Exports slowdown: It's time to act, not to wait

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Bikky Khosla | 08 Mar, 2016
Latest exports data makes for dreary reading, again. Overseas shipments in January fell 13.6 percent from a year earlier. This is the 14th consecutive month of fall and it is a no brainer to say that this situation deserves immediate attention. But our policy makers do not seem to be much bothered about this decline. Every time after the release of monthly foreign trade data, the blame is placed, in no time, on the global trade environment. There is not an iota of doubt that the global economy is shaking but this should not be an excuse to believe that there is little that anybody can do about our exports downfall. Our exports may start reviving quickly once the global economy improves, but should we just wait and watch till then?

Exports fetched India foreign exchange worth $21 billion in January 2016, $24.39 billion in January 2015 and $26.75 billion in January 2014. These figures show that monthly exports fall in January 2016 accounts to 21 percent in the last two years. Even if we take non-petroleum product exports, shipments fell nearly 10.5 percent y-o-y to $19.12 billion in January 2016. Also, decline in exports from several manufactured goods industries is a concern. Most importantly, engineering exports plummeted 28 percent, with shipments to 19 out of our top 25 destinations witnessing a sharp dip. Exports from some SME centric industries, including textiles and leather also declined considerably in the month. Something needs to be done about this.

The Budget has come with some positive measures, however. Steps like extension of benefit of Section 10AA to new SEZ units, tax exemptions for small business units with a turnover of up to Rs 2 crore, corporate tax cut for companies with turnover not exceeding Rs 5 crore, etc. will give relief to large segment of exporters. In addition, several other Budget measures aimed at promoting ease of doing business will also benefit the sector in the long term. But as far as immediate concerns are concerned, the Budget is visibly lacking, with the only exception in the form of widening of the duty drawback benefits. Most of our export sectors have been facing severe hardships for quite some time now and they urgently need a helping hand.

No matter how far or close our exports may be from a revival, the Centre must recognize that the sector has been facing severe hardships for a long time. Also, the slowdown in exports must be seen as a potential challenge to economic growth as pointed in the mid-year analysis of the economy last year. For a short period, we might be able to achieve fast GDP growth without export growth, but in the long run sustaining high growth rates will require strong growth in exports. In addition, MSMEs in India contribute 40 percent to exports and 8 percent to GDP. Our growth dream may turn into a nightmare if we fail to support this sector adequately.

I invite your opinions.