Competitive Exams: Current Affairs 2011: Export performance

Export performance

The recent export performance has been exemplary. There has been a slowdown in the global economy and Indian exporters who have traditionally depended on the large markets of the EU, the US and Japan have had a challenging task.

In the circumstances, the foreign trade policy (2009 − 14) with its emphasis on diversification both in terms of commodities and export markets has proved to be far sighted.

Trade with Africa, Latin America and a few other non traditional areas has been on the rise thanks to supportive government policies and has, to a considerable extent, helped exporters in facing the consequences of the global slowdown.

Exports grew by 38 per cent to touch $250.5 billion in 2010 − 11.

With the momentum continuing into this year, exports are slated to clock a growth rate of 32 per cent to $330.2 billion in 2011 − 12. Imports too have been robust. Despite strong export growth, the trade deficit has increased to $130.5 billion in 2010 − 11 from $118.4 billion in the year before:

More significantly, the impressive export performance and consequently the lower merchandise trade deficit have helped in containing the current account deficit to what is considered to be a prudential limit of less than 3 per cent of the GDP during 2010 − 11.

In India, invisible receipts have played a major role in reducing the size of the current account deficit.

In what could be the beginning of a downward trend, invisible receipts have come down from $89.9 billion in 2008 − 09 to nearly $80 billion in 2009 − 10 but has increased to $86.2 billion in 2010 − 11.

Of even greater concern are some disquieting features in capital flows. The non debt creating foreign direct investment (FDI) has come down sharply from $33.1 billion to $23.4 billion between 2009 − 10 and 2010 − 11 portfolio flows decreased marginally from $32.4 billion to $30.3 billion.

On the other hand, debt creating flows represented by external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) went up from $18.36 billion in 2008 − 09 to $21.67 billion in 2009 − 10.

There are bound to be differences between the data furnished by the Government and that furnished by the RBI. But the broad trends will be the same.

Outlook for 2011 − 12:

The Prime Minister's Economic Advisory Council (PMEAC) in its Economic Outlook (July 2011) projects that merchandise exports at $330 billion (BOP basis) will grow by 32 per cent in 2011 12, while imports at $484 billion would expand by 27 per cent leaving a merchandise trade deficit of $154 billion or 7.7 per cent of the projected GDP.

Service sector earnings and remittance inflows (ITeS exports and private remittances) are projected to grow by 18 per cent in the first half of 2011 − 12 and by 11 per cent during the second half (14 per cent for the whole year).

Net investment outgo will be higher by 15 per cent. The current account deficit is projected at around 2.7 per cent.

The outlook for capital account is clouded with a great deal of uncertainty. Many assumptions made by expert bodies such as the PMEAC will be severely tested.

The turmoil that has engulfed financial markets world wide was not anticipated. If, as feared, some of the developed countries slip into a recession and their financial markets continue their downward drift, India's external economy will come under strain to a greater degree than is visualized.

Courtesy: The Hindu and Times of India