© Siddhartha Rastogi
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India's international trade performance has dwindled in recent past, partially due to the world economy turmoil, and equally due to domestically retrograde policies. The current account deficit has been widening, the value of the Rupee has declined, and economic slowdown is already a reality in manufacturing and agricultural sectors.
On the exports side, the major export destinations (like the USA, the EU, and China) are reducing their demand for Indian goods, whereas India has failed in exploring new avenues or in diversifying the product basket significantly.Furthermore, due to domestic hurdles, the pace of reforms is lost and new capacity for production or processing has not been created in any satisfactory manner; therefore, India has been exporting low value-added products only - cotton instead of textile, iron ore instead of steel, and cereals instead of processed food.
On the imports side, the falling Rupee has cost a fortune for the same basket of goods. Since the domestic production has not built sufficient capabilities, the domestic demand for imported goods has also risen. To summarize, the Indian growth bandwagon is on a downhill, and there is little hope to find even a flat surface soon.
2. How the current global economic woes (the European sovereign debt crisis, China's economic slowdown, the US fragile recovery etc.) are affecting India's role in international trade and the country's economic development?
The US, the EU, and China are the major trade partners to India and their domestic economic woes have put India in a difficult situation. I believe that this has affected only the international potential of India.
Whereas, the economic growth and development prospects of India may not have been affected so much by the international factors alone, given a huge domestic aggregate demand that is yet to be catered. Due to domestic archaic policy regime, India has witnessed net capital outflow in the past year.
3. What drivers might foster future growth of India's role in international trade?
Given the huge latent potential India has not exploited yet, it can become the next engine of growth for the world economy. There are some sectors, where India has immense scope of improvement to fuel the world production as well as to cater to the world demand. India's role in the world economy would be decided by the factors like - whether it improves agricultural productivity, reforms electricity and energy sector, creates infrastructure (roads, ports, bridges, aerodromes, storage, and value-add process capabilities), reforms policies related to FDI and labor laws. Obviously, the universal factors, like a more confident, consistent, and stable policy environment, cannot be ignored.
4. Do you regard the decision to make the Yuan international trade settlement currency beneficial for India?
Since China has become the single largest trade partner for India with over US$ 60 billion (second to UAE, if we add the oil import also), it augurs well for India as well as for China. This would reduce the Indian dependability on the US Dollar to fill the US$ 20 billion deficit with China, and in fact, would give a further boost to the India-China trade. Going a bit further, more trade with China would ensure more regional stability and prospects of peace also. Therefore, it would benefit even the world economy also.