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Could poor exports derail growth plans?
Thu, 19 Mar Pre-Open

The new forecast for GDP has more than one challenge to come true. As we all know, the corporate earnings have been disappointing .There has been further nervousness on account of exports, a key variable of the GDP equation. The exports in the fist two months of the current calendar year have seen a double digit decline. This should be seen in the light of the fact that last quarter is generally strong for exports.

So what is dragging Indian exports down? A slowdown in the global demand, fall in the commodity prices, currency wars , Government's policies (such as gold import restrictions that in turn impact jewellery exports) and lower oil prices are some of the reasons that have led to the decline in the value of exports from India. As mentioned in an article in Business Standard, it is quite likely that India will fall short of the not just the ambitious target set for 2014-15, but may not reach even the levels touched last year. While the much awaited Foreign Trade Policy still remains elusive, even the global factors are not in favor. For instance, decline in the value of Euro has made pricing an issue in the European market , that is one of the key export markets for India.

However, it would not be fair to put all the blame on global factors and Indian Government. One of the prime reasons why exports are in the downtrend is lack of geographical diversification and too much reliance on economies in US and Europe. The incentives that have been offered to export in other regions such as Africa have failed to dilute any interest of India exporters in conventional export markets. Going forward, global uncertainties and hence currency volatility are only likely to go up. And unless the Government and India Inc. both put in efforts, the poor export performance may play spoilsport to India's growth plans.

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