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Exporters shouldn’t rely on Rupee fall to be competitive: Piyush Goyal

Commerce and industry minister Piyush Goyal says exporters shouldn’t rely on the crutches of rupee depreciation to stay competitive, and that a strong domestic currency is good for a net importer like India.

Exporters shouldn’t rely on Rupee fall to be competitive: Piyush Goyal
Commerce and industry minister Piyush Goyal (IE)

Commerce and industry minister Piyush Goyal says exporters shouldn’t rely on the crutches of rupee depreciation to stay competitive, and that a strong domestic currency is good for a net importer like India. “I’m happy that the Indian rupee has shown more resilience than most of the currencies in recent years,” he told Banikinkar Pattanayak in an interview. The minister expects Indo-US trade to jump from $159 billion to at least $500 billion in the next six to eight years. Goyal, who attended the first in-person ministerial of the Indo-Pacific Economic Framework for Prosperity (IPEF) last week, says India could consider joining the trade pillar of the US-led initiative if it gets a good deal that is in the national interest. Excerpts:

On the desirable rupee level to make export competitive

There is no comfortable or uncomfortable level of the rupee, which finds its own place. The currency movement of a country against the dollar is driven by a number of factors—deficit, capital flows, inflation and risk-reward ratio in each country. I’m happy that the Indian rupee has shown more resilience than most of the currencies in recent years.

In fact, the rupee depreciated at a CAGR of about 3.25-3.5% against the dollar until 2014 (for about two decades). After that, the rupee has depreciated at a CAGR of about 2.5%. So that’s a significant improvement in the strength of the Indian rupee. Going forward, the rupee is likely to retain its strength. I am one of those who believe that a strong Indian rupee is, in fact, good for the country.

I don’t think exporters should rely on a depreciating rupee to stay competitive. Instead, they should stand on their own feet on the basis of quality of products and the ability to serve the needs of customers.

Also read: Industrial production growth slows to four-month low of 2.4 pc in July

On EU move to scrap GSP benefits from next year

I don’t think the GSP (generalised system of preference), under which select Indian products are exported to the EU at zero duty) is a necessary tool to widen bilateral trade engagement. It’s better to have a free trade agreement (FTA) with the EU, which we are focussed on. Without the GSP (with the US, which rolled back such benefits for India in 2020), our exports (to the US) have not suffered one bit. I believe our exporters will be able to supply significantly to the EU on the basis of their own strength, even without the GSP benefits.

On FTAs India is firming up

Unlike what used to happen earlier (during the UPA period), FTAs are now being firmed up after a lot of consultations with a broad range of stakeholders where domestic industry is treated as a partner. Therefore, I feel each of the agreements will help us grow trade.

Exports will grow, and, of course, there could also be some growth in imports. Ultimately, economic activity grows both ways. So, I see overall international trade taking a big upswing.

As for exports, we are very confident that by 2030, India will achieve annual goods exports of $1 trillion and services exports of another $1 trillion. This will drive up the export share in overall gross domestic product. And this has been defining feature of developed economies as well (larger share of trade in GDP). That is the effort and direction in which India is moving today.

On scope for further trade expansion with largest partner US

In fact, sky is the limit. There is scope for further expansion in India’s exports to the US in every possible sector, given the size of the American market and the fact that it’s a big player in international trade and is looking for a massive expansion in technology. I think the Indian IT sector, particularly, will stand to gain consistently because of the huge talent pool that we have. In goods, whether it’s textiles, ceramics, or auto components (and going forward cars), electric vehicles, there is a huge scope. We have to focus our energies on producing high-quality products at competitive prices. We aim to raise bilateral trade with the US from the current $159 billion to at least $500 billion dollars in the next six to eight years. Also, the US is going be a big source of investments in India as well.

Also read: Inflation rises to 7 per cent in August; remains above RBI’s comfort level for 8th month

On export target for this fiscal

I am doing comprehensive stakeholder consultations on it. It’s not yet decided, as the situation across the globe is in a flux.

On likely talks on the IPEF trade pillar with the US, and the way forward

We have a trade policy forum where all bilateral issues are discussed (with the US). As such, there will be discussion (on the trade pillar) at the IPEF. We will also participate in those discussions as an ‘observer’ and whatever will be in India’s interests, we will do that. You don’t necessarily have to do what others are doing. If we get a deal that is good for the country, we can also join (the trade pillar) later.

We have the status of an ‘observer’. This was just the first in-person ministerial discussion (on the IPEF). We follow a comprehensive process before joining an agreement. We have to see what level of commitments we have to give (at the IPEF).

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