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Mahesh Desai

“... surging prices of raw materials are making Indian exports less competitive globally. Despite predictions of India being a big gainer in the postCovid situation, several MNCs have chosen to transfer their operations to Vietnam or Taiwan ... Therefore, making Indian exports competitive should be the key objective of both government and industry”

THE Government of India has published GDP figures for the first quarter of 2020 and, as expected, a significant contraction of economic activities was noted. This contraction was expected in line with the global economic contraction that has set in following the rapid spread of the Covid19 pandemic. However, India was expected to undergo a much sharper decline in GDP when compared to its peer countries such as Brazil and Mexico, which were equally if not more impacted by the pandemic. While the situation is not likely to improve drastically in the coming months given that the pandemic is still raging, experts are looking at all possible facets of recovery including the four pillars of growth – consumption, private investment, government expenditure, and exports.

In the coming months exports are bound to gain more importance in the country’s policy with the shift in the global supply chain towards more than one sources of input. Various experts believe that as MNCs look towards alternative sources apart from China, India can be a potential contestant. This has even come out in the recent speeches of the Prime Minister who has strongly advocated export augmentation and import substitution through an Atmanirbhar Bharat. In fact, looking at the export figures of the last few months, it is noticed that while exports surely fell in the first two months of the current fiscal, the rate of decline has come down in July in case of merchandise exports. Interestingly for engineering, July exports witnessed a 9 percent increase. Therefore, if properly backed by policies, exports, especially engineering exports, can go a long way in reviving India’s economy from the current stalemate.

In this context let me reiterate that while recent figures show a gradually recovering exports, in value terms the lower numbers indicate that the products are mainly in the low-value-added segments or lower price raw materials. Furthermore, surging prices of raw materials are also making Indian exports less competitive globally. Despite predictions of India being a big gainer in the post-Covid situation, several MNCs have chosen to transfer their operations to Vietnam or Taiwan during this period. Therefore, making Indian exports competitive should be the key objective of both government and industry.

Additionally, the government must look at strengthening its trade relations with its major export partners and forge new treaties with potential non-traditional partners. In this respect, the recent talks between India and the US regarding a mini trade deal is important. It needs to be borne in mind that US is a key trading partner for India and the topmost export destination. However, India is not among the top 10 suppliers to the US. Additionally, Indian exporters especially in the engineering sector underwent a significant blow when the US decided to withdraw GSP benefits. Reinstating the GSP benefits, one of the key aspects of the mini trade deal, can augment India’s share in the US import basket to a huge extent.

The US began moving away from its dependence on China since the last year with the US-China trade issues. Countries such as Mexico and Brazil have accrued the advantages of this shift due to longstanding FTAs with the US. At the same time, the US is currently looking to cement such mini trade deals, having recently signed one with the European Union. In this edition we bring you an assessment of the proposed US-India mini trade deal for a post-Covid world.

I would now bring your attention towards RoDTEP. This scheme was launched as a replacement to MEIS, which is a WTO-incompatible strategy. While MEIS has been restarted from September 2020 to December 2020, there are questions regarding its continuation and stability. The government has begun collecting data for RoDTEP and I would urge all my fellow exporters to submit their data to EEPC India to the earliest. In the absence of MEIS, RoDTEP will become crucial for exporters and your pro-activeness at this juncture will go a long way in augmenting your exports.

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