Why in news?
The trend of contraction in exports has been arrested, following six straight months of growth.
What are the reasons behind the growth?
- There has been 17.5% year-on-year rise in February 2017, the highest expansion since October 2011.
- This will also be the first time since 2013-14 that India’s exports growth is likely to end the fiscal year on a positive note.
- The recent growth has been led by a sharp jump in a few items such as iron ore and engineering goods.
- The impact of recovery in oil prices also helped India’s exports earning from petroleum products as well as demand for Indian goods from oil-rich nations in West Asia.
- But its influence on full year exports may be neutral.
- This will also lead to a jump in India’s import bill, because crude oil is the nation’s largest import.
What is in the future?
- Oil prices have once again softened recently due to doubts over effectiveness of production cuts mandated by the Organisation of Petroleum Exporting Countries.
- Such volatility in oil prices may once again lead to a widening of trade deficit, as imports continue to rise much faster than exports.
- There is also increasingly protectionist approach worldwide as opposed to more integrated on trade.
What should be done?
- The only way to help exports grow is by becoming more competitive through lower costs.
- The US is the largest destination for Indian exports accounting for about 15 per cent of outbound merchandise.
- The good news is that India’s exports to Asian nations, including immediate neighbours such as Nepal, and to Vietnam and Malaysia have been rising.
- Additional efforts to increase demand in these countries will stand India in good stead.
- It also needs to further diversify its geographical spread given the risk posed by a possible US protectionist policy.
Source: Business Line
