Government of India must heave-ho, make exports flow – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-editorial/government-of-india-must-heave-ho-make-exports-flow/articleshow/92685325.cms

Synopsis

Immediate policy responses will react to a rapidly evolving external environment. But the government would do well to use this opportunity to push ahead with targeted export facilitation. Merchandise exports need to retain the momentum they gained during the global economic revival following the pandemic. ​​The success of electronics exports would provide pointers on what India is doing right. Competitiveness gains in pockets will need to percolate to wider merchandise exports through improvements in infrastructure and ease of doing business.

A ballooning trade deficit has set off a series of policy responses that include bypassing Western sanctions on Russian energy, imposing an export duty on petrol products, and raising tariffs on gold imports. The scope for intervention in crude, coal, and gold imports is limited unless Indian policymakers are more open to the idea of letting the rupee fall faster and lowering its ambitions for economic growth.

The scope for intervention is greater in pushing merchandise exports, which have slowed. Exports in June grew 16.8%, significantly slower than the 22.2% in April-June. A further deceleration can be expected after recent restrictions on export of diesel, wheat and steel in an effort to tame inflation.

The June slowdown was led by declines in machinery, drugs and textiles, which together make up 31% of the export basket. These segments have been slow movers during the quarter, affected by supply chain disruptions, orchestrated central bank monetary tightening and the European conflict.

Another 20% comprising refined petroleum is vulnerable to tariff actions and tightening sanctions on Russian crude oil shipments. Effectively, half the Indian export basket faces downside risks, and around half the import basket, constituting crude oil, coal, vegetable oil and gold, displays sticky demand.

Immediate policy responses will react to a rapidly evolving external environment. But the government would do well to use this opportunity to push ahead with targeted export facilitation. Merchandise exports need to retain the momentum they gained during the global economic revival following the pandemic.

The success of electronics exports would provide pointers on what India is doing right. Competitiveness gains in pockets will need to percolate to wider merchandise exports through improvements in infrastructure and ease of doing business. Markets need to be made more accessible through targeted bilateral agreements and a lower tariff structure. The managed float of the rupee will also be governed by the price advantage of Indian exports.

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