Rationalising tariffs, phasing out some export promotion schemes and having “useful” free trade agreements with some major countries will help India gain a “respectable share” in world exports, the second volume of the Economic Survey released on Friday said.
India’s rising trade deficit and protectionist tendencies on the global front are areas to watch for in the short term, it said as India’s share in global exports has stagnated at 1.7 % from 2011 to 2016 with intermittent drops to 1.6%.
Citing rising protectionism, trade restrictive measures and risk of a backlash against movement of persons adding to a situation that is of growing concern, the survey said special efforts are needed to take India’s exports to a respectable share of at least 5% in world exports from 1.7% in 2016, which is very low compared to China’s 13.2%.
Streamlining export promotion schemes as many duties have been subsumed under GST, demand-based export basket diversification rather than a mere supply-based strategy and developing world-class export infrastructure and logistics on a war footing, are some recommendations of chief economic advisor Arvind Subramanian-authored survey.
It also said the focus should be on increasing FDI-linked and value-added exports, particularly high-tech exports as in China and some Asean countries.
Referring to the rise of anti-globalisation sentiment in recent years, the survey said such tendencies have surfaced with developments in the US during and after elections and the Brexit referendum.
People are viewing trade, immigration and multilateral engagements with some amount of scepticism and becoming wary of benefits of globalisation, it said. On trade curbs, the survey said there has been a rise in recent years of such steps including several types of non-tariff barriers.
GREEN SHOOTS VISIBLE
The survey did contain some cheer for the export sector, saying that green shoots have started to appear on the trade horizon with world trade growth projected at 3.8% and 3.9% in 2017 and 2018, respectively, and India’s trade growth also picking up.
“With the green shoots slowly becoming visible in merchandise trade, and robust capital flows, the external position appears robust, reflected inter alia in rising reserves and a strengthening exchange rate,” the Economic Survey said.
Reflecting the slowly improving world economic situation, India’s exports turned positive at 12.3% in FY17 after an interval of two years.
This, along with decline in imports of 1%, resulted in narrowing of the trade deficit to $112.4 billion (5% of GDP) in FY17 compared with $130.1billion (6.2% of GDP) in FY16.
In FY17, services exports recorded growth of 5.7% with a pickup in some major sectors such as transportation, business services and financial services along with good growth in travel. However, as per the survey, software services exports, accounting for around 45.2% of total services, declined marginally by 0.7%.