India’s five-cornered trade strategy

Five rather unfavourable trends define India’s trade performance over the past two years; these trends also provide useful pointers as to where India’s future trade strategy can go over the next three years as it deals with a global economic slowdown, the rise of megatrade agreements and a pivot to a more intensive trade relation with the U.S.

The Narendra Modi government’s trade policy has been marked by five noteworthy, but rather unflattering, trends: declining trade volumes, unsuccessful diversification of trade destinations, continuing deadlock in U.S.-India commercial ties, India’s services strength remaining underutilised in trade agreements, and, lack of a national strategy for mega trade agreements.

This then shapes the government’s trade agenda for the next three years.

The first element, the dismal state of India’s trade, impacts Indian industry. In the two years of the current government, exports have contracted by almost 17% — from $314.405 billion in fiscal 2013-14 (April 2013 to March 2014, a couple of months before Modi and his Cabinet were sworn in) to $261.136 billion in 2015-16. Even imports have dipped by a considerable 16% during the same period: from $450.12 billion to $379.6 billion.[1]

To be fair, exogenous factors are behind the drop. The global slowdown has eroded demand for manufactured goods. But, while global trade in 2015 expanded – albeit marginally, by 2.8%[2] — India’s trade shrunk. In addition, lower commodity prices have impacted volumes and values for both exports and imports. However, the fall in imports has another worrisome aspect – it could signify lower demand for raw materials and intermediate products from Indian manufacturing sector. Combined with lower merchandise exports, which also affects broad swathes of industry, contracting trade volumes adversely impact employment, incomes, investment, consumption and economic growth.

                        Exports                                      Imports

2013-14:    $314.405 billion USD        $450.199 billion USD
2014-15:    $310.338 billion USD        $448,033 billion USD
2015-16:    $261.136 billion USD        $379.596 billion USD
Source: Department of Commerce, Ministry of Commerce & Industry

Undoubtedly, trade performance has to be improved urgently. One reason for India’s continuing indifferent trade performance is lack of integration with regional and global supply chains. Foxconn’s decision to set up a handset manufacturing unit in India is an improvement but it will require many similar initiatives to markedly improve India’s trade profile.

This brings up the second aspect. India has been trying for some years to diversify its export destinations, away from the developing countries of North America, Europe and Japan where demand and consumption levels have dropped appreciably. India saw in Africa a key trade and investment partner and fixed a $90-billion trade target for 2015. It finalised similar trade targets with ASEAN, other regional groupings and individual countries. Unfortunately, most of these trade targets remain unattainable.

For example, trade between Indian and Africa fell short of the $90-billion target – two-way trade dropped from $71.5 billion during 2014-15 to $ 56.67 billion by 2015-16. One of the reasons for the shortfall is the steep drop in commodity prices, leading to the oil import bill from Nigeria (India imports about 15% of its oil from that country) shrinking. However, that still does not explain the lack of a concerted thrust at creating alternative markets for Indian goods and services in either Africa or Latin America. It’s not too late, given India’s strategic and civilizational ties in these two continents.

The third facet is a visible pivot over the past two years towards a more intense trade and investment relationship with U.S., though the results are mixed[3].

India’s engagement with U.S. froze under UPA-II regime. However, the past two years have seen considerable energy invested in the relationship. Trade ties between the two nations is conducted through the Trade Policy Forum (TPF, set up in 2005), under the broad rubric of the US-India Strategic and Commercial Dialogue. The forum’s ninth meeting was held in October 2015 and like other previous rounds, the outcome remained wedged between on familiar issues – agriculture market access, intellectual property rights, trade in goods and services. Strategy firm Albright Stonebridge Group comments: “Will the TPF continue to be a talk shop where issues are raised, discussed and shelved for discussion next year…Over the last few years a meeting would be called successful if both sides simply showed up to the meeting at the agreed place and time, discussed the agenda and closed by agreeing to disagree.”[4]

One of the perennial sticking points in the India-U.S trade negotiations is services, the fourth pillar of India’s trade profile and unarguably a competitive advantage. The Economic Survey for 2015-16 states: “WTO data shows that India’s services exports grew from $16.8 billion in 2001 to $155.6 billion — which constitutes 7.5% of the GDP — in 2014, making the country the eighth largest services exporter in the world. The share of India’s services exports in global services exports at 3.2% in 2014, is nearly double its share of merchandise exports in global merchandise exports at 1.7%.”[5]

But, India has failed to utilise this competitive trade advantage, specifically cross-border movement of professionals, in various trade agreements.

For instance, India signed a Free Trade Agreement (FTA) with ASEAN for goods first, and then followed it up five years later with a FTA on services. In the interim, India suffered a negative trade balance given the SE Asian region’s superior manufacturing capability and integration with global supply chains. Strategically, if India had signed an FTA for both goods and services simultaneously, the outcome might have been different.

The past lessons seem to have been learnt and, in various FTA talks, India is now insisting on inclusion of freer movement of professionals in return for demands to lower customs tariffs.

The fifth corner of India’s future trade strategy relates to mega trade agreements. The largest – Trans Pacific Partnership – promises to change how trade is conducted. India and China are noticeably absent from the pact; in fact, if the other mega agreement under discussion (Transatlantic Trade and Investment Partnership, between USA and Europe) is finalised, India and China could find themselves in trade hibernation.

Opinion is divided[6] [7] on whether India should join TPP, even though scholars are unanimous that such mega agreements will definitely result in trade diversion for India. Excluded by both TPP and TTIP, India has now set its eyes on completing the Regional Comprehensive Economic Partnership (RCEP), a trade and investment agreement between ASEAN members plus India, China, Japan, South Korea, Australia and New Zealand. Simultaneously, President Obama is pushing for India’s membership in Asia Pacific Economic Cooperation, a 21-country regional economic forum. In fact, APEC membership is a stepping stone for TPP inclusion.

India’s strategy on mega agreements should be to first conclude RCEP without compromising on its strengths. Alongside, India should also try and finalise FTAs with individual states, such as Australia. At the same time, the government must initiate a broader public discussion on India’s trade strategy, specifically to clarify the country’s stand on TPP and its focus on “beyond-border” issues, such as domestic labour laws or environment rules.

This feature was exclusively written for Gateway House: Indian Council on Global Relations. It can be read here also
References

[1] India’s Foreign Trade: March 2016; Ministry of Commerce and Industry, Govt of India; April 18, 2016; http://pib.nic.in/newsite/erelease.aspx?relid=0

[2] Trade Statistics and Outlook: Trade growth to remain subdued in 2016 as uncertainties weigh on global demand; Press Release No Press/768; World Trade Organisation; April 7, 2016; https://www.wto.org/english/news_e/pres16_e/pr768_e.pdf

[3] Elliot, Mark and Linda Dempsey; Stalled Progress on U.S.-Indian Trade; The Washington Times; January 12, 2016;www.washingtontimes.com/news/2016/jan/12/mark-elliot-linda-dempsey-stalled-progress-on-us-i/print/

[4] India Newsletter; Determining Success or Failure of United States-India Trade Policy Forum; October 28, 2015; Albright Stonebridge Group;http://www.albrightstonebridge.com/news/determining-success-or-failure-united-states-india-trade-policy-forum

[5] Page 158, Services Sector (Chapter 7), Economic Survey 2015-16, Vol 2, Ministry of Finance, Govt of India

[6] Banga, Rashmi & Pritish Kumar Sahu; Trans-Pacific Partnership Agreement (TPPA): Implications for India’s Trade and Investments; Working Paper CWS/WP/200/24; October 2015; Centre for WTO Studies; http://wtocentre.iift.ac.in/workingpaper/Trans%20Pacific%20Partnership%20Agreement_Implications%20for%20India.pdf

[7] Bergsten, Fred C; India’s Trade Gains From Joining An APEC-Wide TPP; September 18, 2015; Peterson Institute for International Economics;https://piie.com/research/piie-charts/indias-trade-gains-joining-apec-wide-tpp

Do Trade Targets Work?

India has used two-way trade targets as a proxy for judging the temperature of its key bilateral and plurilateral relationships. But a deeper understanding is needed of the extent to which physical targets can help accomplish qualitative objectives

The government of India’s new Foreign Trade Policy (FTP) for 2015-2020 has set a $900-billion goods and services export target, to be achieved by 2020. Compared with the $465.9 billion achieved during 2013-14, the target is almost double of current levels.

The policy document prefaces the target with a rare pithy statement: “A vision is best achieved through measurable targets.”[1] But the fact is, most of India’s key diplomatic engagements—at bilateral, plurilateral, or even multilateral levels—are defined by targets.

Targets are ubiquitous in India’s economic diplomacy. There are many ways to judge the breadth and depth of a relationship between two countries, including cultural exchanges, defence cooperation, people-to-people interaction, and historical ties. But trade and investment targets lay out vector paths for future growth, and set concrete milestones against which progress can be gauged.

The target-driven approach is now spreading to bilateral ties with even smaller nations; for example, India and Vietnam recently agreed to a trade target of $15 billion, to be met by 2020. [2]

But targets are essentially cut-and-dry, and temporal. There is no definitive research showing whether targets have succeeded in imparting additional meaning to an existing relationship, or whether they have been effective in bringing two disparate nation-states closer. In other words, there’s no conclusive evidence showing that quantifiable bounds improve the qualitative facet of an engagement.

India’s Free Trade Agreement (FTA) with ASEAN is a good example. It has been a source of anxiety within government and key stakeholders. India signed the FTA for goods in 2009, but the one on services and investment—arguably India’s strong point—is yet to come into force. Even in the goods trade, India suffers a chronic trade deficit with ASEAN: it imports more than it exports.

In the face of this, the target for India-ASEAN bilateral trade—$100 billion by 2015—looks unattainable, especially since two-way trade (exports plus imports) between the two regions amounted to only $70.5 billion during April-February 2014-15. [3]

Confronted by this glacial pace of trade growth, India has done the next best thing: it has stretched out both the physical target as well the end-date. The India-ASEAN relationship will now be measured by a new target without having to necessarily address performance vis-a-vis the earlier target. External affairs minister Sushma Swaraj announced the new target at the inaugural session of Delhi Dialogue VII on March 11: “However, we need to make a special effort to achieve our target of enhancing trade to $100 billion by 2015, and our aspiration is to double it to $200 billion by 2022.” [4]

India has recast other targets in other strategic relationships as well. During Prime Minister Narendra Modi first state visit to the U.S. in September 2014, the joint statement he issued with President Barack Obama stated: “Noting that two-way trade has increased five-fold since 2001 to nearly $100 billion, President Obama and Prime Minister Modi committed to facilitate the actions necessary to increase trade another five-fold.” [5] In other words, to take trade to $500 billion, though the statement refrained from mentioning a target year.

In the other strategic relation with neighbour China, there is some clarity of objectives on both investments and trade. A joint statement issued by Modi and President Xi Jinping in September 2014 announced: “The Chinese side would also endeavour to realise an investment of $20 billion in India in the next 5 years in various industrial and infrastructure development projects”. [6] During the same trip, a five-year Trade and Economic Development Plan signed between the two countries has, among other targets, an unquantified over-riding objective: reduce the trade imbalance India suffers in its $65-billion bilateral trade with China. [7]

Even with Africa, the $90-billion target set for 2015 is likely to be missed. [8] It is also quite likely that the target will be bumped up—both the volume as well the year. This might be announced at the Third India-Africa Summit scheduled for October 2015.

When the foreign trade and investment landscape is suffused with a surfeit of targets, the logical questions are: How are targets fixed? What is the strategy for meeting them? No one knows the answers.

For one, there is no clarity on who should set and announce targets—the commerce ministry or the external affairs ministry? While think tanks and academic experts are known to have been engaged by both ministries to finalise targets, the research output is not available to civil society, either for viewing or for providing inputs. Inviting public comments before finalising targets, or even to assess the methodology used, can probably infuse some realism into these exercises.

Second, once the targets are announced, there is no detailed analysis of how these will be met, and no outlining of strategy, at least not in the public domain.

Finally, this year’s Foreign Trade Policy also raises a crucial issue that has bedevilled India’s trade practices: the lack of coordination between different economic agents as well as ministries operating in silo-like structures. But then the policy stops short of mentioning how “Make in India” or “Digital India” or even the policy on smart cities can be integrated with the FTP to deliver higher exports of both goods and services. That remains the biggest challenge for India’s trade regime.

References


[1] Ministry of Commerce and Industry, Government of India; Foreign Trade Policy Statement, <http://dgft.gov.in/exim/2000/FTPstatement2015.pdf>, p.14

[2] Ministry of External Affairs, Government of India, Joint Statement by Indian Prime Minister Narendra Modi and Vietnamese Prime Minister Nguyen Tan Dung,28 October 2014, <http://www.mea.gov.in/Speeches-Statements.htm?dtl/24143/Media+Statements+by+Prime+Minister+of+India+and+Prime+Minister+of+Vietnam+in+New+Delhi+October+28+2014>

[3] Ministry of Commerce and Industry, Government of India, Trade Statistics, <http://commerce.nic.in/ftpa/cntq.asp>

[4] Swaraj, Sushma, Keynote Address at Inaugural Session of Delhi Dialogue VII,Ministry of External Affairs, Government of India, 11 March 2015,

<http://www.mea.gov.in/Speeches-Statements.htm?dtl/24899/Keynote_Address_by_External_Affairs_Minister_at_the_Inaugural_Session_of_Delhi_Dialogue_VII_New_Delhi>

[5] Ministry of External Affairs, Government of India, Joint statement by Indian Prime Minister Narendra Modi & U.S.A. President Barack Obama, 30 September 2014,

<http://www.mea.gov.in/bilateral-documents.htm?dtl/24051/Joint_Statement_during_the_visit_of_Prime_Minister_to_USA>

[6] Ministry of External Affairs, Government of India, Joint Statement between the Republic of India and the People’s Republic of China on Building a Closer Developmental Partnership, 19 September 2014,

<http://www.mea.gov.in/bilateral-documents.htmdtl/24022/Joint_Statement_between_the_Republic_of_India_and_the_Peoples_Republic_of_China_on_Building_a_Closer_Developmental_Partnership>

[7] Ministry of External Affairs, Government of India, List of Documents signed during the State Visit of Chinese President Xi Jinping to India, 18 September 2014, <http://www.mea.gov.in/incoming-visit-detail.htm?24012/List+of+Documents+signed+during+the+State+Visit+of+Chinese+President+Xi+Jinping+to+India>

[8] Singhal, Rajrishi; Indian Banks in Africa: Change Agents; Policy Perspective No 8, Gateway House: Indian Counmcil on Global Relations, 9 January 2015, 

<http://www.gatewayhouse.in/wp-content/uploads/2015/01/Policy-Perspective_Economic-diplomacy-with-Africa.pdf>

Budget 2015: No Heed to Economic Diplomacy

Finance minister Arun Jaitley’s 2015-16 Budget resonates only partially with Prime Minister Narendra Modi’s arc of economic diplomacy; it lacks strategic intent that could invest India with some geo-strategic heft in the years to come

Soon after he was sworn in as Prime Minister, Narendra Modi invested India’s languishing economic diplomacy with a renewed energy. It was therefore widely expected that Budget-2015 would achieve strategic convergence with Modi’s vision of using economics to drive India’s foreign policy. But the Budget seems to have achieved that only partially.

Economic diplomacy has a two-pronged role in the Indian economy. One, to open up markets for Indian goods, services and investments, with special emphasis on widening and deepening India’s footprint in neighbouring countries and newer markets like Africa and Latin America. Two, Modi’s whirlwind foreign engagements in the first eight months of his premiership were also focused on attracting foreign inward investments — from governments as well as the private sector — to further invigorate his “Make In India” programme.

On the first count, the Budget is conspicuously silent. It is on the second that the Budget holds out some hope.

The silence in the first instance is surprising. With the U.S., European and Japanese economies — which have also been India’s traditional export markets — still struggling to break out of a low-growth trap, it is imperative for India to create a beach-head in newer markets for its goods, services and investments. Post 2008, India was forced to look to Africa and Latin America to maintain export buoyancy. But, both continents together account for a paltry 15% of India’s total exports and there is nothing strategic in this Budget that indicates a desire to achieve higher numbers.

Modi’s foreign policy priorities have also included a renewed thrust on India’s immediate neighbourhood — countries in both the South Asia Association for Regional Cooperation (SAARC) and Association of Southeast Asian Nations (ASEAN). Barring the announcement of a project development company to help facilitate Indian private sector investments in Cambodia, Myanmar, Laos and Vietnam (CMLV), the Budget is bereft of any meaningful strategy. For example, there is no mention of, or funding allocated to, linking India’s North East to ASEAN through an all-weather transport corridor, an issue that has been discussed and accepted. Even with CMLV, there is no clarity on the investment-absorbing capacity of the individual countries or the kind of sectors Indian companies can focus on [1].

The Budget’s commitment to economic diplomacy is also reflected in money kept aside for various ministries. Budget allocation for 2015-16 under the head “Technical & Economic Cooperation with Other Countries and Advances to Foreign Governments” in the Ministry of External Affairs (MEA) [2] is up by 25.88%. But when compared with the original budget estimate, the allocation is actually down by about 3.5%. Worse, the budgetary outlay for the Department of Commerce in the Ministry for Commerce and Industry (the bulk of which is earmarked for foreign trade and export promotion) for 2015-16 is lower than both the revised and budget estimates for 2014-15. [3]

Another missed opportunity is the Indian Technical and Economic Cooperation (ITEC) programme, a key instrument of India’s development diplomacy which is administered by MEA. Despite its popularity, it’s allocation at Rs 180 crore for 2015-16 is just 16% higher than the actual expenditure last year. 

An argument can be made that given the shrinking fiscal space for the Centre, and the pressure to kickstart growth impulses through public spending, little is left to spare for economic diplomacy. However, that logic is self-defeating because the gains to economy — both in terms of growth and revenue — from accelerated geo-economic strategies is well known.

What makes these lapses doubly alarming is the grim future scenario for India’s trade regime outlined in the Economic Survey, which was released by Chief Economic Advisor Arvind Subramanian only a day before the Budget announcement. [4]

The survey singles out three main challenges: the phenomenon of unbundled and geographically dispersed global value-added manufacturing chains into which India has integrated slowly, the imminent rise of two large trade blocs (Trans-Pacific Partnership with Asia and Trans-Atlantic Trade and Investment Partnership with Europe) which will cover half the world’s trade and China’s emergence as a major voice in trade negotiations. India, says Subramanian, has only two choices: measured integration (an euphemism for status quo) or ambitious integration, which will require India joining the TTP (currently a remote possibility). The flip sides to both options are that measured integration will leave Indian exports isolated, while joining the TTP will require substantial liberalisation which may be out of alignment with domestic level reforms.

As China did during its entry to the WTO in 2001, India can forcefully dovetail the domestic reforms agenda to an external priority. But the country’s competitive democratic politics and the presence of varied interest groups makes that task exceedingly difficult.

Gateway House has been advocating a greater impetus towards improving India’s relationships with neighbours in SAARC and ASEAN, through a strategy of Corridors of Development and Circles of Influence, as a means of achieving some geo-strategic primacy in the coming years. [5] [6] This Budget could have begun that journey.

But, to be fair, finance minister Arun Jaitley has introduced many measures to attract fresh investment into manufacturing and services. These moves may not be headline-grabbing, but are a nuts-and-bolts policy framework: they seek to improve the ground conditions for attracting investments, facilitate efficient use of financing, eliminate legal obstacles that inevitably lead to disputes and prolonged legal battles, simplify processes and stabilise the tax regime. There seems to be a realisation in the Budget, as well as in the Railway Budget of February 26, that investors — whether domestic or foreign — are unlikely to part with their money unless the ground conditions are improved substantially.

The specific measures introduced by Jaitley – heeding the advice of the Economic Survey – include eliminating distinctions between different categories of foreign investors, one-source clearance for regulatory approvals, easier dispute settlement mechanisms, broadening scope of investment vehicles for foreign capital, providing tax clarity and stability. [7]

Hopefully, the oversight in providing the Budget with a strategic edge through geo-economics will be corrected in the quinquennial Trade Policy 2014-2019, which is already delayed and is likely to be announced soon by Commerce Minister Nirmala Sitharaman.

REFERENCES:

[1] Mathur, Akshay; Policy Catalyst: Seven Sisters’ Corridor; 30 May, 2014; Gateway House; http://www.gatewayhouse.in/policy-catalyst-seven-sisters-corridor/

[2] Notes of Demands for Grants 2015-16; Demand No 33, Ministry of External Affairs; Expenditure Budget, Vol II; http://indiabudget.nic.in/ub2015-16/eb/sbe33.pdf

[3] Notes for Demands for Grants 2015-16; Demand No 12, Department of Commerce, Ministry of Commerce and Industry; Expenditure Budget Vol II; http://indiabudget.nic.in/ub2015-16/eb/sbe12.pdf

[4] Economic Survey 2014-15; Department of Economic Affairs, Ministry of Finance, Government of India; February 27, 2015; http://indiabudget.nic.in/es2014-15/echapvol1-01.pdf (Page 37)

[5] Kripalani, Manjeet; Circles & Corridors of Economic Diplomacy; 18 April 2014; Gateway House; http://www.gatewayhouse.in/circles-corridors-of-economic-diplomacy/

[6] Gateway House Fellows; India’s foreign policy priorities 2015; 1 January 2015; Gateway House; http://www.gatewayhouse.in/indias-foreign-policy-priorities-2015/

[7] Jaitley, Arun; Minister of Finance, Government of india; Speech to Parliament while presenting Budget 2015-16; 28 February 2015;http://indiabudget.nic.in/ub2015-16/bs/bs.pdf

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Reprinted with permission from Gateway House: http://www.gatewayhouse.in/budget-2015-no-heed-to-economic-diplomacy/

and

Quartz India: http://qz.com/354516/another-area-where-modis-budget-disappointed-economic-diplomacy/

Export Numbers Scaled Down

So, here it is: There is official confirmation that something is wrong with the trade figures. Commerce Secretary Rahul Khullar has said that exports have been over-stated by $9 billion due to "misclassification and errors" (read here). Unlike many of his colleagues, Mr Khullar is not scared of owning up and admitting that mistakes have occured.

The export numbers for the year will now have to be revised. The finance ministry released the mid-year review of the economy on Friday, December 9, 2011. April-September exports were shown as $160 billion. Now that will have to be scaled down to $151 billion. So, the earlier growth number of 52% for the first half of 2011-12 will also have to be scaled down to 43.8%.

Economists and experts (including this blogger) have been complaining about the ureliable nature of the trade data. It was obvious that something was wrong somewhere. Record export growth numbers at a time when the rest of the world is shrinking did sound a bit incongruous. It also does nothing to burnish India's already dodgy record with data. We now hope that the error margin is only $9 billion and not higher. Because even 43.8% growth in exports sounds a bit strange, especially in these stranger times.

Data Grapple

Commerce Secretary Rahul Khullar discussed October trade figures with journalists on Tuesday (November 8, 2011). The numbers were not at all encouraging – exports grew by a mere 12.4% YoY (to $19.9 billion), but imports were higher (at $39.5 billion), leaving a trade deficit of $19.6 billion, the worst in many, many years. Different newspapers have reported Mr Khullar’s briefing differently. While The Economic Times reported that imports had increased by 36.7% (read here), both newspaper Mint and wire agency Bloomberg Businessweek reported that the YoY imports growth rate for October was 21.7% (read here and here). But, soon thereafter, both Mint and Bloomberg disagreed on how bad it was – Mint said it was the worst trade deficit in any month in the past four years, but Bloomberg Businessweek contended that this was the biggest gap since April 1994. Even The Financial Times weighed in (read here)

But, we digress. The press briefing raises two important issues.

1. At the beginning of every month, the Ministry for Commerce and Industry releases official trade figures. For instance, on November 1, it released trade data for September through an official press release. Then, exactly a week later, on November 8, came the provisional October numbers via Mr Khullar’s briefing. But, this data seems to be missing from the ministry website. The question that arises now is: how are we to treat this data? The press release available on the PIB website says: “Dr Khullar informed that these figures are provisional and are likely to change.”

This is a monthly affair. While there is no doubt that timely information is always helpful and provides an early trend indicator, this data should be available on the ministry’s website. There should also be some indications about how the final figures vary from the provisional numbers.

2. The second, and more important, point is this: why have exports dipped in October? The pat answer being dished out is also a seasonal favourite: the crisis in the Euro-zone and the slow growth in USA. But then, this crisis has been continuing in both the continents for a while now and yet exports were growing by 80-120% in the preceding six months.

There have been various reports in the past trying to explain the sudden spurt in exports and some even predicted that exports growth would taper off in October. One of the reasons was the expected demise of the Deemed Export Passbook (DEPB) scheme, which was expiring on September 31. There was some speculation that exporters were front-loading a large part of their exports contracted for later in the year to try and extract maximum benefit from the dying DEPB scheme. The other speculation was that many Indians were bringing back their cash stashed abroad in tax havens, through over-invoicing of exports, before the tax sleuths discovered this hidden cache. The Economic Times carried a story (read here) about how exports to Bahamas had shot up from $22 million three years ago to over $2 billion this year.

However, surprisingly, nobody seems to be asking why was there such an unprecedented spurt in exports when the rest of the global markets were in a funk? One lengthy interview of Mr Khullar by CNBC-TV (read it here) seems to ignore the issue completely. Especially, since principal adviser to Planning Commission and former Chief Statistician Pranab Sen recently fretted about how the buoyant export numbers of April-August did not seem to jive with the torpid industrial production data for those months. It is logical that if there is a pick-up in exports, some of that will definitely reflect in the industrial production data.

When exports were growing at counter-intuitive rates, an explanation was indeed forwarded: that India had successfully diversified both the basket of the goods exported (by including more value-added products) and by diversifying the markets away from the developed economies of USA and Europe in favour of South America and Africa. How come that doesn’t hold good now? How has that changed so soon? Can we have some time series data on the volume and value of goods exported to South American and African countries, please?

A veil of mist continues to shroud, and bedevil, official economic data in India.