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India’s foreign trade:
Beyond correction

India’s export industry is not making headway because of its narrow and week production base. For long that basic disability has been masked by a strategy made up of very low exchange rates for its currency rendered worse by a slew of incentives. Despite a steady stream of devaluations the export trade have not picked up in dollar terms. The composition of exports remained unchanged until the 90s when the IT and IT related services kicked in. Even these sunrise industries owe their apparent prosperity to the devalued rupee not to business acumen or managerial skills. For even the feeble science of recovery in rupee where enough to unnerve them. On the basis of purchasing power parity the nominal rupee rate of, say, Rs.48 works out 8 times higher. In the case of the much despised Chinese Yuan it is only 60%, says IMF.

On the whole the Indian Export industry is the most protected in the world. So the union commerce minister, Mr.Anand Sharma, is not on strong wicket when he complains about the growing protectionism abroad, especially in developed country. A good number of economists, at times, have argued that a long reign for a depreciated currency could breed inefficiency and vested interest. That is happening now. The fall in exports should be seen from that angle. The week rupee is hurting not only exports but even the manufacturing companies chasing local orders. For instance the low exchange rates is not coming to the rescue of the power equipment industry. So the problems facing the export trade are deep and complex. And of course beyond redemption by a simply worded policy statements.

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