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Foreign Trade: Global economic environment have been unfavourable for most of the world economies due to several global events—the Global Financial Crisis, Eurozone crisis, Brexit, etc. Though India has been able to manage one of the highest growth rate in the world it has its own quota of negatives. As per the Economic Survey 2016-17, meanwhile, some green shoots been seen on India’s the trade front during 2016-17 (April-December):
Exports did show symptoms of recovery during 2016-17:
• During 2014-15 and 2015-16 India’s exports had declined by 1.3 per cent and 15.5 per cent, respectively. The trend of negative growth was reversed somewhat during 2016-17 with exports registering a growth of
0.7 per cent (US$ 198.8 billion). A large number of export sectors have moved to positive zone during this period.
• India’s exports to Europe, Africa, America, Asia and CIS and Baltics declined in 2015-16. However, India’s exports to Europe, America and Asia increased by 2.6 per cent, 2.4 per cent and 1.1 per cent
respectively.
• Exports to Africa declined by 13.5 per cent.
• USA followed by UAE and Hong Kong were the top export destinations.
Imports did show mixed trend with decline being the chief feature:
• Value of imports declined from US$ 448 billion in 2014-15 to US$ 381 billion in 2015-16, mainly on account of decline in crude oil prices resulting in lower levels of POL (petroleum, oil and lubricants) imports. The trend continued in 2016-17 also with imports declining by 7.4 per cent to US$ 275.4 billion.
• Decline in imports was 10.8 per cent in POL; 35.9 per cent in gold and silver imports and 2 per cent in non-POL and non-gold & silver imports.
• Imports of capital goods declined by 8.8 per cent.
• Positive growth was registered in pearls and semi-precious stones (19.0 per cent) and Food and allied products (1.3 per cent).
• India’s imports from Europe, Africa, America, Asia and CIS & Baltics regions declined in 2015-16. However, in
2016-17, imports from CIS & Baltics region increased by 10.3 per cent while other four regions witnessed decline.
• Top three import destinations of India were China followed by UAE and USA.
India’s trade deficit has been declining since the last two years—while it declined by 13.8 per cent in 2015-16, it has fallen by 23.5 per cent during 2016-17 (falling to around US$ 100 billion). India’s current account deficit (CAD) was very comfortable at 0.3 per cent by the first half of the fiscal 2016-17.
As of 2011, India’s openness—measured as the ratio of trade in goods and services to GDP has far overtaken China’s (a country famed for using trade as an engine of growth). India’s “internal trade to GDP” is also comparable to that of other large countries and very different from the caricature of a barrier-riddled economy.
FDI: India had a net FDI (foreign direct investment) inflows of $ 21.3 billion during the first half of 2016-17 showing a whopping
29 per cent increase over the same period of the preceding year 2015-16. The inflows have shown accelerating growth—in the second half of
2016-17 it reached 3.2 per cent of GDP from 1.7 per cent of GDP of the same period of the preceding year.
FPI: Foreign portfolio investment (FPI) saw a net inflow of $ 8.2 billion in the first half of 2016-17 against an outflow of $ 3.5 billion in the same period of 2015-16. The net inflow to India during 2014 and 2015 were Rs. 2.56 lakh crore and
Rs. 63,663 crore.
But the trend reversed in the following year—for the first time since the meltdown of 2008, net FPI turned negative during the year 2016—an outflow of Rs. 23,079 crore from the Indian markets. It was not special case with India but most of the EMEs (merging market economies) saw big outflows from their markets—as developed economies were giving higher returns.
Exchange rate: Indian rupee has depreciated during 2016-17 (April- December) which could be attributed largely to the strengthening of the US dollar globally following the US presidential election results and tightening of monetary policy there. However, it has performed better than the currencies of most of other emerging market economies (EMEs). On year-on- year basis, the rupee depreciated by 3.4 per cent against US dollar as compared to the depreciation of Mexican peso (14.4 per cent), South African Rand
(8.6 per cent) and Chinese renminbi (6.3 per cent).