Question

Export of mica has been reduced why

Answer 1

Recent weeks have seen the display of an element of forced optimism regarding India’s export performance; the commerce minister has argued that the evidence indicating that the declining trend in the dollar value of the country’s merchandise exports had bottomed out.

June 2016 was the first month after 19 consecutive months when India recorded an increase of 1.3 per cent (rather than a fall) in the dollar value of exports relative to the corresponding month of the previous year.

The claim that this was a first sign of green shoots of revival was soon negated with year-on-year growth rates turning negative again in July and August.

Slowing down

So, few are convinced that the return to relatively high positive month-on-month rates in September and October is a definitive indicator of an upturn. If we take the period April to October 2016, the growth in the dollar value of exports stagnated (0.02 per cent growth) relative to the corresponding period of the previous year. Even if we exclude petroleum, given the distorting effects of large price changes there, merchandise exports have grown by a marginal 1.8 per cent during April-October 2016.

As Chart 1 shows the problem is by no means recent. Over a relatively long period starting 2011-12 the dollar value of India’s merchandise exports has been stagnant or declining. Clearly, the persistence of the Great Recession in the world economy has affected India quite adversely. But even granting that, the period since March 2015 seems to have been worse than before.

Thus, the growth in the dollar value of merchandise exports over 2015-16 was a negative 15.6 per cent, as compared with minus 1.3 per cent in 2014-15 and a positive 4.7 per cent in 2013-14. But what stands out in Chart 1 is the extreme volatility of export growth in recent years, with growth rates varying from a positive 21.8 per cent to a negative 15.6 per cent.

What’s lacking

Three factors seem to underlie this combination of a stagnant or declining trend and extreme volatility. The first is the limited diversification of India’s export basket, with the top 10 principal exports in terms of commodity groups accounting for as much as 78 per cent of total merchandise exports.

What happens in the market for these commodities has a major impact on overall export performance.

The second is that in recent times the export performance of some of these goods has either deteriorated or been characterised by a lack of dynamism.

Thus, for example, four of India’s lead exports (Engineering goods, Gems and jewellery, chemicals and readymade garments) registered negative or near zero growth rates during 2015-16.

Their growth performance, as well as that of a commodity group like drugs and pharmaceuticals that was earlier showing export dynamism, has been indifferent or poor during recent months as well (Chart 2). While this was undoubtedly largely the result of the global recession, the importance of these commodity groups in the export basket affected aggregate export growth adversely.

The experience in the pharmaceuticals area is different. The absence of product patents till the revision of the patent law in 2005 had helped India build the capability to manufacture of generic drugs that are substitutes for more expensive branded products.