New Delhi, Sep 4 (SocialNews.XYZ) India’s recent currency depreciation has not translated into a strong export recovery because a missing middle of mid‑technology and intermediate goods is failing to respond, a report said on Friday, adding that trade deals and lower export tariffs could solve this issue.
The report from HSBC Global Investment Research said that weakness in mid‑tech exports leaves the country’s trade balance vulnerable and limits the benefits of a weaker rupee.
"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," the report said.
The research firm said that high‑tech exports such as machinery and electronics have shown a positive response to the rupee’s decline. Low‑tech goods responded modestly, while mid‑tech categories, including textiles, footwear and plastics, showed only negligible response.
"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," the report said.
If recent trade deals -- EU trade deal, UK-India CEPA and others -- are executed expeditiously and extended to other regions, India's import and export tariffs could be lowered, it added.
India has traditionally grown faster than its export markets, resulting in a persistent trade deficit, which becomes a source of vulnerability in periods when foreign inflows are not enough to fund it. It may need to raise export competitiveness to address this issue, and part of it could come from a weaker currency.
However, the firm noted that the rupee has weakened sharply in the last 18 months which should help improve the trade balance via the "J curve" effect.
The exports did not rise enough to narrow the trade gap, which is probably due to the weakness in mid-tech exports.
—IANS
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Source: IANS
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