2 min read.Updated: 20 Oct 2019, 10:51 PM ISTVivek Kaul
Exports during this fiscal have fallen 2.5% to $159.6 billion. The most worrying part is that labour-intensive exports, which create employment in large numbers, have been falling
Merchandise exports in September fell by 6.6% to $26 billion. Exports during this fiscal have fallen 2.5% to $159.6 billion. The most worrying part is that labour-intensive exports, which create employment in large numbers, have been falling. Mint examines this decline.
Which sectors haven’t done well in exports?
Exports of petroleum products have fallen by 7.2% to around $22 billion during this financial year. Exports of non-petroleum products have fallen at a much slower pace of 1.7% to $137.6 billion. But within non-petroleum products, exports of major labour-intensive sectors have fallen at a much faster rate. For instance, agriculture and allied exports declined by 9.2% to $14.4 billion between April and August (the period for which data is available). In case of leather and leather manufacturers (products), exports during the April to September period fell by 8.3% to $2.4 billion.
Which other sectors are flagging?
The history of economic growth tells us that exports from the textiles and ready-made garments sectors are very important for a country to make the transition from “developing" to “developed"—all the more so because they create employment for women. As is well known, the labour force participation rate of women has fallen dramatically over the years. Between April and August, textile exports fell by 9.7% to $7 billion—this was the steepest fall in five years. When it comes to ready-made garments, exports between April and September increased by a minuscule 2.2% to $7.8 billion.
How are exports of skill-intensive sectors?
When it comes to engineering goods, exports fell by 3.9% to $40 billion, the worst drop in four years. Engineering goods are by far India’s largest exports. There is good news, however, in the case of electronic goods. Their exports jumped by 42.3% to $5.5 billion. Clearly, some sectors have a reason to cheer. There isn’t gloom and doom everywhere.
Why have exports fallen in H1 2019?
Export products need to be globally competitive, which isn’t the case with many Indian goods. There are specific reasons for this in every sector, other than India not being able to compete on the land and labour front. But, on the whole, labour-intensive exports have been hurt because of the Indian rupee being stronger than it actually should be. A weaker rupee would help Indian exporters compete on the price front by helping them earn more in rupee terms—thus allowing them to cut prices to stay competitive.
What’s holding the rupee back?
India imports the bulk of the fuel it consumes in various forms. In fact, the import dependency of crude oil during the April to August period has jumped to 84.8% against 83.3% last year. A weaker rupee would make petrol and diesel expensive. Further, governments earn a lot of taxes from petrol and diesel and are not in a position to cut these taxes. It’s really a choice between stronger labour-intensive exports and cheaper petrol and diesel.
Vivek Kaul is an economist and the author of the Easy Money trilogy.