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New markets hold export promise

Source : BUSINESS_STANDARD
Last Updated: Wed, Mar 14, 2012 19:55 hrs

Since 2004-05, India’s merchandise exports have been witnessing a considerable shift from the developed West to the developing East, South-east, Latin American and African countries.

While the developed markets account for bulk of India’s exports, incremental growth will come from the new markets, according to experts. However, it’ll take the new markets almost a decade to achieve the quantum and scale of the developed markets.

Exports from India have diversified to a large extent since 2005 when the country started reaching out to other countries through bilateral trade deals and other trading arrangements, rather than focusing on the US and European markets.

In 2004-05, the US and Europe absorbed 40 per cent of India’s exports, while West Asia, Northeast Asia, Africa and Latin America accounted for 16, 15, seven, and three per cent, respectively. By 2010-11, the US and European markets’ share came down to 30 per cent, while West Asia, Northeast Asia, Africa and Latin America’s share rose to 20, 17, eight and four per cent, respectively, according to the commerce & industry ministry.

“India’s export promotion policies have periodically focused on products and markets, which are away from traditional western markets. And relatively speaking, there is higher opportunity to serve growth markets. Also, India’s increasing closeness due to the free trade agreements with Asian countries such as Thailand and ASEAN (Association of Southeast Asian Nations) goes beyond mere WTO (World Trade Organisation)-based relationship,” said Ajit Ranade, chief economist of the Aditya Birla Group.

Ranade said the western markets would continue to be important for India due to their sheer size, but additional growth would be contributed by developing markets. The western markets would continue to dominate when it comes to services exports such as information technology and healthcare, according to him.

Experts believe the US and European markets are more matured for certain category of Indian goods like textiles, gems and jewellery and handicrafts, while the growth in new markets are coming from a new set of products such as engineering goods, chemicals and machinery.

“The US and Europe will continue to remain to Indian exports as far as items like and gems and jewellery and textiles are concerned. The new growth markets are Saudi Arabia, China, Africa and Latin America and they are our bigger partners for engineering products. It is really a matter of right mix of products for the right kind of market. The US and European markets have been built up in a span of last 30-40 years, so it’ll take time for the new markets to acquire that scale,” said Anis Chakravarty, director with Deloitte, Haskins & Sells.

According to Abheek Barua, chief economist, HDFC Bank, the diversification has not been that extensive and the share of India’s exports to the new markets has increased by hardly one or two percentage points. “The growth drive is still the West. Exports to the Middle East have only gone up, but that’s also because oil is the most important commodity traded with this region. We have not really decoupled from the western markets at all,” Barua said.

At present, India has 15 bilateral trading arrangements with a number of countries such as Singapore, Japan, South Korea, Sri Lanka, Chile and Afghanistan, among others.

In the past three years, India signed free trade agreements with South Korea, Japan, Malaysia and the 10-member Asean.

Sanjay Budhia, chairman of the Confederation of Indian Industry National Committee on Exports and Imports and managing director of Patton Group, said though exports had recently been shifting towards the eastern and African markets, the US and Europe would continue to remain India’s bigger trading partners.

“The new markets can only fill the vacuum due to contraction in demand and recession in the developed markets. But that does not mean exporters are abolishing these markets which have been developed over decades by exporters,” Budhia said.



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