Exports as a percentage of GDP is the lowest since 2003-04.
The botched introduction of the goods and services tax (GST) has taken a heavy toll on India’s exports. Merchandise exports as a proportion of gross domestic product for 2017-18 is the lowest since 2003-04, as the chart illustrates. The data has been taken from CMIE or the Centre for Monitoring Indian Economy.
While it could be argued that the poor showing in 2017-18 is a consequence of GST, especially in the delay in giving refunds to exporters, the trade figures for March 2018 are also not encouraging. Exports contracted in March from a year ago.
The gems and jewellery sector has not done well all through the last quarter and the disruption on account of the Punjab National Bank (PNB) scam has hit the sector hard.
Textile exports too haven’t been doing well, nor have engineering exports. EEPC (Engineering Export Promotion Council) India chairman Ravi Sehgal said, “The engineering sector, which had been leading the basket of goods exports, could manage to grow by a meagre 2.62% in March, making it imperative to redraw our external trade strategy. This is all the more important in the backdrop of more and more protectionism rearing its head. Rising raw material costs, among other factors, have had a crippling impact on the shipments.” Sehgal also pointed out that Indian exports have been sluggish despite a pick-up in global growth.
With the rise of protectionism in the US, the outlook for exports has been further clouded. Last Thursday, the US trade representative office said it has launched investigations on whether India was complying with the rules on the Generalised System of Preferences, which could affect duty-free entry of a host of products from India.
Given this lacklustre export performance and the clouded outlook, growth in the Indian economy will have to come from the domestic market.