India's top corporate body, Confederation of Indian Industries (CII), has said the Gross Domestic Produce (GDP) growth rates in eight of India’s top ten export markets are “expected to fall in 2016”, asking the Government of India for “intensified policy measures for trade facilitation and promotion.”
In a report published in “CCI Communique” (August 2016) titled “Global Slowdown could challenge India’s Exports”, says that “the outlook for India’s exports could be challenging for the current year as GDP growth rates in India’s top ten export partners are expected to decelerate.”
Pointing out that “India’s exports contracted for 18 consecutive months till May 2016", the report suggests things are unlikely to improve. The report states, “In terms of items, the export value of petroleum products, India’s top export item, came down by over $26 billion in 2015-16 as compared to the previous year.”
“This comprised more than half of the aggregate value of decline in exports”, the report points out, adding, “The IMF expected oil prices to drop by close to 16% in 2016 in its July Outlook update”, indicating things are unlikely to improve.
The report says, “India’s export performance during 2015-16 was impacted by the slowdown in global growth and trade, the drop in oil prices, and exchange rate fluctuations.”
“As global growth following the Brexit referendum and China’s slowdown will moderate further, proposed policy measures on the trade facilitation and trade promotion side must be intensified to alleviate the challenges faced by exporters”, the report, prepared by Sharmila Kantha, principal consultant, CI I, says.
Quoting International Monetary Fund's (IMF's) post-Brexit World Economic Outlook of July 2016, the report says, it “reduced the forecast for world growth by 0.1 percentage point, to 3.1% for 2016”, with “the world trade volume of goods and services is expected to grow at a slower pace of 2.6% in advanced markets in 2016, as compared to 3.8% in 2015.”
“In emerging economies”, the report says, “the volume of trade would pick up pace from 0.6% in 2015 to 2.9% in 2016.”
Pointing out that India’s top ten export partners – USA, UAE, Hong Kong, China, UK, Singapore, Germany, Saudi Arabia, Bangladesh and Sri Lanka – account for half of its total exports in 2015-16”, the report says, “GDP growth rates in eight of these ten countries, barring Germany and Bangladesh, are expected to fall in 2016 as compared to 2015, according to the IMF. ”
“In 2015-16, Indian exports to all ten of its top export destinations contracted. While the contraction in exports to USA was the lowest at (-)4.8%, it was the sharpest for Saudi Arabia at (-)42.7%, largely on account of the steep fall in exports of petroleum products. Exports to China too declined by over 24%!”, the report says.
Making a forecast, the report says, “Post-Brexit forecasts show that the US, India’s largest export destination, will grow at a marginally slower pace in 2016. As the US accounts for over 15% of India’s exports, we could target further building exports to that country.”
It further says, “India’s second largest market, the United Arab Emirates, is forecast to deflate in 2016, and exports to that country could remain subdued due to a decline in oil prices as forecast by the IMF.” As for Hong Kong exports to it “depend strongly on diamonds, which experienced a sharp drop in value as well as volumes in 2015-16.”
The report believes, “India’s exports to China comprise a large proportion of primary products and prices can be expected to remain around current levels for these, going forward. Moreover, China’s demand for these commodities depends on its policies on stockpiling and dealing with excess capacities.” GDP growth in China was 6.7% for the first half of 2016.
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*Freelance writer
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