Exports to suffer due to global slowdown
India's exports face an uncertain future in wake of a persistently rising rupee and an uncertain world economic environment, reports Gaurav Choudhury.business Updated: Feb 28, 2008 21:33 IST
India's exports face an uncertain future in wake of a persistently rising rupee and an uncertain world economic environment, making it imperative for the government to offer more fiscal and monetary relief is provided to the beleagured traders, the Economic Survey has said.
"The outlook for exports in 2008-09 may not be as bright as in the past few years with lower projections in world GDP and world imports and exchange rate developments," it said.
India's exports totalled $ 111 billion dollars in April-December 2007.
The government has recently announced an interest subsidy of two per cent, subject to the condition that interest rate does not fall below 7 per cent, in sectors that are severely hit by rupee appreciation such as leather and leather products, handicrafts, textiles and carpets.
The government has earlier announced various packages totalling Rs 5,200 crore to help the exporters.
The rupee has appreciated by 12 per cent in 2007 and is currently trading at less Rs 40 to a dollar leading exports becoming costlier and less profitable.
The rupee's appreciation against the dollar is significant as almost 70 per cent of India's external trade is invoiced in dollars, forcing many to believe that the export target of $160 billion for this year was unlikely to be met.
The survey that said though exports to the US have already been slowing in 2006 and 2007, a further slowdown may be unavoidable, but may be relatively modest. "The slower Indian economic growth in 2007-08, relative to 2005-06 and 2006-07, may also have a temporary dampening effect on capital inflows," it said and called for "some fundamental policy changes besides relief measures already given."
The Survey further said trade deficit would continue to widen in the current year based on the trends in the first six months of 2007-08.