By Rakesh Neelakandan
India's current account deficit is widening and its rupee is depreciating. Its exports are not gaining strength. Meanwhile, in China, yuan is appreciating, exports are climbing and the nation as per economists, is running a current account surplus.
In a normal scenario, rupee depreciation should aid exports. And yuan appreciation should decelerate Chinese exports. But the opposite is happening.
?But where are the volumes in exports for India and where do we stand in terms of export destinations. Not to speak of the lack of diversification in exports.? ask Martin Patrick in an apparent explanation of this conundrum.
?India exporting to US is a fact, but China exporting to US is also a fact and a resounding one at that. China has got a monopoly when it comes to exporting toys to US; India is nowhere on the radar. China is also giving us some decent competition in textile exports to US where India's position is of strength. Thus, they are monopolistic in certain sectors and gives class competition in other sectors where we are touted to have some strength.? Martin Patrick elaborated.
This is not to say that India is having no hope...
?On the contrary, things have improved in the past 10 years.? he said. ?But we can improve by leaps and bounds and should also focus on stepping up exports to Latin American countries and other Asian nations.? he added.
The slowdown in Europe is also a prime factor curtailing Indian exports.
?China is not as depended on Europe as India is when it comes to exports.? he pointed out.
While the Chinese turnaround has been endorsed by many economists, Vijayakumar, Investment Strategist, Geojit BNP Paribas says that Chinese interest rates are key to their turnaround in exports.
?In China, returns on deposits are to the tune of 2.5%-2.7%. They are building the nation using people's money.? he said. in India, interest rates on savings are four times bigger.?
But how sustainable is that strategy of China:
?Opinions galore that it is sustainable on a short-term basis but not on a longer term note. But it has also to be noted that Chinese have a culture of discipline and high ranking productivity.? he observed.
?Besides, inflation in China is moderate...they produce more and supply bottle necks are relatively non-existent.? he added, ?this gives them greater room for maneuverability.?
?Had they had to grapple with inflation, then they too would have to raise interest rates. However, that is not the case.? he pointed out.
The point is clear: if you cannot play the game on your own terms, then simply change the game! (rakesh@commodityonline.com)
Photo Source: www.bigstockphoto.com
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