The Exports Debacle

But the data on foreign trade and industrial growth, released by his government Wednesday, does not present as rosy a picture.

Quite apart from the fact that the foreign trade data for the last financial year reflect the country's worst-ever performance on the export front, the sharp deceleration in imports growth points towards more fundamental problems that might affect prospects of a revival of the economy in the medium term.

After maintaining a steady growth of over 20 per cent for the last few years, exports in the last financial year increased by only about four per cent. Experts will cite many reasons for such a debacle.

 

Among these would be a sharp deceleration in world exports growth, lack of adequate incentives for exports and increasing global competition. But none of these reasons can sufficiently justify the debacle.

There is bound to be a more fundamental cause for the pathetic performance on the export front. One explanation could be that India's exports may have lost their competitiveness in the world markets.

The policy of keeping the rupee reasonably stable vis-a-vis the dollar may have enhanced the finance minister's pride. But this has also eroded the competitive edge Indian exporters could have otherwise enjoyed.

A more serious problem is of course the sharp drop in imports growth to only six per cent. This is an ominous trend. For, oil imports show a healthy growth of 34 per cent growth, indicating how the country's domestic oil production is failing to keep pace with the rising domestic demand, mainly fueled by the automobiles boom.

On the other hand, a negligible one per cent growth in non-oil imports shows that the industrial economy is in a pathetic state.

A one per cent growth in non-oil imports means that industry's appetite for industrial raw materials and intermediates is still very low. Thus, it may be too early to hope for a revival in industrial production.

The industrial growth figures for January 1997 (up 1.1 per cent compared with 12.9 per cent in the same month of 1996) confirms such an assessment.