Wednesday, January 16, 2013

The silk route still remains jagged

India’s Foreign Trade Policy (FTP) 2009-14 is a half step undone by more omissions than commissions, say anchal gupta and niharika patra, who argue all is not lost...

The term was originally coined by the German geographer Ferdinand Von Richthofen in 1877. It has been considered as the first ever link between the east and the west in recorded history. Its role in being one of the pillars on which the great ancient civilizations of India, China, Greece and Egypt stood is undisputed. It was the panacea to large trading communities who survived because of it. Unfortunately, the silk routes that can lead India back to brighter shores are still blocked. With demand for India’s exports still remaining low than its 2007-08 levels in the biggest markets of US and Europe, the dark skies for India’s trade might take some more time to clear up. However, with certain developments sending a whiff of fresh air in the suffocated dungeons that is India’s exports, the picture gets complicated.

There is no denying the fact that India’s over dependence on USA and the EU for its cheap and labour intensive exports (same is true for services also) has hurt India in the short term as there have been huge job losses in some of the biggest export sectors. According to latest figures released by the Labour Bureau, the job losses amounted to 1.72 lakhs in the April – June quarter mainly in the textiles and gems and jewellery sector with export oriented units accounting for 1.67 lakhs of the same. It must be remembered that the government itself declared that the total job losses amounted to 5 lakh in the October to December quarter last year owing to the meltdown. With varied statistics putting the job losses at different levels, the in total job losses owing to depression can be put in the range of 1-1.2 million including indirect losses.

However, with the first signs of recovery beginning to pour in the last 2 months, it is widely hoped that the trade train of India can be back at full throttle soon. But, the trade picture can be more complicated than Einstein’s field equations at times. With the drop in demand in biggest economies like USA, Japan, EU and slowing down of China, the oil prices went down to nearly US $40 a barrel from its peak of $145 in the middle of 2008.

Source : IIPM Editorial, 2012.
An Initiative of IIPMMalay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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