India’s external weakness has become a cause of some concern. As Table 1 shows, the current account balance has declined since March 2009, when it was in surplus. And, as Table 2 shows, the trade balance has been particularly problematic in the past year, declining sharply. It is also evident through that graph that the rupee has become correspondingly cheaper over the same time interval. As Table 3 shows, year-on-year growth of exports has been weak over the past 12 months, actually contracting in March 2012. Holding an export slump partly responsible for the adverse current-account deficit, the government last week announced attempts to stimulate India’s exports, which are faced with weak market conditions elsewhere in the world.
Which are the sectors that are growing stronger than others? As Table 4 lays out, agriculture exports have done pretty well, but that may be the product of a base effect. Engineering goods have done poorly and textile export growth has barely kept up with rupee depreciation over the year. Yet, are the government’s mixture of interest subsidies and tax credits sensible policy? As Table 5 shows, the rupee’s depreciation contains within it an in-built stimulus: It is much cheaper now compared with China’s currency.(Click here for tables)
If the government really wanted to fix exports, it should perhaps look at the biggest bottleneck: India’s ports. As Table 6 shows, traffic handled by major ports has actually declined over the past financial year. Is that purely demand driven? Table 7 suggests otherwise. Average turnaround time for cargo has steadily increased over the past seven years, and pre-berthing time, too, has sharply increased over the past four. Clearly, export promotion requires better port infrastructure, first.