Diversification of products a must

Of the first 10 months of the current financial year, exports saw a decline for eight months

Even as export growth has surpassed the pre-crisis level in 2010-2011, the adverse impact of the global recession seems to be showing only now, with exports falling drastically in 2012-2013. According to the Economic Survey 2012-2013 presented by Finance Minister P Chidambaram in Parliament today, growth in exports can only be achieved with greater diversification of products.

For the first 10 months of the current financial year (FY13), exports declined in eight months. It revived slightly by posting growth of 0.8 per cent in January 2013 year-on-year. The trade deficit reached a peak of $184.6 billion in 2011-12 from $118.6 billion in 2010-11, with the highest growth of 55.6 per cent since 1950-51. The trade deficit of $167.2 billion for 2012-13 (April-January) was 7.9 per cent higher than the $154.9 billion in 2011-12 (April-January).

“India has been fairly successful in diversifying its export markets from developed countries like the US and Europe to Asia and Africa, which has helped to a great extent in weathering the global crisis of 2008 and the recent global slowdown. However, in terms of product diversification, a lot more needs to be done as can be seen from the following,” the Survey noted.

According to the Survey, the recent global slowdown has thrown up new challenges for India with its export growth being continuously negative since May 2012, compared to high growth rates of even above 50 per cent in some months of the previous year.

It also suggested that more focus needs to be given in export of products such as electronic, electrical, engineering, textiles, iron and steel and ores, among others. The Survey also noted that India should focus on gaining its market share in the exports of some traditional items such as textiles and leather.

The Survey has strongly recommended to increase India’s bargaining capabilities while negotiating a trade deal with its partner countries, keeping in mind the geopolitical considerations. It has said that India should “bargain more”, especially in those free trade agreements where there are livelihood concerns. “India also has to follow a strategic regional trading policy focusing on the potential technology-intensive items in the more important RTAs (regional trade agreements),” it said.