The study suggests India to undertake massive investments in vocational ecosystems and infrastructure development to become a world-class exporting hub
The Dollar Business Bureau
India may not achieve its ambitious target of doubling its exports to $900 billion by fiscal 2020 from the current level of $470 billion due to various structural challenges, a study has said.
While the newly-agreed Trans-Pacific Partnership (TPP) and the global cyclic slowdown are the current major deadlocks, the bigger challenge of the country’s export is structural, said CRISIL in its latest research.
“Falling trade intensity of global growth is the external structural constraint while declining competitiveness, infrastructural bottlenecks and labour market rigidity are domestic,” said the report released on Thursday.
The study stressed that a combination of massive investments in vocational ecosystems, creating a large number of skilled workers and rapid development of infrastructure would be essential for the government to attract foreign investment and become a world-class exporting hub.
Merchandise exports, which account for about two-thirds of India’s total exports, have declined for the eleventh straight month in October. Exports have contracted by 17.6% during April-October 2015-16.
“Trade openness, or the proportion of trade to GDP, has shrunk drastically – from a high of 55.6% in fiscal 2013 to 47.1% in fiscal
2015 and further to 42.6% in the first quarter of the current fiscal,” the report said.
Several domestic and global factors including appreciation of the rupee against a basket of 36 currencies, descending competitiveness for India’s key exports items and falling prices of many export items, too, have contributed to the country’s continuously declining exports.
Even real exports of goods and services shrank by 6.5% during April-June period of this year.
While GDP growth across the world improved to 3.4% during 2012-2014 from 3.2% in 2009-2011, India’s real growth of exports came down from 11.1% to 4.1%.
“This suggests the decline isn’t merely cyclical – there are structural elements at play as well. The cyclical component of exports will move up when cyclical factors (world GDP growth, prices) turn favourable, but structural factors, if not addressed, will continue to act as a drag on India's export performance,” the report said.
The report cited the implementation of the Trans Pacific Partnership (TPP), signed between 12 countries that account for over 25% of India’s exports, as one of the major challenges before India’s future exports. “Because of not being a part of the TPP, India risks losing out a significant chunk of its export market to rivals,” it said.
Because of not being a part of the TPP, India may risk losing out a significant chunk of its export market to rivals
November 04, 2015 | 2:45pm IST.