Past Tense, Future...

India's merchandise exports, which account for two-thirds of its trade value, have been contracting every month since December 2014, despite the optimism shown by the NDA government in the initial months. In April this year, India exported goods worth $20.57 billion, almost 24 per cent less than the $25.63 billion in April 2014. In 2015/16, the figure was $261 billion, 18 per cent less than the $314 billion in 2013/14.

However, the trend, say experts, may be about to reverse, due to two reasons. One, the low base effect. Two, rise in prices of commodities, especially crude. In fact, after shrinking in double digits for 13 months in a row, the drop in merchandise exports has been in single digits for the past three months. The fall was 5.66 per cent in February 2016, 5.47 per cent in March and 6.74 per cent in April. Also, with the decline in commodity prices showing signs of reversing, the import bill, especially for oil and related products, which account for a major chunk of imports, will rise. The value of petroleum products that India exports will rise correspondingly.

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This will come as a relief to the government whose ambitious plans to increase exports have been negated by the situation on the ground. In September 2014, a few months after the NDA government came to power, Commerce Minister Nirmala Sitharaman had claimed that India's export competitiveness and export growth had picked up "as the government has instilled greater confidence among businesses". She said the improved outlook and proactive policy environment the government had been able to create in just three months will boost exports and put India on the trajectory of faster economic growth.

The optimism was short-lived, though it will be unfair to put all the blame on the government. Right from bringing a new foreign trade policy to ratifying the Trade Facilitation Agreement of the World Trade Organization, or WTO, India has taken several steps in the past two years to increase exports. Also, export volume did not shrink in the same proportion as export value. Besides, the decline was not across the board, and most of the hit was taken by the oil and engineering sectors. The government claims that India is not alone in this. In January, for instance, US exports fell 10.81 per cent. The situation was the same with the European Union (-7.40 per cent), China (-11.37 per cent) and Japan (-12.85 per cent), as per the WTO data, says the commerce ministry.

Though exports now seem set for another growth cycle, it is too early to say if the trend will sustain for long.