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After a year of slide, exports to look up in 2016

Date 28-Dec-2015
Subject After a year of slide, exports to look up in 2016

NEW DELHI: After remaining in the negative zone throughout this year battered by demand slowdown, India's exports are expected to show improvement in 2016, propelled by government incentives.

But there is a word of caution. Improvement in outbound shipments would still depend largely on demand revival in the global markets and movement in prices of crude oil.

The main markets of Indian exporters - the US and Europe - are not yet showing strong signs of demand revival. The two regions account for over 30 per cent of the shipments.

Multilateral body World Trade Organization too has lowered the trade growth projections for 2016 to 3.9 per cent from 4 per cent earlier.

"I (would) like to have exports improving (in 2016)," Commerce and Industry Minister Nirmala Sitharaman said when asked about her expectation on exports performance next year.

The minister's expectation is based on the incentives announced by the government this year. It has extended the 3 per cent interest subsidy for exporters besides giving benefits under merchandise Export India Scheme (MEIS) and enhanced duty drawback rates.

"We have given support under MEIS India Scheme. We have also announced the interest subvention scheme. So there should be an improvement on our exports soon," she said recently.

The government has also taken steps to improve ease of doing business for traders. It has reduced the number of mandatory documents required for import and export of goods to three in each case from 10 earlier.

The Federation of Indian Export Organisations (FIEO) has said meanwhile that improvement in export performance will depend on the crude oil and commodity prices.

"Further softening of prices of crude oil and commodity may dampen the export's growth further. Since global situation will take some time to improve, a 15 per cent increase in exports may take us to USD 305 billion in 2016," FIEO President S C Ralhan said.

Last year, exports had stood at USD 323.2 billion.

"In the 11 months of 2015, exports have reached USD 243.68 billion. Going by the current trend, we may end with exports of USD 265 billion this year, reflecting a decline of 21.9 per cent as compared to 2014," Ralhan said.

As for the growth in shipments during the coming year, he said the support extended by the government will help in pushing up exports.

Since December last year, the country's merchandise shipments have been in the negative zone. In November, the decline was the steepest in several months. Exports dipped 24.4 per cent in November.

India's exports in last four financial years (April-March) have been hovering around USD 300 billion.

Falling short of the USD 325 billion target, India's exports in 2013-14 stood at USD 312.35 billion. The figures for 2012-13 were USD 300.4 billion, after USD 307 billion in 2011-12.

Further to boost exports from special economic zones (SEZs), the commerce ministry is holding stakeholders consultation to revive these zones.

SEZs contribute about 23 per cent of the country's total exports. They are facing problems after imposition of minimum alternative tax and dividend distribution tax.

The Commerce Ministry has sought roll back of reduction in these taxes from the Finance Ministry.

Barring pharmaceuticals and textiles, all the the top four exporting sectors - engineering, petroleum, gems and jewellery and textiles - are registering negative growth.

In November 2015, exports of engineering, petroleum and gems and jewellery dipped by 28.57 per cent, 54 per cent and 21.5 per cent respectively.

Pharmaceuticals and textiles exports grew by a meager 1 per cent and 3 per cent respectively in November this year.

On the other hand, declining gold imports and crude oil prices are helping in keeping the country's trade deficit in check.

During April-November this fiscal, trade deficit aggregated at USD 87.5 billion as compared to USD 102.5 billion in the same period last year.

As almost all the major currencies depreciated in 2015 against dollar, rupee decline has not much impacted the country's exports growth. The rupee fell in 2015 for the fifth straight year.

Source: economictimes.indiatimes.com

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