Exports growth - real or Anna Hazare effect?

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Bikky Khosla | 13 Sep, 2011
Exports continue to surprise everyone. After jumping by a whopping 81.8 percent y-o-y to US $29.3 billion in July, overseas shipments grew again at a robust pace of 44.2 percent y-o-y in August, reaching US $24.3 billion. During the April-August period, exports have reached a level of US $134.5 billion, registering a growth rate of 54.2 percent y-o-y.

These numbers are spectacular but puzzling. How could Indian exports grow at a consistently scorching pace over a long time at this time of global economic uncertainty, particularly when two of its biggest export markets â the US and Europe â are battling fears of recession? The question is doing rounds in my mind â probably everywhere now.

However, policy makers say that high growth in exports is the result of India's market diversification policy. Eggs are put in many baskets and the economy is reaping benefits, they claim. But still I am skeptical about the fact that our exporters are moving away from the traditional export markets so fast!

Interestingly, the skepticism is backed by recent IMF monthly trade statistics which indicate that other countries' import from India don't match with the Indian government's numbers on exports. The government denied that there was anything wrong with the export data, although earlier in March it had admitted that the merchandise import data for February 2011 were underestimated because of a technical problem in a government e-commerce portal.

But is there a bigger cat in the bag? In the last few days I talked to a few exporters and they viewed that their growth is not really so high. So, is it black money, as claimed by some people, that is playing a hidden role in the recent growth in India's export earnings? In a modus operandi of over-invoicing their exports, are some people who have stashed money abroad bringing the wealth back to the country in the name of exports?

Black money is pushing Indian exports â such a claim is more difficult than anything else to prove. But I feel the argument cannot totally be ignored, particularly in the post Baba Ramdev and Anna Hazare scenario and after the recent nationwide hullabaloo over black money, forcing the government to put renewed efforts to tighten the noose on money launderers.

Recently, the government has entered into the Tax Information Exchange Agreements with a number of countries and jurisdictions that are known as tax havens for black money. Also renegotiation of Double Taxation Avoidance Agreements (DTAA) with some other nations, including Switzerland (expected by September-October) is also being pursued.

Keeping the above developments in mind it seems quite plausible that Indians who secreted away their black money in these tax havens would try everything to shift the wealth to some safer place or bring it back home.

While bringing back the black money, funding over-invoiced export earnings from illegal wealth held abroad is likely to be a preferred way, which, unlike the hawala route, helps to make the black money white and even tax exemptions can be enjoyed. And if such exports could be shown from a SEZ or an EOU, that's icing on the cake with more benefits on avail.

Concluding, I feel that the recent exports figures are encouraging for the sector, and the growth could be part of some larger developments in the world trade. But at the same time it is equally, if not more, plausible that black money has something to do with the recent export figures. To be or not to be - but the questions are in the air â Are the export figures real? Is black money behind the current flamboyant performance in exports?