Slowdown in industrial growth, exports to keep Suresh Prabhu busy

File photo of Suresh Prabhu
Apart from a slowdown in exports growth and widening trade deficit with China, new Commerce and Industry Ministry Suresh Prabhu has his task cut out. What more, the industries are still reeling from demonetisation and GST.

In Sunday's Cabinet reshuffle, former commerce and industry minister Nirmala Sitharaman was given the Defence portfolio. 

The three years of Sitharaman's tenure at the Commerce Ministry saw merchandise exports reach $310 billion in 2014-15, after which it hasn't been able to break the $300 billion annual barrier. It declined to $262 billion in 2015-16 and rose 4.7 per cent to $274 billion in the last financial year of 2016-17. 

While Commerce Department officials have pointed to a slowdown in global trade growth, apart from a crash in prices of raw materials like processed petroleum, industrial metals and meat, which India exports heavily. Domestic exporters have continued to raise the issue of falling competitiveness, loss of foreign market for strong sectors like apparel and engineering goods and a growing trade gap with China as more serious concerns.

Also on Prabhu's agenda will be at least 16 free trade agreements that India is currently negotiating with nations or nation groupings. While the completion of new agreements have been painstakingly slow, industry experts say that existing trade deals have grown increasingly stronger.

During Sitharaman's tenure, the country hasn't made progress at the World Trade Organisation on matters of international trade rules. India's long time demand of a permanent solution on stockpiling of food grain or a special safety mechanism for agriculture hasn't materialised.

However, Prabhu will also have to put up the pressure for a global Trade Facilitation Agreement on Services, which had been proposed by India.

The investments front seems better secured as the Department of Industrial Policy and Promotion under Sitharaman has managed to ease more than 87 FDI rules across 21 sectors to accelerate economic growth and boost jobs.

FDI inflows rose by 23 per cent to $55.6 billion in 2015-16, creating a new record. In 2016-17, the figures were even higher at $60.08 billion.

The incoming minister's toughest challenge will be to start the industrial growth machine which has fallen flat due to the double whammy of GST regime as well as last year's demonetisation exercise. Latest June quarter GDP figures have surprised many by registering 5.7 per cent, the lowest growth rate since Prime Minister Narendra Modi was elected. Rising by the slackest of paces in more than three years, GDP has primarily dropped due to industrial growth being stifled.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel