1 week ago
Lower tariffs may revive India's missing middle exports
India’s currency has become weaker, which can sometimes make its exports cheaper for foreign buyers.
However, India’s exports have not increased enough to reduce its trade gap.
A report says the main problem is a “missing middle” of products such as textiles, footwear and plastics.
These goods are not responding strongly to the weaker rupee.
High-tech products like machinery and electronics are doing better.
High import duties can make it harder for Indian factories to produce parts and materials.
The report says new trade agreements and lower tariffs could help.
This could make Indian exports more competitive and strengthen the country’s trade balance.
HSBC Global Investment Research says India’s weaker rupee has not produced a strong export recovery.
Mid-technology exports such as textiles, footwear and plastics have responded only negligibly to currency depreciation.
High-technology exports, including machinery and electronics, have shown a more positive response.
Higher export and import duties may be discouraging intermediate-goods manufacturing and creating an inverted duty structure.
The report says trade deals and lower tariffs could improve India’s export competitiveness and reduce trade-balance vulnerability.
- Who
- India and HSBC Global Investment Research.
- What
- A report says lower tariffs and trade deals could help revive India’s weak mid-technology and intermediate-goods exports.
- Where
- India and its international export markets.
- When
- The report was cited on Friday; it also discusses the rupee’s decline over the last 18 months.
- Why
- Mid-technology exports have responded weakly to currency depreciation, while high tariffs and import duties may be discouraging manufacturing and exports.
Key facts
- Researcher
- HSBC Global Investment Research
- Affected exports
- Mid-technology and intermediate goods
- Examples of weaker-performing exports
- Textiles, footwear and plastics
- Stronger-performing exports
- Machinery and electronics
- Currency movement
- The rupee weakened sharply over the last 18 months
- Proposed measures
- Execute trade deals quickly and reduce import and export tariffs
- Trade vulnerability
- A persistent trade deficit can become risky when foreign inflows are insufficient to fund it
Quotes
HSBC Global Investment Research
Research firm that authored the report
“India's exports face a larger tariff than its peers, especially so for its mid-tech exports. Further, higher import duties tend to create an inverted duty structure domestically for several intermediate goods, discouraging manufacturing.”
thehansindia.com
“Intermediate goods exports are gradually being squeezed out, even as final goods exports rise. India is exporting more finished products, but often with more imported components – mobile phones are a good example.”
thehansindia.com
Sources
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