Demonetisation, GST slam brakes on India’s export growth

In 2015, the Narendra Modi-led NDA government had set itself a mammoth target of $900 billion in exports of goods and services by 2020. During the previous UPA regime, India’s merchandise exports saw a whopping 75% increase from $179 billion in 2009-10 to $314 billion in 2013-14. Despite this trend, many viewed the target as an ambitious one. Cut to 2018. Demonetisation, GST and global trade war concerns have slammed the brakes on India's export growth, with the figure for 2017-18 coming in at $302 billion. The ambitious target is now an impossible one.

In light of this, the Federation of Indian Exporters Organisation, the country’s apex export promotion body, said that a more realistic export target to achieve by 2020 would be around $500 billion, which is 44% lower than the one that was set by the incumbent government. Speaking on the sidelines of an event in Mumbai on Friday, Khalid M Khan, FIEO’s Chairman in the western region, said, “We have been clocking in exports around the $300 billion levels for some years now. Going to $500 billion from here is doable. But even that requires a lot of support.” He added that it is important for India to aim for a realistic export target.

Union Minister of Commerce Suresh Prabhu also seems to be downplaying the export target figure. Speaking at the same event, he said, “I don’t believe in just numbers. Strategy is more important than just chasing numbers. If we have strategies in place, the numbers will follow.”

He added that this focus on strategy instead of numbers was the reason why last year’s mid-term review of the Foreign Trade Policy was heavy on the former. (It was in the same mid-term review that many had expected a revised 2020 export target to make an appearance.) Prabhu instead spoke about a longer term goal; focusing on making India a $5 trillion economy where both exports and imports of goods and services will contribute 20-40% of the GDP. He also emphasised on the need to ramp up services exports.

The need to revise the rather lofty target that was set in 2015 has not gone unnoticed by the Ministry of Commerce and Industry. After a meeting with exporters in October 2017, Commerce Secretary Rita Teaotia had said, “We are certainly not going to aim for the same target because we have not been able to show that growth rate in the first three years.” The ministry had then said that it will revisit the export target by 2019.

FIEO’s downward revision of the export target is not its first either. A report in May 2017 quoted Director General and CEO of FIEO, Ajay Sahai, as saying that $700-750 billion would be a more realistic export target for 2020 owing to global economic pressures.

With pending GST refunds, tighter lending norms for gems and jewellery players post the diamantaire Nirav Modi's alleged  fraud of $2 billion involving Indian banks and competition from Bangladesh and Vietnam in the apparels space, the problems facing Indian exporters are far from being resolved. To top it all, a possible trade war between the US and China has got global trade on tenterhooks. Given these factors, it remains to be seen if the 2020 export target will be subject to further cuts by industry bodies and experts.