India’s trade scenario remains uncertain, especially because its export growth has been far lower than expected. In the past, the sluggish global economy had proved to be a major drag, but with most regions registering decent growth rates in 2017, there was a sense of optimism that India’s exports would also measure up. Backed by some decent growth figure in November 2017, hopes had rekindled that India’s exports would double in the near future. The slowing of export growth in December 2017 has once again raised questions about its sustainability. At the same time, it raises a much larger issue about the GDP growth since attaining the 7% mark in 2018 is predicated, as the finance minister has informed us in his Budget speech, on an export growth of 15%.
One of the key aspirations of the government has been to improve the ease of doing business. While there are some indications that there are improvements on this front, the situation for the export business has worsened after the teething troubles of the GST had hit them. These bottlenecks have to be removed urgently. The FM could have responded to the demands of the exporters to address this issue in his Budget speech, for this could have eased the uncertainties that they are facing.
Providing support to the exporters has become imperative also because the trade deficit (in terms of dollars) has been rising over the past few months. In April-December 2017, it was almost 50% higher than that a year ago. This situation could worsen further in the closing months of the current fiscal if the oil prices maintain their upward movement.
Agricultural exports have always been recognised by successive governments as one with considerable “potential”. The FM has informed us today that while agricultural exports from India have a “potential” to go beyond $ 100 billion, less than a third is being actually exported. He proposed two welcome steps to bridge the gap between actual and potential exports. The first is liberalisation of exports of agri-commodities, and the second, setting up of state-of-the-art testing facilities in all the existing 42 Mega Food Parks.
The implications of complete liberalisation of exports would have to be examined carefully as the government has been forced to restrict exports of agricultural products only when the domestic supply shortages have arisen, leading to rise in prices. The second proposal of setting up of state-of-the-art testing facilities was a long felt need. India’s agricultural exporters have suffered tremendously in major markets as they have failed to meet the stringent food safety requirements. However, this needs to be combined with initiatives to train farmers for using the best practices in the use of chemicals and pesticides. These measures can take agri-exports beyond the potential that the FM has indicated.
By Biswajit Dhar Professor, Centre for Economic Studies and Planning, JNU
via Budget 2018: Why GST woes of exporters must be tackled urgently to improve trade – The Financial Express