Shrinking Foreign Trade: A Cause for Concern

India's exports have been continuously contracting since last 16 months. In the month of March 2016, as well the country's exports have registered a decline of 5.5% over the previous month. In comparison with the exports of March 2015 as well, they have contracted by 5.47% to have touch a new bottom of $ 22.71 billion, since December, 2014.  The cumulative value of exports for the period April-March 2015-16 too has therefore come down to US$ 261.13 billion (Rs.1708841.43 crore) as against US$ 310.33 billion(Rs.1896348.40 crore) in April-March 2014-15 registering a negative growth of 15.85 per cent in Dollar terms and 9.89 per cent in Rupee terms. The non-petroleum exports in March 2016 are valued at US$ 206.39 billion against US$ 213.86 billion of March 2015, a decline of 3.49 per cent. Non-petroleum exports during April to March 2016 are valued at US$ 231.95 billion as compared to US$ 253.54 billion for the corresponding period in 2015, a reduction of 8.52 per cent.

The trend of falling exports is though in tandem with other major world economies. The growth in exports have fallen for USA by 10.81 percent, European Union by 7.40 percent, China by 11.37 percent and Japan by 12.85 percent for January 2016 over the corresponding period previous year as per WTO statistics. So, it is a matter of serious concern that vis a vis the US, EU, China and Japan the decline in India's exports is more pronounced. To the contrary the Chinese exports have rather experienced an 18.7 % growth in March, 2016 vis a vis a decline of 5.5% in case of India.

 Though, imports of India too  were lower  during March, 2016 and valued at US $ 27.78 billion, (Rs.1,86,250.88 crore) lower by 21.56 per cent in Dollar terms and 15.82 percent lower in Rupee terms over the level of imports valued at US$ 35.42 billion (Rs.2,21,251.65 crore) in March, 2015. Cumulative value of imports for the period April-March 2015-16 was US $ 379.60 billion (Rs.24,81,367.22 crore) as against US $ 448 billion (Rs.2737086.58 crore) registering a negative growth of 15.28 per cent in Dollar terms and 9.34 per cent in Rupee terms over the same period last year. 

Though, the balance of trade has also declined to a record low of $ 5.1 billion in March, 2016 , while the trade gap for March, 2015 was $ 11.4 billion. The trade deficit for April-March, 2015-16 has been estimated at US$ 118.45 billion which is lower than the deficit of US$ 137.69 billion during April-March, 2014-15. Services exports have also been affected the current year. As per RBI’s Press Release dated 18th April 2016, the trade balance in Services (i.e. net export of Services) for February, 2016 was estimated at US$ 5140 million. The net export of services for April- February, 2015-16 was estimated at US$ 64.60 billion which is lower than net export of services of US$ 69.13 billion during April- February, 2014-15. (The data for April-February 2015-16 has been derived by adding April-December 2015-16 with month wise QE data of RBI Press Release dated 18th April 2016).

So, the Overall Trade Balance, while taking merchandise and services together, has also come down in 2015-16. The overall trade deficit for April-March, 2015-16 estimated at US$ 53.859 billion as compared to US$ 68.55 billion over same period last year, has fallen by 21.44 percent. Services data pertains to April- February as latest data available are only up to the as February 2016 per the RBI’s Press Release dated 18th April 2016. However, the same deficits i.e. the trade and current account deficits  are bound to turn into a surplus in the Balance of Payments after taking into consideration the private transfers of $ 69 billion. Thus, NRIs working abroad have jacked up forex receipts and converted the  the current account deficit into a surplus of $16 billion and also enhanced the Forex reserve of the country . Yet, something needs to done, to ramp up exports of the country, if the target of doubling the exports, spelled out in the foreign trade policy of 2015-20 has to be attained. China has already rebounded its exports in March, 2016 by 18.7 % on a year-on-year basis, in the March, 2016, while the Chinese imports have declined 1.7% by March, 2016, generating a trade surplus of 194.6 billion yuan in March, 2016. the export growth in March had been highest for China in last more than a year. India has to take a call from China, especially when India is having  the largest trade deficit in its trade with China since  last many years.

India needs to take a call on the problem of growing trade deficit with China

The growing trade deficit with China is a formidable challenge for India. India has highest trade deficit of $ 51.9 billion with china, inspite of persistent enemic activities of China, ever since the war of 1962. China is occupying 38000 sq. km. of India’s territory which  it capture in Aksai Chin in the 1962 war. Thereafter, China has been regularly committing border incursions very frequently. Presently it has been causing approximately 450 border incursions per year. Moreover, its seige in the Daulat Beg Oldy region 3 years back had been most humiliating for India after the 1962 war.  Chinese veto against India's proposal for declaring Maulana Masood Azhar as an internationally dreaded terrorist has also aimed to  humiliate India , as china has no stake against declaring Maulana Masood Azhar  a Laskar-e-Taiba terrorist, who has also established Jaish-e-Mohammad another terrorist outfit. 

it is also an open fact that one after the other industry sectors in India are getting destabilized due to dumping of cheap goods by China. India has been experiencing the problem of de-industrialization into a number of sectors on account of Chinese dumping. The latest victim is the solar power equipment manufacturing sector of the country. Today 80% of solar panels and roof top solar systems are coming from china. This has been causing rapid industrial closers in the country into this sector. Even US has to impose anti-dumping duties on Chinese import up to 238% of their cost to keep the US solar power sector surviving against Chinese dumping. So, India too takes care of a variety of sectors against the Chinese dumping.

The Commerce and Industry Minister Nirmala Sitharaman has also said in a written reply to the Lok Sabha, that "Increasing trade deficit with China can primarily be attributed to the fact that Chinese exports to India rely strongly on manufactured items, meeting the demand of fast-expanding sectors like telecom and power. While India's exports to China are characterized by primary products, raw materials and intermediate products,"

She has informed the parliament that India's trade deficit with China stood at USD 51.86 billion, with a bilateral trade of USD 71.22 billion in 2015. According to her, during this period India's exports to China came in at USD 9.68 billion while imports were USD 61.54 billion. moreover, In a separate reply, she has also said that Indian MSMEs are facing significant competition from Chinese imports. Especially in respect of 12 major product groups largely manufactured by MSMEs, imports from China grew at a higher rate than respective imports from all other countries combined during 2011-2 to 2014-15," she said coming to the issue of dumping , she has said that so far, there have been 322 anti-dumping cases, of which 177 cases involve China.

Chinese Smart Phones taking over the Indian Market:  Like most other sectors, the smart phone market in India has also been experiencing an import surge from china. According to the consulting firm ‘Country Point Technology Market Research’ the number of Chinese smart phone brands available in India, has jumped from 12 in the first quarter of 2013 to 57 in first quarter of 2015 in a span of two years. The market share of Chinese vendors of smart phones too has grown from 15% in the last quarter of 2014 to 22% in 2015. Indeed, the share of china-based smart phone vendors has increased by 7% in a year. While the share of home-grown smart phone vendors of India has declined by 5% and even the share of global vendors too has shrank by 1%. All the Chinese brands viz. Huawei, Lenovo, Moto, Xiaomi, , Gionee, One Plus, Vego, Oppo, Meizu, LeeCo, Cool Pad and so on have been making rapid strides in the Indian market.

            It is also worrisome that, inspite of having enjoyed a strong position in the  first generation of telecom technology, India has dropped itself out of race in harnessing the 2G, 3G & 4G technologies and has how become, foreign dependent in all these categories. Therefore, India needs to develop this sector indigenously, to avert such a foreign dependence. At the time of advent of 2G technology, India had achieved a major breakthrough in developing the coreDECT technology, unique for 2G telecommunication of mobile telephone wherein both voice & data can travel together under this technology. Therefore, it is most imperative to develop the handsets industry as well as this unique home grown technology. Moreover, if India has to take care of its trade deficit, steps has to take care of its Chinese imports, which need to be taken to curb to industrial sickness and closures. This sickness and closure of Industries alone is responsible for the growing non performing assets (NPAs) of the banking sector. 

Mega Regional Trade Agreements and India

Exports of India have been persistently declining since last 16 months at a time when, India in its trade policy for 2015-20, has set the target to double its exports by the end of 2019-20. While, the Mega Regional Trade Agreements being negotiated by the largest traders of the world viz. USA, Japan, the European Union etc are going to add further turbulence in the trade scenario for India. India’s free trade agreements (FTAs) have also doubled to about 42 and we have been negotiating for an FTA with European Union too. Moreover as per the observation of the finance minister made in the budget 2016-17, India has been experiencing more inflow of imports than the exports due to these FTAs with respects to the three mega regional trade agreements, India is party to only one, i.e Regional Comprehensive Economic Partnership (RCEP) being negotiated inter se ASEAN10+6. But, the two other mega trade pacts viz. the Trans-Pacific Partnership (TPP) - a mega trade deal among the 12 countries including the US – and the Transatlantic Trade and Investment Partnership (TTIP) are going to further affect exports of India.  India would experience erosion of its trade preferences for several sectors, such as pharma, textile, chemicals etc when the TPP would see the light of The Commerce Minister of India, Nirmala Sitharaman has also expressed her apprehension about the adverse impact of TPP on the export of plastics, leather, textiles, plastics, chemical, pharmaceutical etc.

On coming to the RCEP, it appears quite likely that India might experience unprecedented import surge from china, with whom India has largest trade deficit of $51 billion, Because China is also a negotiating partner in the RCEP.

In view of the likely turbulence, expected from the mega regional trade pacts and other FTA’s of India, coupled with a continuous decline of the exports in the last 16 months, a well targetted strategy needs to framed to ramp up exports and safeguard economy from the likely import surge, out of market access being offered under the ongoing negotiations for trade and investment liberalisation.

India’s Own GPS System-A Commendable Feat

India had very jubiliant moments to enter an exclusive club of five nations which have their own satellite navigation and positioning system on successful launch of the IRNSS-1G. country’s seventh navigation satellite and completion of the a constellation of seven satellites for the purpose on the Thursday April’ 28.These were the moments of immense pride for the nation on April 28, when 12.50 pm sharp, when a 44.4-metre-tall PSLV rocket, weighing 320 tonnes, blasted into the clear afternoon skies from Sriharikota in Andhra Pradesh with a blazing orangered tail trailing behind to put in orbit this seventh satellite in this series of seven. After zooming through the sky for nearly 20 minutes, the satellite IRNSS-1G was ejected from the rocket and injected into an elliptical orbit. It swiftly opened its solar panels, and the nation rejoiced to have its mini GPS, a regional positioning system.now the country will no more have to depend on any foreign power for military navigation. With the complete system now in place, the armed forces will be able to find their position accurately in the battleground and direct ammunition and missiles even deep into enemy territory, as it would have an  extended range of 1,500 km of the system even beyond our borders.

This “Indian Regional Navigation Satellite System”(IRNSS) will be known to the world as NAVIC(Navigation with Indian Constellation) , when the IRNSS-1G becomes operational in about a month’s time.The NAVIC would offer services like terrestrial and marine navigation, disaster management, vehicle tracking and fleet management, navigation aide for hikers and travellers, visual and voice navigation for drivers.with this launch, the IRNSS constellation of seven satellites is now complete. This will allow the Indian Space Research Organisation (ISRO) to focus on the process of designing front end chips which will receive the navigational signals sent out by the satellites. The system will be similar to the Global Positioning System (GPS) operated by the United States with 24 satellites and the Glonass, Galileo and BeiDou systems of Russia, Europe and China respectively.

The system can also be used for civilian navigation —i.e. for the aircraft, ships, railways and others. It would also provide terrestrial navigation aid for hikers and travellers, along with visual and voice navigation for drivers. It can also be integrated into phones. Other civilian applications of the system would include mapping, disaster management, and vehicle and fleet management, said experts.

Earlier, India had already launched six regional navigational satellites (IRNSS-1A, 1B, 1C, ID,1E and 1F), to provide accurate position information service to users across the country and the region, extending up to an area of 1,500 km. Though the full system comprises nine satellites (seven in orbit and two on the ground as standby), navigation services could be made operational with four. Each of these satellite has costed about Rs 150 crore and the PSLV-XL version rocket about Rs 130 crore. The seven rockets would entail an outlay of Rs 910 crore . The total project cost including other facilities is around Rs.1,420 crore, as per ISRO officials. The first satellite IRNSS-1A was launched in July 2013, the second IRNSS-1B in April 2014, the third on October 2014, the fourth in March 2015, and the fifth and sixth on January 20 and March 10, 2016. All satellites will have to  undergo stabilization testing and verification of their performance over the next few months before being pushed into use, according to ISRO officials.

The Indian system provides positional accuracy of 10 metres. Civilian usage of GPS would bloom and costs would come down,when more and manufacturers have to start making the navigation signal receivers.That will soon happen once the IRNSS is formally declared operational,It would also add to our strength in the regional diplomacy,since.

Since an area of 1,500 km from Indian boundaries will be covered under the navigational system and our Prime Minister Narendra Modi has already invited other countries to make use of this system as well we would be able to secure better international cooperation and leadership by giving access to the other countries of this region.We have seven neighbours who may rely on us for technology to be provided by us in this respect . They can use Indian services at their will. With an accuracy of better than 10 m being claimed by ISRO, the navigation system will be offered as an open or Standard Positioning Service and a superior, coded military Restricted Service.

An Indian-owned satellite navigation system is crucial to get positional accuracy during war or a war-like situation as the country could be denied such information by countries owing similar systems during such times. So, it is a unique gift of our scientists for our people and polity.