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Lot to learn from Bangladesh: Economic Survey of India

The top five export commodities account for more than 90 per cent of total exports of Bangladesh since 2015

Friday January 29, 2021 10:13 PM, ummid.com with inputs from IANS

Economic Survey

New Delhi: At a time when India is looking to expand its presence in the global markets by increasing the basket of its exports, the Economic Survey has pointed that it has a lot to learn from its neighbour Bangladesh on how to build a competitive edge and scale up its position in the export market.

Bangladesh seems poised to emerge as a dominant exporter as its exports posted an impressive compound annual growth rate (CAGR) of 8.6 per cent during 2011-2019, higher than 0.9 per cent for India, and 0.4 per cent for the world.

Top Five Export Commodities

The top five export commodities account for more than 90 per cent of total exports of Bangladesh since 2015. These five commodities mainly pertain to textiles & apparel and footwear industry, which are highly labour-intensive and employ unskilled and semi-skilled labour.

India Export Performanc

In case of India, on the other hand, export performance is more broadbased as the top five export commodities jointly contribute around 40 per cent of total exports.

Bangladesh holds lesson for India on how to build specialisation in products in which it is competitive, the Survey said.

High diversification combined with low specialisation implied that India is spreading its exports thinly over many products and partners, it added.

"More focus on core inflation needed"

Citing possible inaccuries in the Consumer Price Index - Combined (CPI-C) inflation, the Economic Survey 2020-21 said that greater focus should be given on core inflation, the costs of goods and services excluding food and energy sectors.

The Economic Survey, tabled in the parliament on Friday, found that sole focus on CPI-C inflation may not be appropriate for four reasons. The first reason being food inflation, which contributes significantly to CPI-C and is driven primarily by supply-side factors.

"Second, given its role as the headline target for monetary policy, changes in CPI-C anchor inflation expectations. This occurs despite inflation in CPI-C being driven by supplyside factors that drive food inflation," it said.

"Food Inflation"

Further it noted that several components of food inflation are transitory with wide variations within the food and beverages group. It also said that food inflation has been driving overall CPI-C inflation due to the relatively higher weight of food items in the index.

While food habits have undergone revisions over the decade since 2011-12, which is base year of CPI, the same is not reflected in the index yet, it said, adding that the base year of CPI therefore needs to be revised to overcome the measurement error that may be arising from the change in food habits.

"For all these reasons, a greater focus on core inflation is warranted," the document said.

Further, given the significant increases in e-commerce transactions, new sources of price data capturing e-commerce transactions must get incorporated in the construction of price indices, suggested the survey.

"Fiscal Policy"

The Economic Survey 2020-21 further said that India requires an active fiscal policy which will ensure accrual of overall benefits from Centre's seminal economic reforms.

The survey document which was tabled by Finance Minister Nirmala Sitharaman in the Parliament cited fiscal multipliers are disproportionately higher during periods of economic crises than booms.

"Thus, as the Covid-19 pandemic has created a significant negative shock to demand, an active fiscal policy can ensure the full benefit of seminal economic reforms taken by the government," the survey said.

"As the IRGD is expected to be negative in the foreseeable future, a fiscal policy that provides an impetus to growth will lead to lower, not higher, debt-to-GDP ratios."

The Economic Survey examined the optimal stance of fiscal policy in India during a crisis and concluded that it is growth that leads to debt sustainability and not necessarily vice-versa.


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