India Projects $450 Bln. Exports Target By 2014 .

The Commerce Ministry, in its draft paper released early this month, has projected India's exports to double in three years to $450 billion by 2014, provided the shipments grow at a rate of 26 percent per annum.

The draft paper, now put up for wider circulation in the nature of visionary documents, is aimed at attaining a higher export target. Achievement of the Commerce Ministry's stated goals also depends on some outside factors and other arms of the government.

Though the draft paper projected ambitious targets, most of these points were made before in the Foreign Trade Policy and other forum.

There were some good news on the trade front soon after the strategy paper was released. Cumulative exports during April-February 2011 breached the $200-billion mark and touched $208 billion, thus surpassing the projected figure of $200 billion for the current fiscal year in the first eleven months itself. Robust U.S. demand helped in achieving this growth. The immediate target is to achieve $225 billion by this fiscal year-end.

According to Commerce Minister Anand Sharma, the export strategy is aimed at doubling of exports in textiles, tripling of shipments in gems and jewellery and engineering, tripling of exports in electronic goods, doubling of agri exports and tripling leather sector exports.

The Commerce Ministry says imports in February also went up by 21.2 percent, leaving a trade deficit of $8.1 billion. During the first 11 months (up to February) imports grew by 18 percent to $305.3 billion. Imports are set to close the year at $350 billion leaving a merchandise trade deficit of around $125 billion.

The Economic Advisory Council (EAC) to the Prime Minister headed by C. Rangarajan has estimated the merchandise trade deficit for the current and next year to be at the same level of 7.7 percent of the gross domestic product (GDP).

The current account deficit (CAD) for 2011-12 is projected at around $56 billion or 2.8 percent of the GDP. The position on net invisibles is also expected to remain at the same level of 4.8 percent.

Improvement in service sector exports may be offset by an increase in the outflow of investment income. On the capital side, flows of a similar magnitude amounting to $76 billion (3.8 percent of GDP) is projected for 2011-12 which will leave a modest surplus of $20 billion to be added in the foreign exchange reserves.

The EAC has admitted that the large absolute values of current account deficits that have been in evidence from 2009-10 onwards are likely to persist in 2011-12. As a percentage of GDP, the current account deficit has been 3.7 percent during the first-half of 2010-11 and even touched four percent during the second quarter.

Though CAD were to stabilize at a lower level of around 2-2.5 percent, it is clear that large capital inflows will have to come in. Domestic conditions need to be favorable to attract the right type of inflows, foreign direct investment and those that do not create debt.

Recent thinking calls for a continued vigil on the levels of CAD even if the deficit can be attributed to bright economic prospects in the country leading to excess of investments over savings.

Source : rttnews.com