Asia’s third largest economy India – which is critically dependent on consumption, is facing  the challenge of a fall in consumption which is indicated by dropping sale figures in some of the key sectors.

As a solution, the economy – which is arguably still the fastest growing major economy in the world, wants to focus more on exports for growth in the economy even though that strategy is typically not a crucial driver of its economy.

India’s plan for an “exports-oriented economic policy” is in play, said Sanjeev Sanyal, principal economic adviser at the country’s Ministry of Finance.

“Many people often say India’s story is about the return of consumption. We are challenging that,” he told the Nomura Investment Forum in Singapore.

He said that the present moment may be offering an opportunity to do just that, and added that the ongoing US-China trade war should be seen by India as its chance of foraying into and capturing some of the international export market.

“Do not worry about the fact that the global exports environment may or may not be conducive. Our share of global exports is so small … The fact that global supply chains are disrupted should be seen as an opportunity,” Sanyal said.

There have been recent concerns about whether consumption alone can be the main growth driver for the Indian economy. A slew of weak sales data for key sectors in the country have been witnessed in India in the last few months.

In April there has been a drop of 17 per cent in the sale of vehicles in the country which is the worst monthly figure ion almost eight years. It was also the fifth straight month of decline.

In the first three months of the year, there was also a slowdown of 13.6 per cent in the growth in India’s fast moving consumer goods sector compared to almost 16 per cent in the last three months of 2018, according to Nielsen data.

Further, the growth of the country’s economy was 6.6 per cent in the last three months of 2018 according to available data, which is the slowest rate of growth for the country’s economy in five quarters. Slowing growth was flagged as a “serious concern” by the top industry body of India — the Federation of Indian Chambers of Commerce and Industry. It also said that what was more worrisome was the fact that a general low down of the global economy was not being adequately offset by the growth of domestic consumption.

On the other hand, growth projection have been curbed by India’s central bank – the Reserve Bank of India, from an earlier target of 7.4 per cent for the 2020 financial year to 7.2 per cent.

According to Sanyal, there would be a few key tasks for India cause a shift to export-driven growth. India would need to identify the type of goods and services that it would be exporting and the determination of the kind of support needed for those sectors.

“New areas could be areas like defense, for example … even in areas like services exports where we are big but, in fact, we are not growing as fast as we should be. We need to also revive our IT industry and get that going. The key here is we need to find whichever sectors, focus on those clusters, help them out,” Sanyal said.

However, India will not be “using our exchange rate in any strategic way” in order t to increase the attractiveness of its exports, stressed Sanyal.

“We do have a tilt towards accumulating reserves in general, but we do not want to use the exchange rate as an active weapon … Even in the case of China, they made one big devaluation, (but) the rest of the time actually they really played the game through productivity gains,” he told the conference.

(Adapted from CNBC.com)

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