Trade and balance

The governments annual supplement to the trade policy for 2009-14,released on Monday,extended sops worth just over Rs 1,000 crore to exporters,particularly in labour-intensive sectors like textiles,handicrafts leather goods and toys. This is in addition to the sops already being offered in the aftermath of the global economic downturn. It is hard to argue against certain limited sops as short-term palliatives. The one sector of the Indian economy that has genuinely suffered after the global economic crisis is the one oriented towards exports. Exports showed a dramatic decline in the immediate aftermath of the crisis in the last quarter of 2008,a trend that continued well into 2009. It is only in 2010 that exports once again started picking up steam. However,exports in value terms continue to remain well below the peak levels achieved in the pre-crisis period. In fact,if the latest trade statistics released last week are an indicator,exports may have once again lost some steam in the month of July growing only at 13 per cent compared with the 30 per cent recorded in the previous month.

Leave aside the numbers for a moment and consider the fundamentals. The biggest markets for Indian exports continued to be the US,EU and Japan. And none of those three is in the pink of economic health,even now. Japan has,of course,been stagnant for a long time now,but the crisis made things worse. Europe is grappling with the severe debt problems of some of its peripheral economies that are taking a toll on growth in the entire region. In the US,the expiry of the fiscal stimulus has taken some of the sheen off the expectations of a quick recovery. That sort of bleak growth scenario in the biggest markets,almost certain to persist for a number of months,isnt a pleasant one for Indian exporters.

Indian exporters must,therefore,seriously think beyond sops to boost their fortunes. Some of the initial recovery in Indian exports towards the end of 2009 was driven by exports to newer markets in Asia,Africa and Latin America. All these regions are registering impressive rates of economic growth. Its time Indian exporters formulated business strategies to penetrate these fast-growing markets.