‘Withdrawing export sops will make us uncompetitive’

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The current year has seen a sharp improvement in Indian exports, and growth has surged much faster than expected, putting an end to the pessimism that reigned in the first half of the last fiscal year. Though a depreciation of the rupee is one reason why exports have picked up, buoyancy in shipments to regions like Africa and Latin America has also contributed to the turnaround. In an email interview with FE’s P Raghavan, Federation of India Export Organisations (FIEO) president Ganesh Kumar Gupta discusses India’s export recovery. Excerpts:

Indian exports have picked up sharply from the lows of the beginning of last year. Was this sharp turnaround expected or was it a pleasant surprise?

The rupee appreciated by over 12% in 2007, but in the last six months or so, it has depreciated by about 10%. Exporters, who have adjusted to the appreciating rupee are now in a comfortable situation and have become more competitive. Frankly, none of us expected the dollar to breach the Rs 44 mark. We have all been advised to live with a strong rupee and, therefore, the turnaround has come as a pleasant surprise.

How much of the export recovery is due to global trends and how much is due to India-specific reasons?

The world trade outlook is not very encouraging. The growth forecast for 2008 and 2009 point to a slowdown in world trade growth. The IMF has continuously updated its forecasts on various economies and now projects a growth rate of about 1% in the US and about 2% in the EU. Fortunately, our exports to other destinations like Asean, Latin America and Africa is showing much better growth.

I should admit that the export recovery is primarily due to India’s specific reasons, including exchange rate movements, but high inflationary pressure at home and infrastructure bottlenecks are the twin factors that we need to address quickly to maintain this buoyancy.

How much has the recovery got to do with price and exchange rate movements and how much can be explained by volume growth? Give us some examples?