Business Today – August 25, 2019

price of agricultural produce tends to dip

sharply when the production volume is up.

The Ministry of Commerce and Industry

has recently came out with an agri export

policy to address this pain point. However,

India must focus on all three critical com-

ponents – exports of manufacturing goods,

agri produce and services – if it wishes to

improve its trade prospects.

It is easier said than done. In June this

year, merchandise exports fell 9.71 per cent

to $25.01 billion, hitting a 41-month low

as almost all major sectors earning foreign

exchange (oil, petroleum products, gems

and jewellery and engineering goods) reg-

istered subdued or negative growth. For-

mer commerce minister Suresh Prabhu ad-

mits that Indian exporters were struggling

for most of the time during 2014-2019, the

first term of the Modi government. It was

only in 2018/19 when the country was able

to earn more foreign exchange via exports

than what it made in 2013/14 and thus

set a new record. Prabhu, during whose

tenure exports peaked, attributes it to the

changes he spearheaded, but the current

numbers suggest that the growth was tran-

sient and the road ahead could be tough.

Seen in that context, Goyal’s absence in the

RCEP meeting raises eyebrows.

inference was made in the cases of four Asian countries – Thai-
land, Indonesia, Malaysia and South Korea. “The global market
is extremely competitive with firms which are able to produce at
the lowest costs having the ability to gain market share in exports.
So, the average productivity of firms in the economy becomes cru-
cial to export competitiveness. Capital investment enhances total
factor productivity, which in turn enhances export performance.
Therefore, investment becomes crucial to enhancing export per-
formance,” the survey says.
A quick look at India’s economic growth also affirms that high
GDP growth has always been paired with even higher growth
in exports ever since the economic liberalisation two decades
ago. “Exports grew 20 per cent year over year when the Indian
economy grew the fastest. Globally, too, no middle-income or
low-income country has ever taken off without robust growth in
exports. Exports make you (the domestic industry) more com-
petitive and allow you to implement structural changes, leading
to better technology adoption and more investments in innova-
tions. That is why we should focus on exports and not just rely on
the domestic market even though that market has high growth
potential,” says Rajat Kathuria, Director and Chief Executive of
Indian Council for Research on International Economic Rela-
tions (ICRIER). Exports accounted for 17 per cent of GDP in
2010/11 compared to 12 per cent in 2017/18 – a big decline, he
adds.
Simply put, without a significant rise in exports, capacity ex-
pansion in manufacturing and its subsequent contribution to
GDP from the current 17 per cent to 25 per cent will be near
impossible. Even the promise of doubling farmers’ income by
2022 looks unrealistic without an export push as the domestic

BACK TO START

Share of merchandise

exports in GDP (in %) is

back to what it was about

a decade ago

SAME PACE

Export of services has

increased in value but

its share in GDP (in %)

has remained stagnant

2003/04 2018/19 2003/04 2018/19

4.42 7.65

10.52 12.12

August 25 I 2019 I BUSINESS TODAY I 51

2011/12 2012/13 2013/14 2015/16 2016/17 2017/18

GDP at constant prices. Combined

expenditure of central and state

governments. Source: CMIE

7. 3 8.2 7. 4
   7.1 7

11.3 13.4

13.9

16.56

-9.49

5.79

8.17

7.7 5

14.5

7. 9

8.0

6.39

7. 4

5.24 5.5

12.9

11.3

28.26