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Indian exports Factors inhibiting

its growth; what can be done to


revive its growth?
By
Group-7
N.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

Cont
In 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 Exports


Exports 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 factors


Demand

Potential
Demand

Domestic
Price

Price
Competitiveness

Competitors
Domestic Price

Trade Barriers

Relative
Exchange Rate
Adjustment

Cont..
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


Supply

Infrastructur
e
Bottlenecks

Factor productivity

Procedural
bottlenecks

Cont
Factor 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 procedures
Infrastructure: 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

Cont
Two 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 procurement

What 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.