By Dhurjati Mukherjee
India’s exports have witnessed a slide in most sectors, as per latest reports, in view of the current geopolitical situation and the pressure of US tariffs. The fault-lines have widened with the rupee falling to its lowest value while exporters, especially small and medium-sized firms, continue to face sustained pressure. Though the trade pact with the US is close to finalisation, and it is expected that the tariffs would be brought down, the position now is far from encouraging. India’s export-oriented policy efforts have not only faced weak global demands but intense competition from Asian peers that have historically exported their way to prosperity, enabling labour shifts out of agriculture. Many of the economies have become preferred destinations for entrepreneurs and firms relocating from China. Mention may be made of relative newcomers like Vietnam which recorded strong export growth during the post-pandemic period, when the global economy has been slow. Both Vietnam and China increased their export shares while India slipped. India’s goods export growth averaged only one percentage point above world GDP during 2014-2024. Though comparisons cannot be made with countries such as Indonesia or Brazil, it is significant to note that even Vietnam tripled its share of world exports from 0.6% to 1.7% during this period, almost equalling India’s 2024 share of 1.8%. There is good news for the country as the European Union is eyeing to forge a broad agen da with India to fi rm up a free trade pact, a defence framework agreement and a strategic agen da at their annual summit on 27 January. Added to this, after the meeting of Prime Minister Narendra Modi with his Canadian counterpart on the sidelines of the G-20 summit, it was decided to begin negotiations on an ambitious ‘Comprehensive Economic Partnership Agreement’. It is understood that the agreement will cover goods, services, investment, sanitary and phytosanitary measures, technical barriers to trade and dispute settlement. It has also been reported that India and Israel will soon begin negotiations for an FTA, according to Union Commerce and Industry Minister Piyush Goyal. The government is aware of the matter and has rightly taken a prompt decision by clearing the Rs 25,000-crore Export Promotion Mission after a long time, and also the Rs 20,000-crore additional free collateral credit to support exporters grappling with global trade uncertainty.
Priority support has been identified to sectors such as textiles, leather, gems and jewellery, engineering goods and marine products hit by US tariffs. Along with this, the RBI decided to cushion exporters in stressed sectors by announcing relaxation under the Foreign Exchange Management Act by extending the time available to exporters to realise and repatriate export proceeds from the existing 9 to 15 months. The shipment time has also been increased from one to three years, giving exporters greater flexibility to manage orders and supply chain uncertainties. The need of the hour is obviously on improving quality through technological upgradation, especially in labour-intensive sectors, through innovative designs and better marketing in foreign and unexplored markets with the government helping through its trade missions abroad. Moreover, cost-effectiveness is also a key factor in Indian goods making entry into foreign markets in a big way. In the current situation, the four Labour Codes announced recently may augur well for the growth of the economy as also the export front. Prime Minister Modi stated that “the codes will serve as a strong foundation for universal social security, minimum and timely payment of wages, safe workplaces and remunerative op portunities for our people, specially Nari Shakti and Yuva Shakti.” It is a fact that rigid labour laws prevalent in the country had been hurting entrepreneurship growth. A large provision in the Industrial Disputes Act, 1947 forbid enterprises with 100 or more workers from laying off workers under any circumstances. This draconian provision, complemented by other rigidities, encouraged firms, especially the labour-intensive ones, to remain small. At the same time, Indian trade unions have condemned the government’s rollout of the new Labour Codes, as a “deceptive fraud” against workers. It remains to be seen whether, with these Labour Codes, India will be able to attract more foreign investment.
