Indian exports Factors inhibiting its growth; what can be done to revive its growth?

Indian exports Factors inhibiting its growth; what can be done to revive its growth?ByGroup-7N.Siva Krishna Reddy (131312)Ravi Kanth (131326)S.Nishanth (133310)G. Sri Santoshi (131328)K.Chandra Kanth (131321)India Exports

Exports in India decreased to 25400 USD Million in December of 2014 from 25960.57 USD Million in November of 2014.

ContIn recent years, India has become one of the biggest refined product exporters in Asia with petroleum accounting for around 20 percent of total exports. The country also exports: engineering goods (19 percent of the total shipments)chemical and pharmaceutical products (14 percent)gems and jewelry (14 percent)agricultural and allied products (10 percent) and textiles and clothing (10 percent)Indias main export partners United Arab Emirates (12.1 percent of the total exports)United States (12 percent)Singapore (4.5 percent)China (4.5 percent)Hong Kong (4 percent) Netherlands (3.5 percent)

India Imports

Imports in India decreased to 34830 USD Million in December of 2014 from 42821.60 USD Million in November of 2014. India Balance of Trade

India recorded a trade deficit of 9430 USD Million in December of 2014. Balance of Trade in India averaged -1942.55 USD Million from 1957 until 2014.Factors affecting ExportsExports are influenced via many channels, These channels can be classified into two groups.A set of demand side factors can lead to a sudden turnaround in growth.Supply bottlenecks can prevent a quick revival and also act as a hindrance to maintaining high growth over a long period.Demand side factorsPotential DemandPrice Competitiveness Trade Barriers Domestic Price Competitors Domestic PriceRelative Exchange Rate Adjustment DemandCont..Potential demand: The GDP of importing economies is also considered to be an important variable for estimating export demand functions (Goldstein and Khan, 1978; Magee, 1975). imports by Indias major trading partners are based on derived demand, demand for Indian exports refers to potential rather than actual demand. Price competitiveness: Indias share of exports in the world market does not vary much from other Asian counterparts. Thus, we included major South-East Asian nations and China in our sample to compare the changes in Indias external competitiveness relative to her neighbors. Setting the price of a product or service based on what the competition is charging.Trade Barriers: Abarriertotradeis a government-imposed restraint on the flow of international goods or services.Supply Side Factors SupplyInfrastructure Bottlenecks Factor productivity Procedural bottlenecks ContFactor productivity: From the supply-side perspective, growth in exports can be an outcome of improved factor productivity. During the previous decade to 4.5 per cent in the period 1993-1999. The agricultural sector lagged behind, with output per worker rising to only 2.4 per cent from1993 to 1999, compared with 1.5 per cent during the previous decade.Procedural bottlenecks: Exporters face a maze of government orders, regulations, rules and procedures, which raise the cost of production and hence affect exports. Enforcing a contract in India takes an average of 1,420 days and involves 56 different proceduresInfrastructure: To sustain the rapid growth of exports, it is necessary to have a well-functioning infrastructure, including electric power, road and rail connectivity, telecommunications, air transport, and efficient ports

ContTwo direct factors are tariff barriers and non-tariff barriers (NTBs). Repeated negotiations at various World Trade Organization (WTO) ministerial meets have seen a fall in tariff barriers.A further reduction in tariff barriers and the phasing out of NTBs are prerequisites for greater market access for Indias goods and services.Non-tariff barriers (NTBs).

Some of the NTBs that are adversely affecting our exports are listed below: Anti-dumping procedures Countervailing procedures Safeguards Sanitary and phyto-sanitary sanctions Import licensing Export subsidies Rules of origin Tariff quota Voluntary export restraints Investment barriers Government procurementWhat Needs to Be Done?Negotiations at multilateral forums: Enhancing market access is possible by reducing tariffs barriers and phasing out NTBs. This can be achieved through aggressive negotiations so that Indian exporters gain better access to foreign markets.Join a regional trading agreement (RTA): One way to gain better market access is to become part of a RTA. During the last two decades, RTAs have gained prominence. The repeated failure of multilateral negotiations, especially at various ministerial WTO meets, has lead to an increase in the number of RTAs.Cont..Domestic policy measures: Export competitiveness is primarily a function of variables such as the exchange rate, strength of infrastructure, domestic inflation and interest rates. Presently, there are growing concerns that the appreciating pressure on the Indian rupee will negatively impact the countrys exports.Infrastructure: Lack of proper infrastructure facilities indirectly raises the cost of our exports. As a share of GDP, India still spends only one-third of what China spends on her infrastructure.Conclusion These factors have played a significant role in the recent surge in exports, removal of supply bottlenecks is necessary to sustain this high growth. Supply-side factors, such as infrastructure and human capital, are extremely important. Since multilateral talks in forums like the WTO have not made much headway, India needs to venture into some meaningful RTAs to facilitate better market access for her exports.