Updated: May 31, 2019 3:05:03 am
The commerce ministry has its work cut out in the coming months, with issues such as a subdued outlook by the World Trade Organisation (WTO) on global trade, a widened trade deficit and a multitude of challenges on the bilateral and multilateral fronts confronting the new Narendra modi government. A downward slide in Foreign Direct Investment inflows and flagging merchandise exports are other areas of concern.
Over the last five years, the previous NDA government focused on increasing exports, including through identifying newer markets it could tap. By the end of the 2018-19 financial year, the commerce ministry announced that the country had achieved a record high of around $331.02 billion in merchandise exports. Yet, it reportedly missed its own internal goal of crossing $350 billion.
The country also experienced a high trade deficit for merchandise goods at $176.42 billion and an overall trade deficit of $95.85 billion for that period. India had also taken measures to improve its ease of doing business ranking, managing to secure 77th position towards the end of last year, up from over 140 in 2015. It further tried to encourage foreign investment through schemes like ‘Make in India’ and by relaxing rules for Foreign Direct Investment (FDI) in several sectors.
Yet, recent government data shows that FDI fell for the first time in six years, dropping around 1 per cent to $44.4 billion in the 2018-19 financial year. The telecom sector, due to its stressed financial condition, and pharmaceuticals sector, due to uncertainty in regulations, took the highest hit.
The government has reportedly begun work on boosting exports as part of its 100-day agenda, considering measures like a new major export promotion scheme and pushing exports through e-commerce. India exported products valued at $1.2 billion through e-commerce in the last financial year and there is “tremendous scope” of increasing and diversifying exports through this mode, according to a presentation by the ministry earlier this week.
Yet, the ministry should think further ahead, according to trade expert Biswajit Dhar, Professor, Centre for Economic Studies and Planning, Jawaharlal Nehru University.
“The need for the government is to actively engage with the industry, and actually on the sectors where they feel there is export potential,” he told The Indian Express. “I’m a little more surprised than worried, because we’re still thinking short-term, whereas the need of the hour is to think longer term,” he added.
For instance, India has been facing “enormous” pressure from the Trump administration, which had raised tariffs on steel and aluminum imports from the country last year. India’s retaliatory tariffs on 29 goods, including almonds, has been deferred several times over the last year.
In March, the US also announced its intentions to withdraw India’s benefits under a preferential trade scheme, the Generalised System of Preferences, which would impact around 1,900 products exported from the country.
India’s trade deficit with China, another major trading partner, still remains high at over $50 billion. This has reportedly spurred recommendations in a commerce ministry strategy paper to push exports, cut import dependence and attract foreign firms looking to shift base from China. However, areas like India’s focus on its agricultural sector, including in negotiations on the Regional Comprehensive Economic Partnership (RCEP) and in ongoing WTO disputes over its support to sugar cane producers, require a stronger focus as well, he added.
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