India\\\'s falling exports worry businesses

An awful question that hovers around India's economy:  Is it a reasonable prediction that China's Yuan devaluation will further strain India's already-falling exports?
In July 2015, India's merchandise exports contracted for the eighth consecutive month after marking an annual drop of 10.3 per cent due to the continued deficiencies in global demand and oil prices, among others. Last month, India's imports fell at 10.3 per cent from a year earlier to $35.95 billion while the country's exports stood at $23.1 billion. The trade deficit widened to $12.8 billion last month from $10.8 billion in June, 2015.
In fact, India has failed to increase its exports since last November when shipments were up to 7.27 per cent. Incidentally, oil products form almost 31 per cent of the total exports while petroleum products account for 18 per cent of the total exports.  During the first four months of the financial year 2015-2016, Indian exports declined by 15.04 per cent to $89.82 billion while Indian imports dropped to 12.01 per cent resulting in a trade deficit of $45 billion.
While India's declining exports remain a major concern, China has devalued its currency by 6.0 per cent in three tranches - perhaps to make its own products more competitive in the global market. Effects of the devalued Yuan were felt worldwide -- with the US Dollar firming, gold regaining a strong position, and Asian currencies tanking against the 'greenback'.
India's Chief Economic Advisor, Arvind Subramanian tried to ease worries about the Indian Rupee: "What is happening in China has introduced some amount of volatility. Since our macroeconomic situation is better, this should be seen as a temporary adjustment due to our strong fundamentals." Yet, the degree of impact cannot be quantified at this juncture and there is no solid guarantee that Chinese Yuan will not be devalued again!
Pertinently, Indian manufacturers and exporters have expressed their concerns regarding a) gradual decline in India's exports to China and rest of the world, and b) substantial rise in cheaper imports from China. They have suggested that India should take steps to protect its manufacturing sector and stop the proliferation of Chinese goods in the Indian market.
Besides, engineering and textile exports from India are likely to face a major hit with Chinese goods becoming more desirable, while steel firms fear that cheap imports from China could intensify further competition. In the coming months, troubles may increase since the global demand remains quite subdued except US market.
Major steel companies of India have experienced a plunge in revenues due to the cheaper imports from China and South Korea. Undoubtedly, China's Yuan devaluation has deepened these concerns. An extra surge in imports will devastate the domestic industry if steel is sold at a price much lower than the domestic prices of Indian exporters.
Moreover, the Federation of Indian Export Organisations (FIEO) has sought immediate reintroduction of the interest subvention scheme for exporters - a timely reimbursement of input taxes and restoration of the higher rates of export incentives for both merchandise and services to help exporters overcome the current crisis. The exporters' lobby also asked for reclassification of tax incentive scheme for merchandise trade and inclusion of additional 70 sectors in the scheme for services.
Perhaps, India's sliding export performance is difficult to grasp if we look at the ongoing situation. Deficiency in global trade growth has become regular and hence affects Indian exports. Recently, WTO has cut trade growth forecast for 2015 to 3.3 per cent and feels strong exchange rate fluctuation along with appreciation of the US Dollar at 14 per cent complicating the situation. At present, trade growth has been disappointing largely due to continuation of the sluggish growth in the post-2008 gross domestic product (GDP) of several countries. Trade is likely to continue its slow recovery, although this trend might become vulnerable due to economic fragility and geopolitical tensions in the long run.
Interestingly, 2014 was the third consecutive year when global trade grew at less than 3 per cent. Growth averaged 2.4 per cent over each of the last three years - the slowest rate on record for a three-year period when trade was expanding. Apparently, international trade grew at 2.8 per cent in 2014, much less than the original forecast of 4.7 per cent and also lower than the revised forecast of 3.1 per cent as estimated by WTO last September. The deliberate GDP in the emerging markets and the patchy recovery in developed countries contributed to such scenario.
However, India's 19th position amongst the ranking in merchandise exports remained unchanged in 2014 along with a share of 1.7 per cent in global exports at $317 billion. Further, India's merchandise exports had contracted 15 per cent last February due to global slowdown as well as the appreciation of Indian Rupee against a 'basket' of international currencies. Merchandise exports account for nearly one-fifth of the $2 trillion worth of Indian economy. India's services exports fell two places into the 8th position in 2014 down from sixth on the previous year as India was overtaken by Japan and Netherlands, although value of the country's commercial-services exports increased to $154 billion from $151 billion.
Despite WTO (World Trade Organisation) slashing its global trade growth forecast, India cannot boost its exports in considerable proportions. Hopefully, the country's recently-announced Foreign Trade Policy (FTP2014-2019) can reinforce both merchandise and services exports to help double total exports up to $900 billion by 2019-20. Government announced tax incentives under Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) - in the form of fully-transferable duty-credit scrip's with reward-rate ranging between 2 per cent and 5 per cent; exporters can offset service tax, excise duty or customs duty.  Besides, lower prices for oil and other primary commodities can provide some benefits if the positive impact on net imports of these products outweighs negative impact on net exports.
Once the exports steadily move towards north, a good performance is definitely registered - rise in international competitive strength is ensured. In such assessment, vital indicators include the quality of six different components - efficiency of the clearance process; quality of trade and transport related infrastructure; ease of arranging competitively priced shipments; competence and quality of logistics services; ability to track and trace consignments; and timeliness of delivery.
Thus, the performance of our blue-chip companies should be observed in to an extent where they can explore the salient features of the announced policy. However, an appropriate strategy should not lose sight of - increased market size; greater returns on major capital investments, new products or processes; greater economies of scale, scope or learning; and a competitive advantage through location.
Three strategies should be kept in mind before initiating such policy: 1) Multi-domestic Strategy - when strategic and operating decisions are decentralised to the strategic business unit in each country to tailor products to the local market; 2) Global Strategy - that assumes more standardisation of products across country markets; 3) Trans-national Strategy - that seeks to achieve both global efficiency and local responsiveness.
International marketing is the performance of business activities that direct the flow of a company's goods and services to consumers or users in more than one nation for a profit. Such marketing is simply the application of marketing principles to more than one country. Carefully, let us watch how the situation would go on and corrective measures taken to ensure better results.
Dr. B. K. Mukhopadhyay, a Management Economist,  is attached to West Bengal State University.
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