The government of India can take a cue from the Chinese authorities who are concerned enough about their falling exports — down 8.3 per cent in July — to have devalued the yuan by nearly two per cent. Though two per cent is not much, it will still impact India’s trade with China and make Chinese exports a little more attractive. India has a huge trade deficit of $50 billion with China and Indian exporters will have to increase their marketing efforts to showcase Indian goods in China. It is said that it is primarily the medium- and small-scale sectors that export mainly lifestyle products like carpets, handicrafts, etc., to China. We need a mechanism whereby China should waive the high import tariffs on these Indian goods, at least for a year or so. The government can also put aside a special fund for marketing facilities for the MSME sector and hold them accountable.
The government does not have to devalue the rupee as the rupee has already weakened quite substantially, but it needs to listen, and, more importantly, act on issues faced by exporters. One has to rue the fact that though a vague, hurried note on interest subvention for exporters was reportedly presented by the director-general of foreign trade to the Cabinet last weekend, it will soon be a week and nothing has been heard on this crucial issue. The finance minister had provided for this subvention in the Budget but till today there is no notification. Mere announcements are not going to increase exports. We need a hands-on commerce minister who understands the problems of exporters and can take independent decisions.
Then, with a strong trade administration in place, one need not panic like the Cassandras who feel Indian exports will suffer heavily because of the near two per cent devaluation in the yuan. Of course it will suffer a bit, but the Centre and the states can work together to see how Indian goods can be made more competitive. Industry, too, must do its bit by cutting costs and being more aggressive in marketing. Besides, unlike other Asian economies badly hit by the yuan devaluation, India does not have export-led growth, though exports are important to meet the country’s current account deficit. With Prime Minister Narendra Modi’s good equation and long association with the Chinese governments, he could persuade them to reduce bilateral tariffs on Indian exports. The Chinese have already agreed to this in principle; they are also keen to do business with India and are aware of the huge trade deficit.sdfklsdkls
