2018-CGS-29: Mains Revision-17: Secondary Sector of Economy
Opportunity for Indian Exports
The current situation provides a favourable opportunity for an exports rebound in the coming quarters. There are at least four factors that augur well.
- Nomura report predicts significant potential for dollar appreciation. This has implications not only for Indo-US trade but also for India’s trade with other countries, as over 88% of Indian exports are invoiced in dollars.
- Since most exporters set prices in rupee and invoice in dollars, the importers of Indian goods will have to pay less when the rupee weakens against the dollar, further stimulating Indian exports.
- The inevitable trade war between the US and China offers another opportunity. US President Donald Trump imposed tariffs on $50 billion worth of imports from China, to which China retaliated immediately and equally. US importers from China cannot just shift this entire demand to US manufacturers as the local economy is already operating at close to full employment.
- Moreover “reshoring” of labour-intensive assembling in the high-wage US will be too expensive. India can take advantage of the situation and further strengthen its trade ties with the US. With factory wages in China escalating to the highest in emerging Asia, India can enjoy an export boom in sectors otherwise dominated by China like electronics and apparel.
Demand from the European Union
- Financial crisis and PIIGS (Poland, Italy, Ireland, Greece, Spain) debt crisis broke the back of EU’s economic growth. This led to a decline in demand from EU for Indian exports. Arguably, 2017 marked the onset of growth revival in EU when it grew at 2.5%, the fastest since 2007.
- The projections for 2018 remain good, according to a European Commission report. With the EU regaining the share in India’s total exports it lost between 2008-09 and 2014-15 (from 21% to 16%), the resurgence in demand from the West will act as a boon for Indian exporters.
Diversification of China’s manufacturing sector
- The growth in the manufacturing sector in February was at its lowest in the past 18 months due to a crackdown over pollution in major industrial provinces. Understanding the long-term limitations, China has started diversifying its trading pattern by focusing more on technology-driven sophisticated goods and developing a comparative advantage in this segment.
- China has already become a major exporter of green tech. This is creating a vacuum in the manufactured goods export segment. Chinese micro, small and medium enterprises, riding on the back of low wages, cost of capital and an undervalued currency, have been eating India’s lunch when it comes to low-end, labour-intensive manufacturing. India should now capitalize on the opportunity.
Reaping the benefits from these opportunities lies in improving infrastructure, easing land acquisition and boosting human capital. [Mint]
Merging Of Dumping and Import Safeguards Bodies
The government has amended the rules on allocation of business, shifting work pertaining to safeguard measures to the commerce ministry. The refurbished Directorate General of Trade Remedies (DGTR) will also bring safeguards (quantitative restrictions) functions of Directorate General of Foreign Trade (DGFT) into its fold.
Impact of the move
Merging of anti dumping and import safeguard bodies is a step towards enhancing ease of doing business because