Domestic structural issues, and not external factors such as global demand and currency headwinds, are pulling down merchandise exports,says a report.
"While policy disruptions have been transitory, there are structural issues dogging the country's export competitiveness. High exports growth, particularly in the labour-intensive sectors, is vital to sustaining employment- generating growth," Crisil said in a note today.
The report said decelerating exports at a time when the global environment is becoming more conducive for trade is "disquieting" and the country's 9 per cent exports growth lags Asian peers like Vietnam, South Korea and Indonesia who have been taking advantage of the stronger global trade growth.
"Improving global growth and stable rupee suggest that domestic developments might have had a greater role to play in the current export slowdown," it said and pointed out that small businesses in sectors like gems & jewellery, textiles, and leather, which are labour intensive, have been hit by the GST rollout.
Export growth in labour-intensive sectors has been much lower than the overall shipment growth this fiscal, it said, adding disruptions due to GST are transitory in nature.
"The revealed comparative advantage, or generally speaking, competitiveness of these labour intensive sectors, was already on the decline," it said, and pointed out it's the structural issues that are restricting the country's export competitiveness.
It said the current account deficit has climbed to a 4-year-high of USD 14.3 billion in the first quarter due to trade deficit ballooning to a four-year high of USD 41.7 billion up from USD 19 billion a year-ago.
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