<div><em><strong>Sutanu Guru</strong> digs deeper into the latest trade data released by the government.</em></div><div> </div><div>Most of you would have already read about this in this age of instant news and commentary since the information was released a day earlier. Just in case you haven't, August was the ninth consecutive month that witnessed a decline in exports. According to information released by the ministry of commerce, exports declined by more than 20% to $ 21.2 billion in August 2015 compared to August, 2014. Some consolation was provided by the fact that imports too declined by more than 10% to about $34 billion ensuring that the trade deficit remained under control. The last time exports grew were in November, 2014 when there was a marginal uptick.</div><div> </div><div>The usual words of comfort have been offered by government sources. And the usual verdicts have been delivered by pundits depending on their ideological leanings. But there are three possible (in fact more than probable) reasons why exports have declined for the ninth consecutive month. Let's look at the reasons one by one.</div><div> </div><div>The first is that the persistent decline in exports reflects how the global economy seems to be simply refusing to come out of a prolonged recession. The fact is, exports from even exporting powerhouses like China and South Korea have witnessed a significant decline. But the fact that China and South Korea are doing badly can only be a consolation; it can't take away the more important fact that a substantial and sustained jump in exports from India in the immediate future is not going to happen. If exports do not increase, there is a direct impact on tens of thousands of small companies of India which also provide most of the new jobs. What does that mean? India benefits from the global recession because of lower prices for imports like oil. But it also pays a price because consumers in other countries may not be stomping down the gates to buy Indian goods and services.</div><div> </div><div>The second reason is even more dangerous. Look at the latest data closely and some deeply worrisome facts seem to jump out of the fine print. Engineering goods exports declined by more than 30 per cent; that of electronic goods fell by more than 17 per cent while readymade garments exports declined by more than 7 per cent. All three categories are intimately linked with the Make in India mission being promoted aggressively by the NDA regime. Just one look at the story of readymade garments exports shows the daunting challenges that the Indian economy faces. In 2004, the old GATT system that controlled and regulated the exports of textiles and readymade garments from Third World, or emerging economies were abolished as a new trading system under WTO took over. Back then, Bangladesh was an insignificant player in the readymade garments exports market while India displayed a lot of promise because of natural cimetidine advantages. What's the story now? In 2015, readymade garment exports from Bangladesh will cross $ 30 billion while those from India will struggle to reach $ 25 billion. More telling than the laudable success of Bangladesh is the failure of India to capitalize on a more liberal global trading system to trigger a manifold jump in textiles and readymade garments exports. This is one industry that promises tens of millions of new jobs. But if the Indian economy could not capitalize during a global boom, how will hope to do the same during a slowdown? </div><div> </div><div>The third reason is debatable, but troublesome nevertheless. And that is a debate about what the dollar value of the Indian Rupee should be in these times. China literally shocked the world recently when it effectively devalued the Yuan by about 2 per cent when it had to confront a decelerating economy coupled with declining exports. India has already imposed a tariff of 20 per cent on steel imports to prevent Indian steel companies from being swamped by cheap steel imports. This could well be the beginning of a new trade war which could get worse if the American Federal Reserve raises interest rates and hundreds of billions of dollars flow out from emerging economies. The big question is: Will India too be forced to devalue? For a regime that ridiculed and mocked its predecessor for the falling value of the Rupee, it would be a difficult insult to swallow. </div><div> </div><div>But since when has economics paid attention to political rhetoric?</div><div> </div>
