The government is finally showing some activity in response to the exports crisis. India's exports have fallen for 15 months in a row. The average (year-on-year) fall per month during that time is a sizeable 16 per cent. There are various explanations advanced for this. There is some suggestion that, in volume terms, they are not suffering - as Commerce Minister Nirmala Sitharaman claimed last week. There is also the claim that this is driven essentially by the fall in the price of oil, given that refined petrochemicals are a major export category. However, this explanation founders against the suggestion that non-oil exports have also fallen for a similar length of time, with an average year-on-year fall of nine per cent. There are also the problems cited with world trade and overall demand. But India's peer countries when it comes to exports, such as Vietnam, Bangladesh and Malaysia, have grown exports in this period - Vietnam by almost eight per cent, year-on-year, every month.
Clearly there is something specific to India that is wrong. The external account currently appears comfortable thanks to the oil price fall having driven India's import bill down even further than its exports, and to troubles with domestic demand. But complacency about this situation is unwarranted; major risks remain. After all, if industrial growth picks up, as is expected, imports too will likely rise; and, of course, if oil prices go up, the comfort on the external account might soon disappear.
Thus export growth needs to be revived. This is a battle that must be fought on many fronts. The first priority must, it is true, remain the Doha Round of the World Trade Organization, for India will benefit most from multilateral trading arrangements. But that is not enough. India must also strive to plug itself into the many new regional trading arrangements emerging today. Some progress must be made on India's accession to the Asia-Pacific Economic Cooperation or APEC and Finance Minister Arun Jaitley's suggestion that a move in that direction by November could be expected is welcome. This is important, because it would then provide access to markets of certain countries that are signatories to the Trans-Pacific Partnership or TPP. India must be more pro-active in its commitments at the negotiations for the Regional Comprehensive Economic Partnership, or RCEP, too.
There are too many concerns expressed about revenue loss on account of trade agreements. Trade is no longer about tariffs, but about "behind the border" practices - environment and labour standards, customs procedures and trade facilitation norms. And in any case the cost of being cut out of the emerging regionalist trade architecture is greater than any revenue losses that joining would bring. Last week, the commerce minister also expressed concern about opening up job-generating sectors like retail to foreign investment. This ignores the vast employment potential that capital infusion in such sectors would bring. She said that matters were not so dire, and that the value of exports was falling because of currency volatility. Export weakness cannot be blamed on volatility. But it is true that some of it is due to an overvalued rupee, rendering Indian exports uncompetitive. This is something that the government and the central bank must together acknowledge and address.
