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Exports target of US$ 160 bn not achievable

India’s export performance in 2008-09 will not be as bright as in the past few years, the Economic Survey has acknowledged. The loss of sheen in exports is mainly due to the steady appreciation of the rupee and lower projections in world output and imports. A fall in export growth to the US and EU need to be monitored, it said.

Besides relief measures already given to exporters, the Survey said there was a need for some fundamental policy changes like continuation in reduction of Customs duties, weeding out unnecessary Customs duty exemptions, abolishing redundant export schemes and streamlining existing schemes. It also suggested that the government should adopt a balance approach in exchange rate management with both short-term and long-term and long-term concerns in mind. Most projections suggested a moderate but not severe slowdown in the world economic growth, impacting both demand for India
exports and the value of its imports, the Survey observed. Any resultant deceleration in prices of commodities like oil will benefit India as it would mean a moderation in import growth in value terms. There will, therefore, be a modest increase in India’s trade deficit as long as a severe recession is avoided in the US; it said.

The slower Indian economic growth in 2007-08, relative to 2005-06 and 2006-07, may also have a temporary dampening effect on capital inflows. Despite the appreciating rupee, India’s merchandise exports touched $111 billion in April-December 2007, registering a growth of 21.6%. In fiscal 2006-07, India’s exports had increased by 22.6% to touch $125 billion. The increase this fiscal is mainly due to sectors with high import intensity, like petroleum, oil & lubricants (POL).

Imports, in the first nine months of the fiscal, grew at 25.9% to $ 168 billion. Trade deficit increased to $59.4 billion in 2006-07 and $57.8 billion in the April-December 2007 period.

Apart from the appreciation of the rupees, the reasons behind the slowdown in exports from India are inflexible labour laws and diseconomies of scale, logistical delays and costs, high cost of power and a slowdown in demand from some major importers. Commenting on the policy changes required in India’s merchandise trade, the Survey made a case for withdrawal of most exemptions on both basic and additional duty. Some 655 types of Customs duty exemptions in India result in ‘distortions and discriminations’ in the economic structure, it said.

On the various bilateral trade and services agreements being negotiated by India, the Survey said there was a need to evolve a clear policy for beneficial comprehensive economic co-operation agreements (CECAs) even with some developed countries, instead of just FTAs and PTAs.

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