The main concerns of India’s exporters, as they brace themselves for yet another tumultuous year in international trade, are the problems locally due to the demonetisation-triggered cash crunch, as well as the rising support for protectionism in Europe and the U.S. owing to the backlash against globalisation.
Goods exports to the U.S. and the European Union nations — that are India’s traditional and main markets for its shipments — had accounted for 16 per cent and 17 per cent respectively of India’s total goods exports of $263 billion in 2015-16.
However, in what could hurt India’s exports, the incoming administration in the U.S. is widely expected to announce protectionist policies given President-elect Donald Trump’s statements that America’s manufacturing sector has been severely hit by their policies and trade agreements promoting free-trade. In Europe, the Netherlands, France and Germany are going in for general / presidential elections in 2017, and parties and politicians backing policies that are protectionist and anti-immigration are gaining mileage. Then, there is the negotiation of the terms and conditions of Britain’s exit from the European Union to watch out for.
“The outcome of Brexit negotiations and polls in EU countries, especially Germany, will have a bearing on the overall sentiments on global trade. If the EU disintegrates, it will add to the uncertainties in global trade, impacting India’s trade as well,” said Ajay Sahai, director general and chief executive officer, Federation of Indian Export Organisations – the apex body for Indian exporters. Also, if there are more rate hikes by the U.S. Federal Reserve in 2017, it will lead to a flight of capital from emerging market economies (other than India) and weaken their currencies, in turn hitting the competitiveness of India’s exports, he added.