The Hindu : Implications of the trade figures

Online edition of India's National Newspaper
Thursday, May 08, 2003

Opinion

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Implications of the trade figures

THE COUNTRY'S FOREIGN trade data released recently give room for subdued optimism. Export performance has been especially noteworthy. For the year April 2002 to March 2003, exports have grown by an impressive 18 per cent in dollar terms compared to the previous year and much higher than the 12 per cent target. In the process, some important milestones were crossed: exports in the aggregate crossed the $50 billion mark, with the actual value of exports being estimated at $51.7 billion last year, considerably higher than the $43.7 billion recorded the previous year (2001-02). Last year's performance reverses the trend of modest export performances that have been characteristic of the immediately preceding years. The Government has claimed that with last year's surge in exports India had been able to more than double its exports of merchandise goods in ten years and more significantly generate the momentum to achieve the goal of a one per cent share in world trade well before the target date of 2007. It is also noteworthy that the increase has come at a time when recessionary trends continue to grip the developed markets, India's major export destinations. For all countries the impact of September 11 and later the war over Iraq could not have been favourable to the orderly growth of trade and commerce but India seems to have stood out and performed against the global trend at least for now. Practically all major commodity groups have fared well, with iron ore, rice and handicrafts turning in good performances.

While services are not reckoned in the calculations for now, the Government's moves to generate a separate set of data for export of commercial services are welcome. An analysis by export destinations reveals that exports to China increased by as much as 96 per cent. Impressive as that sounds, it has to be evaluated against the backdrop of the relatively low base on which the growth calculations have been made. Yet, amidst widespread fears that Chinese manufactured goods would swamp the Indian markets, it is noteworthy that the burgeoning trade relations between the two countries, now under a uniform WTO regime, can be mutually beneficial. Export growth has encompassed other important markets as well, with only the European Union registering a below par performance. As the coming months will clearly show, future export growth to the traditional markets will depend as much on a dramatic improvement in those economies as on India's ability to manage the increasingly complex trade issues arising out of the rigours of global pacts and agreements. Needless to add, protectionist tendencies are now manifest in many developed countries including the U.S.

India's imports last year at $59.38 billion were much higher than the $50.75 billion import bill of the previous year. Oil imports alone have accounted for a substantial chunk, $17.77 billion during 2002-03 as against $14.02 billion the previous year. With the increasing tendency of policy makers to look at the larger picture of balance of payments rather than balance of trade alone, the trade deficit of about $7.7 billion need not be a major matter of concern. The foreign exchange reserves are surging, the current account is positive after a long time and the rupee is holding firmly against the dollar. What is however disconcerting is the tardy growth of non-oil imports, which for last year has been at just over 13 per cent in dollar terms compared to a more than 26 per cent growth in oil imports. Clearly, that is a reflection of the slow pace of industrial revival at a time when tariff and non-tariff barriers for capital and consumer goods alike are being whittled down. It is time for the country's trade policy to be dynamically altered to meet the emerging scenario. One area that needs a better understanding is the consequence of the accelerated inflow of export proceeds into the country last year. A strong rupee has been cited as one of the consequences but then a rupee appreciation also hinders the export effort.

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