NEW DELHI • India is set to prune its ambitious export target of US$900 billion (S$1.2 trillion) as Prime Minister Narendra Modi's government works on reviewing the foreign trade policy amid continued global weakness and uncertainty.
The reassessment comes as India slogs it out in negotiations for a regional trade deal that would account for almost 30 per cent of global gross domestic product and over a quarter of world exports. The pact, known as the Regional Comprehensive Economic Partnership, involves China, the 10 Asean nations, Australia, New Zealand, South Korea and Japan.
The government unveiled its first foreign trade policy for 2015-2020 in April, setting a merchandise and services export target of US$900 billion by 2020, almost double the US$465.9 billion achieved in the 2013-14 period. But with the fragile global economy and increasingly protectionist economic policies adopted by countries, India is reassessing the export situation.
"We will review the target," Commerce Secretary Rita Teaotia told Bloomberg News in an interview.
"When we fixed the target, the global situation was different and it looked achievable. Since then, there has been a great deal of change. There was economic slowdown, a fall in oil and other commodity prices."
India's export market has been sliding since 2014-15 when it contracted by 1.29 per cent and further dipped 15.85 per cent in 2015-16 from a growth of 4.66 per cent in 2013-14, according to data from the Ministry of Commerce website.
The exports have been adversely impacted by a global slowdown, a sharp fall in commodity prices and currency fluctuations, Ms Teaotia said. "Prices of crude and petroleum products, which are very important commodities in both the export and import baskets, made a large dent in our trade numbers."
The Federation of Indian Export Organisations (Fieo), a body set up by the Commerce Ministry, estimates that to achieve the US$900 billion target, exports will have to grow at a compounded annual growth rate of 28 per cent - a tall order under the current global scenario.
Fieo director-general Ajay Sahai said: "This growth rate is very high. On a 15 per cent growth rate, we will achieve US$725-US$750 billion by 2020."
The Modi government has described infrastructure bottlenecks, high transaction costs and manufacturing constraints as the biggest domestic challenges for the exports. With the implementation of the goods and services tax, however, India will become a unified market subsuming more than a dozen federal and provincial levies in a bid to free up trade.