COMMENTARY
INTERVIEW
SPECIALS
CHAT
ARCHIVES

India must diversify export markets, say foreign trade analysts

Determined efforts are required to diversify the export markets to reduce India's current dependence on four markets even as the chances of repeating the excellent export performance in 1994-96 are bleak, say experts.

India has failed to achieve significant market diversification in 1994-96 as it exported 45 to 48 per cent to the top five markets -- United States, United Kingdom, Japan, Germany and Hong Kong.

However, it could increase her share substantially in the other four markets except Japan, says B Bhattacharya and Somasri Mukhopadhyay of the Indian Institute of Foreign Trade.

In a paper jointly written, 'Global Economic Challenges in the New Millennium: India's Strategic Agenda', the authors say on the basis of export intensity indices for the top five export destinations, India has not done well in Germany and Hong Kong.

In the case of USA and UK, the indices have increased from 0.93 to 1.24 and 0.81 to 1.30 respectively while Germany and Hong Kong could move up from 0.55 to 0.79 and 0.22 to 0.69 respectively.

Despite the commerce ministry's matrix of 25 commodities and countries for giving a strategic thrust to India's exports, the percentage share of these product groups in global exports has in fact declined over the years. This reflects that the average growth rate of these commodities are in fact lower than the average growth rate of the world exports, says Bhattacharya, Dean of IIFT.

Conversely, the share of these commodity groups has increased substantially in India's exports over the same period 1984-94. This may reflect India's concentration on items which are not at the higher growth segment in the world market, warn the IIFT economists.

Suggesting the agenda for the next millennium, the authors say that India should concentrate on priority sectors like fish, dyes, pharma products, fabrics, and metal works machines.

In another article, S Mukhopadhyay says India's sound export performance in 1994 and 1995 was an isolated incident. The major factors behind the sudden swing in world trade might be the Maastrich Treaty and the post-Gulf War boom. It is clear that the phase of that extraordinary high trade growth can not be a regular occurrence, added Mukhopadhyay.

According to him, the fundamental reasons for the developed countries leading in export of goods and services are economies of scale -- they produce more and hence have more to trade, they have a diversified industrial base, and have benefited from the rising global demand of manufacturers. Nations having similar level of income have found to display similar demand characteristics. This in turn paves the way for intra-industry trade, which in turn, accounts for nearly 60 to 70 per cent of all trade, he adds.

Forecasting for the next year, the IIFT scholar says the world trade is expected to grow around four per cent , again led by the the recovery of Western Europe and growth in Asia and Latin America.

UNI