The government is also looking at further improving exports in employment-intensive sectors, including agriculture and textiles and garments—and improving value-addition in sectors like gems and jewellery, a top government official told FE.
Amid talks of stimulus for certain sectors, including trade, to prop up growth, the government is considering adopting a two-pronged strategy to achieve higher exports growth — to promote more value-addition in goods, and to diversify the country’s services product basket to reduce traditional reliance on the IT sector. The government is also looking at further improving exports in employment-intensive sectors, including agriculture and textiles and garments—and improving value-addition in sectors like gems and jewellery, a top government official told FE. Even measures could be initiated to promote more sophisticated level of value addition in engineering goods, said the official. Exports have faltered in recent years, thanks partly to a drop in commodity prices globally, although outbound shipments in volume terms have risen at a faster pace.
With the developed world resorting to protectionism, restricting the free movement of skilled professionals, India will be stepping up focus on diversifying away from IT services, which account for roughly 60% of our services exports. The commerce ministry has identified areas such as tourism, healthcare, wellness services, entertainment, legal advisory services and accounting for greater focus, to start with. Subsequently, the country’s education sector has to be opened up further, said the official. Various departments of the government are working on specific measures to improve exports and details are being worked out, said another official. Earlier this month, commerce and industry minister Suresh Prabhu said the share of exports in India’s gross domestic product (GDP) needs to improve significantly.
Exports growth slowed down consistently since April before rising again in August, although the phase of contraction noticed between November 2014 and May 2016 is well over. Exports-to-GDP ratio fell to 19.4% in Q1 FY18, the lowest in the curent GDP series (with 2011-12 base year) and compared with 21% in the previous quarter, showed the latest GDP data. According to the second volume of the Economic Survey for 2016-17, exports need to grow at 26.5% annually for the next five years for India to reach a “respectable’’ 5% share in world trade from the existing 1.7% it has been stuck at since 2011. This could be achieved only through reforms in trade policy by diversifying exports, rationalising tariffs and developing world class export infrastructure, it added. India’s exports grew 4.7% in 2016-17 after two years of continuous decline.
However, merchandise export value may have grown just 5% in 2016-17 after two successive years of contraction, but volumes of outbound shipmentsmostly rose at a faster pace last fiscal, according to the official data. This indicates fluctuations in global commodity prices continue to influence India’s exports value more than any worthwhile slowdown in overseas demand. As many as 19 of the top 30 commodity segments (in which data in both volume and value terms are available) witnessed export volumes either rising at a faster pace or dropping at a slower rate than the shipment value in 2016-17. Similarly, 21 of these 30 commodity segments—including petroleum products, iron and steel, marine products, spices, buffalo meat, aluminium—registered growth in export volumes in 2016-17, against 15 in the previous fiscal.
These 30 segments together accounted for 45% of the total exports value (in dollar terms) in the last fiscal. Even in 2015-16, the global commodity price crash was the main driver of a 16% contraction in export value, as export volumes in many cases had increased, showed the data.