lose heart. At this moment, the global economic outlook is not rosy, but there is enough evidence to believe that things are getting better -- not worse. Pessimism sells, but it never really helps achieve anything. So our exporters, instead of becoming pessimistic about the future, should think how they can move on. Only in the recent past, they have successfully come through even more difficult times, and I see no reason why they won't be able to do better now.

Recently, some government officials and politicians are talking more about the global slowdown and less about the internal challenges related to infrastructure, taxes and tariffs, credit, tax facilitation, etc. that are hanging like a sword of Damocles over our exporters. It seems they are trying to take our attention away from their fiscal mismanagement as a result of which they now have very limited fiscal space available to help the sector. Of course, the global economy is not all positive now, but this does not justify cowering in the bunker until the storm is over.

Meanwhile, export figures for April were released and it is encouraging to see that there is some growth, albeit modest. However, trade deficit widened in the month to $17.8 billion, driven by high gold imports despite several attempts by the government to curb it. This is concerning, and considering the inelastic nature of India's imports, I think exports is the only option available for the government to manage the ballooning current account deficit.