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Modi Must Focus On Economic Development, Not Elections, To Save Jobs
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Will India's exports slump for the ninth straight month in August cast a shadow over Prime Minister Narendra Modi's goal of achieving over 8 per cent growth in 2015-16 fiscal year? Modi sees manufacturing and export-led growth as the best way to create jobs for the millions of young people who helped him gain power last year.
Jobs are a critical issue for the Narendra Modi-led National Democratic Alliance (NDA) government, struggling to revive growth to a rate that will create employment for the millions who join the workforce every year.
The Modi government aims to almost double goods and services exports to $900 billion in the next four years.
But merchandise exports contracted to $21.26 billion, a dip of 20.66 per cent in August, widening the trade deficit and raising concerns on job creation. Lower exports and much lower imports, however, narrowed the country's trade deficit to $12.47 billion in August from a month earlier, but wider $10.66 billion a year earlier.
The declining exports also indicate the difficulties the Indian economy faces as it attempts a recovery. Trade deficit, is a key parameter that indicates the health of the economy and is the difference between the value of imports and exports.
Sluggish demand in key global markets such as the US and Europe has hurt exports. China's devaluation can make its goods more competitive in the global markets, hurting India's exports prospect further.
Quite a few economists and media commentators are of the view that growth could ease to 7 per cent to 7.5 per cent in the current 2015-16 fiscal year ending in March, against a target of 8 per cent to 8.5 per cent, if the slump in global demand continues.
Analysts say exporters could be forced to lay off workers if sales orders continued to decline over the next 3-4 months.
Federation of Indian Exporters chairman S C Ralhan has said that at this rate, job losses were imminent. He also demanded an intervention by Modi in the matter.
"With the export orders coming down every month, it is a natural process that the companies will look for cost cutting and the workers will be removed," Ralhan said.
According to media reports exporters have been lobbying for lower borrowing costs and fiscal incentives to explore untapped markets such as Africa and Latin America. Modi met business bosses last week and assured them of government support to boost growth.
"We need to target growth assuming little support from external demand," N R Bhanumurthy, an economist at National Institute of Public Finance and Policy, told Reuters.
Some relief could come from Raghuram Rajan, governor of the Reserve Bank of India, who has cut policy rates by 75 basis points this year, is widely expected to reduce rates at a policy meeting on September 29 thanks to inflation at a record low.
Keen to inject more momentum in the economy and encourage investment, the government and business community have urged the central bank to lower interest rates, though Rajan has stressed that he wants to see low inflation on a sustained basis.
So far, to counter slack global demand, Modi has vowed to modernise overloaded roads, ports and railways in a bid to make India's exports more competitive.
At present, other indicators and on-the-ground evidence suggest the economy is struggling, and there is growing impatience with Modi's government to implement more policies that can galvanise growth and create more jobs on sustained basis.