The Hindu Business Line : Export sobs and sops

External trade figures released by the Commerce Ministry for September 2007 and for the cumulative period April-September 2007, that is the first half of the current fiscal, reveal a certain robustness in the external trade that is in keeping with global trends and wider diffusion of growth in the economy. Belying the Cassandras who had predicted a fall in exports with a strengthening rupee, data for September reveal a 19.6 per cent jump in merchandise exports over 12 mont hs; cumulatively, exports in the first six months of the fiscal grew at 18 per cent over the corresponding period last year. Imports, on the other hand, grew 25 per cent over first half of 2006, widening the trade deficit to almost $37 billion from $26 billion in the first half 2006. With the prospect of oil prices shooting to $100 a barrel the average price of the Indian basket of crude, which had remained relatively low at $67.9 a barrel, will zoom past $90 a barrel with a resulting impact on the trade deficit.

More than the widening gap in trade balance, exports are going through a churning that New Delhi would do well to take note of before extending sops. Data for April to July 2007 released by the RBI show that traditional exports — textiles, for example — have been falling. While manufactured exports grew 13 per cent in the period, textiles and textile products fell 12 per cent against a growth of the same rate the previous year. Gems and jewellery exports showed a contrary trend with growth picking up this year compared to a sharp deceleration in 2006. On the other hand, petroleum exports have shown a dramatic spurt this April-July compared to last year with growth more than doubling in value and volume. A study by Assocham points out that such exports grew 73 per cent over the past three years compared with petroleum oil and lubricant imports at 40.6 per cent. The study enthuses that by 2012-13 India would become a net petroleum product exporter at the current rate of growth. Optimistic as that sounds, clearly there is a trend evident between 1999 and 2006 with exports climbing from less than a billion dollars to $18.53 billion, and the policymakers would do well to focus on this.

On balance, the export basket is rapidly changing to mirror the new competitive advantages and the Commerce Ministry must rethink its urge to oblige exporters across the board, especially those complaining about the rupee without making attempts to cut costs and upgrade quality to retain market share.

Related Stories:
Aug crude import up 9.7% on strong overseas margins
Sept exports rise 4.31% in Re terms; imports down
Exports grow 19% in August despite appreciating rupee
$125-b export target for '06-07 fiscal may not be hit

More Stories on : Editorial | Exports & Imports

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Indo-German relations move into high gear

Outsourcing strategy

Export sobs and sops

All eyes on Asia’s sick man

The primacy of politics

Office buildings — New and big need not be the best

Central bankers are fallible

Banks’ profitability