Exports must for economic growth

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Bikky Khosla | 21 Apr, 2015
We missed the export target. Latest foreign trade data released last week shows that India's merchandise exports for the last fiscal fell to $310.53 billion from $314.41 billion in 2013-14. For the month of March, the decline rate is a steep 21.06 percent, the worst in 67 months. It is not difficult to see that petroleum products played the spoilsport in this downfall, particularly in the month of March, but what is more heart-rendering is the poor performance by sectors like gems and jewellery, chemicals, engineering goods, electronic goods - sectors that earlier contributed the most to the country's total export basket.

This was the third consecutive month of export decline and not at all a sudden development. For the last few months concerns have been raised time and again about the demand slowdown in global markets and its possible impact on our exports. In addition, the WTO has already cut the global trade growth forecast for 2015, considering which it is very likely that coming months could be much tougher. In this situation, I think the Centre should make no further delay in coming up with some substantive measures to prevent the export downfall. Long-term policies, as evident in the recent FTP, are, of course, praiseworthy, but this does not mean that a blind eye can be lent to the immediate concerns.

Meanwhile, the World Economic Outlook published by the IMF and the World Bank forecasts that India's economy may rise to 7.5 percent in 2015 from 7.2 percent in the preceding year. This sounds good. In addition, the report adds that Euro zone, one of the most important markets of India, should do better in this fiscal; the Japanese economy may also get back some strength. But risks are also there - particularly geopolitical risks and exchange rate dynamics are high on the IMF's watch list. In addition, the slowdown in the Chinese economy may have spillover effects on the the Asia region, including India. So, even if the tide rises again for the global economy, we will not be a part of this rising tide, unless now we take care of our falling exports. Exports growth is very important for India to meet its high growth ambitions.

Besides the above developments, the government last week decided to rethink on the proposed new income-tax return form. This is a welcome move. The previous decision was surprising, as it was a clear deviant from the Modi government's ongoing effort to push the country's ranking in ease of doing business rank. I don't think that complicating the tax form will help prevent hoarding of black money. Instead, we should look for some better solutions that rely on intelligent use of technology to track people with large incomes and collect tax from them. We rank 158th in ease of paying tax and we need to make the process simpler instead of making it more complicated.

I invite your valuable opinions.