India to sharply cut export target in mid-term review of Foreign Trade Policy

Tepid global demand and shaky conditions in Europe—India’s biggest overseas shipment market—may force the government to significantly scale down the previously set USD 900 billion goods and services exports target by 2020, which now appear increasingly unachievable.

A new target will be announced on July 1, when Commerce Minister Nirmala Sitharaman presents the review of the mid-term foreign trade policy.

“The revised export target will not be as ambitious. It will be substantially brought down after the conclusion of mid-term review (in the next one week),” a senior government official told Moneycontrol.

India’s total exports in 2016-17 stood about USD 435 billion. This include merchandise exports worth USD 275 billion and about USD 160 billion of commercial services exports, up about 5 percent over last year. If the same trend persists, exports would touch about USD 525 billion by 2020, short by nearly USD 400 billion than the original target.

According to top traders’ body Federation of Indian Exports Organisation (FIEO), the government needs to revisit its export target and set it in line with prevailing conditions.

“Looking into the performance of India’s export in 2015-16, if we have to reach the figure reflected in the foreign trade policy, you require a compounded annual growth of around 28 percent or so, which is not possible. At 15-17 percent growth, we can reach an export of around USD 700-725 billion. We need to revisit the target and put it around that number,” Ajay Sahai, Director General, FIEO said.

In March 2015, India had released its Foreign Trade Policy (FTP-2015-20), fixing an ambitious target for goods and services exports to USD 900 billion by 2020, in a bid to increase the country’s share of world exports from 2 per cent to 3.5 per cent.

Merchandise exports slumped for two successive years as shipment orders dried out from the big markets in Europe and China. Merchandise exports fell (-) 1.29 percent in 2014-15 at USD 310.34 billion, and plunged nearly 16 percent in the following year with exports at USD 262.30 billion.

Goods exports have revived since the middle of 2016-17, growing 4.7 percent to USD 274.65 billion, but not quick enough to help reach USD 900 billion overall exports target in the next three years.

“The target is challenging,” said Sanjay Budhia, chairman, national committee on exports at the Confederation of Indian Industry (CII). “Exports need to be more cost competitive. Foreign exchange stability is required and India needs to remove logistics and infrastructure bottlenecks”.

According to Sahai, when the export target for 2020 was fixed, the government had thought that the global trade will help the exports of the country.