Indian exports decline as world trade growth turns negative

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Arun Kumar | 09 Mar, 2009
India registered its first every year-over-year decline in exports as world trade growth turned negative in the last quarter of 2008, raising fears of a protectionist backlash, according to a new world bank report.

Deteriorating growth in global trade has been underway for some time, said the bank in a paper for next Saturday's meeting of the Group of 20 finance ministers and central bank governors. But "in the last quarter of 2008, trade growth turned negative, raising fears in many corners of a protectionist backlash."

Noting that of the 51 economies reporting fourth quarter data for 2008, 36 show double-digit declines in nominal exports relative to a year ago, the paper said manny European countries, including the United Kingdom and Spain, as well as developing countries registered a drop in exports of 20 percent or more.

In October, India registered its first every year-over-year decline in exports (of 15 percent), following growth of 35 percent in the previous five months.

With the economic crisis projected to increase poverty by around 46 million people in 2009, the bank said, "while labour markets in the developing world will take a while to experience the full effects of the on-going global contraction, there is already clear evidence of the fall-out."

So far, the most affected sectors appear to be those that had been the most dynamic, typically urban-based exporters, construction, mining and manufacturing.

The latest estimates from the labour ministry in China show 20 million people out of work. In India, over 500,000 jobs have been lost over the last 3 months of 2008 in export-oriented sectors like gems and jewellery, autos, and textiles.

ILO forecasts suggest that global job losses could hit 51 million, and up to 30 million workers could become unemployed.

In response to rapidly deteriorating growth, the bank noted that New Delhi has allowed the India Infrastructure Finance Company Limited (IIFCL) to raise Rs. 400 billion, or 0.7 percent of GDP, to help with the financing of projects, largely for road and ports, that were being implemented as public-private partnerships (PPPs).

The additional resources being made available through the IIFCL will refinance loans originally provided by commercial banks.

"This will ensure that these projects, which will help address some of the infrastructure bottlenecks that have been a huge constraint on India's long-term growth, are able to proceed, and help support aggregate demand and protect jobs during the economic downturn," it said.