Any investment-driven growth model must have an aggressive export strategy, the government said in its Economic Survey of 2018-2019.
The onus of rescuing economic growth has been placed squarely on exports, since the share of consumption in gross domestic product (GDP) remains constrained by a high level of savings, the Survey said. Goods exports rose 8.8 per cent in 2018-19, after a 10 per cent rise in the previous year.
However, it mentioned weak exports growth in 2019-20 as a key downside risk to the economy, taking note of continuing heightened US-China trade tensions. The Survey sounded a stark warning that prospects of export growth remain weak for 2019-20 if status quo is maintained. The World Economic Outlook in its April 2019 issue had projected growth in world output at 3.3 per cent in 2019, down from 3.6 per cent in 2018.
The Survey pointed out that the desired export growth required to deliver the 8 per cent real GDP growth rate may require a depreciation in the real effective exchange rate. "But we emphasise export growth stemming from increases in productivity rather than currency depreciation," the Survey countered. However, the government stressed that a higher growth rate for exports has been seen in Rupee terms due to the depreciation of the currency, while that of imports declined in 2018-19.
In view of the demand by industry to re-assess India's existing free trade agreements (FTA), the Survey noted that India's imports from FTA nations have been on the rise, accounting for 52.0 per cent of India’s total imports. On the other hand, exports continue to trail. Outbound trade with trade partners accounted for 36.9 per cent of total exports.
The high-level advisory group, formed to boost exports and headed by ex-member of the prime minister's economic advisory council Surjit Bhalla, had suggested making impact assessment studies for industry a pre-requisite for all trade negotiations. India has signed 28 bilateral and multilateral trade agreements with various countries and nation groupings.
East Asia model
The Survey also continued to focus on manufacturing-led growth in east-Asian economies such as Japan, South Korea and most importantly China. Chief Economic Advisor Krishnamurthy Subramanian borrowed from his predecessor Arvind Subramanian’s idea of pushing labour-intensive manufacturing investment to simultaneously boost productivity, job creation and exports.
In two such key sectors — textiles and leather — the government has indicated further structural reforms.
The latest survey again called for drastically raising India’s share in global exports through a targeted plan of pushing up market share in major markets.
In the latest ‘virtuous cycle’ of economic growth, the government has stressed the need for India's exports to GDP ratio to rise fast.