The Hindu : Opinion / Editorials : The challenges in international trade

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Monday, Jul 04, 2005

Opinion

Opinion - Editorials

The challenges in international trade

Addressing the reconstituted Board of Trade recently, Prime Minister Manmohan Singh visualised India's international trade growing robustly to touch $ 500 billion by 2010. The expectation is not wholly unrealistic, although the country's trade turnover is currently just around 37 per cent of that figure. Not only has there been a sharp acceleration in both imports and exports in recent years, but the factors driving India towards a greater share of global trade are likely to grow stronger. During 2004-05, India's trade turnover was nearly $ 200 billion, of which exports were $ 80 billion and imports $ 118 billion, sharply higher than in previous years. While the oil import bill is likely to remain high, the trend of rising non-oil imports seen recently is taken to be a positive sign, reflecting the ongoing recovery. Extrapolating current trade turnover figures over the next five years, exports must grow to at least $ 200 billion, or at a compounded annual growth rate of 20 per cent to achieve the target of $ 500 billion.

Several are the positive factors. Most reliable forecasts say the economy will grow by a respectable 7 per cent this year. There is virtually no shortage of resources to finance imports of capital goods and technology as well as raw materials needed for export promotion. A decade and a half of economic reform has made Indian industry more competitive and outward looking. Financial sector reform has sharply reduced their interest costs while the advent of foreign institutional investors has brought in global best practices in areas such as governance. Having achieved success in software exports and information technology areas, Indian manufacturer-exporters are well-equipped to ride the next big outsourcing wave — this time in manufacturing — from the U.S. Trade policy by itself can do little in an era where controls have virtually disappeared. However it can play a facilitating role by removing the persisting constraints.

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