Export driven industries need some basic changes to make the incentives work for them
Socialist economy has stifled the creation of wealth in India for more than four decades. Foreign trade never became the cynosure in the upper echelons of government till the advent of the era of economic liberalization in 1991. Since then, the removal of a plethora of barriers to trade not only led to wealth generation but creation of millions of skilled and semis-skilled jobs. But, then came the global recession and the tide turned. A continuous decline in the year-on-year (yoy) merchandise exports for last eight months with declining percentages hovering around 30% and above have cast a gloomy picture for the highest employment generating sector of the economy. The worst hit has been the labour intensive textile and handicrafts with demand plummeting by 30-40% over last year. The next worst hit has been the gems and jewellery exports resulting in a cumulative loss of around three hundred thousand jobs. A recent PHD Chamber survey covering 104 entities revealed that 80% of the export-oriented industries have registered a drop in order size and volume. Estimates show that around 5 million jobs have been lost.
The only saving grace in this tumultuous hour has been the reduction in the import bill though close scrutiny will reveal that this has been due to the reduction in oil prices more than anything else (oil import bill has dropped by more than 50% while the non-oil imports have risen). The recent spurt of excitement in the markets has sparked a new hope for all the sectors of the economy but for the millions of blue collar and semi-skilled workers in the export linked industries.
A new ray of hope can be shown only if certain policy initiatives are taken on war footing and a long term framework is made for the sustained growth of merchandise exports.
Socialist economy has stifled the creation of wealth in India for more than four decades. Foreign trade never became the cynosure in the upper echelons of government till the advent of the era of economic liberalization in 1991. Since then, the removal of a plethora of barriers to trade not only led to wealth generation but creation of millions of skilled and semis-skilled jobs. But, then came the global recession and the tide turned. A continuous decline in the year-on-year (yoy) merchandise exports for last eight months with declining percentages hovering around 30% and above have cast a gloomy picture for the highest employment generating sector of the economy. The worst hit has been the labour intensive textile and handicrafts with demand plummeting by 30-40% over last year. The next worst hit has been the gems and jewellery exports resulting in a cumulative loss of around three hundred thousand jobs. A recent PHD Chamber survey covering 104 entities revealed that 80% of the export-oriented industries have registered a drop in order size and volume. Estimates show that around 5 million jobs have been lost.
The only saving grace in this tumultuous hour has been the reduction in the import bill though close scrutiny will reveal that this has been due to the reduction in oil prices more than anything else (oil import bill has dropped by more than 50% while the non-oil imports have risen). The recent spurt of excitement in the markets has sparked a new hope for all the sectors of the economy but for the millions of blue collar and semi-skilled workers in the export linked industries.
A new ray of hope can be shown only if certain policy initiatives are taken on war footing and a long term framework is made for the sustained growth of merchandise exports.
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