India is unlikely to meet its export target of $360 billion for 2012-13, which, along with uneven capital flows, will keep the rupee volatile, Export-Import Bank chairman TCA Ranganathan said on Tuesday, advocating steps to encourage capacity building for hi-tech industries to lower import dependence in the coming years.
With the global economy remaining choppy, India's exports fell 6.2% yoy to $167 billion during April-October 2012, which means the current account deficit (CAD) may widen and overall economic growth may drop to less than 6% in 2012-13. With exports having fallen in six out of seven months this fiscal, capital flows remain uneven and market sentiment continues to be subdued. Ranganathan said, “I apprehend volatility in the rupee to continue. We must strive for lower CAD. If the gap is lower, the rupee volatility will be more.”
The rupee has been on a roller-coaster ride, starting the fiscal at Rs 50.84 to a dollar, touching R 57.13 by end June, again falling to R 51.75 by early October and weakening to R 55 recently.
Analysing the export performance, Ranganathan said while major export items like petroleum products, gems and jewellery, agri products, pharma and chemicals are “not showing signs of dismay”, there could be a sharp drop in mineral exports following curbs on mining in some parts of the country. The mining sector, which contributed about 7% of total exports even last year, is mired in controversies over illegal activity that have prompted some state governments, including those of Goa, Karnataka and Orissa, to clamp down on miners.
While textile exports seem better than what they were eight months back, he said the apparel sector is under stress due to recession in Europe and slowdown in the US. Considering all these factors, Ranganathan said that the chances of attaining the exports target for 2012-13 looked difficult.
The long-term strategy should be to build capacities for capital goods and hi-tech industries such as electronics, aeronautics and defense components. Though hi-tech exports are growing a CAGR of 27%, they comprise only 7% of India’s total exports. However, their share is as high as 20-24% for developed nations like the US, the UK and Germany.
Even the capital goods sector suffers from many an ailment and the lack of a level-playing field is keeping companies from China, Japan and Korea from investing in India, Ranganathan said, adding that the Delhi-Mumbai Industrial Corridor project should boost this sector.