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Indian exports are on a healthy track, touching $100 billion this year. Merchandise exports for 2005-06 rose approximately 25 per cent over the previous financial year. Exporters have widened their market base. In 2004-05, services exports grew 71 per cent to $46 billion and by January 2006 had surpassed the previous year's performance with 75 per cent growth. Interestingly, Indian companies are making gains in non-traditional areas like Africa and Latin America. Indian exports are steadily supporting the country's growth story. Year after year, the numbers have been rising at the rate of 20 per cent. This year, too, trade numbers followed a similar trail, with exports touching $100 billion (Rs 4,70,000 crore). According to the department of commerce, merchandise exports for fiscal 2005-06 rose by approximately 25 per cent over the previous fiscal. These figures offer proof of the upward mobility of India's export graph. A closer look at the trends shows that Indian exports have become less volatile; exporters have widened their market base; and the trade basket is expanding. Services account for a large percentage of total exports. According to Nasscom, software services exports grew by over 33 per cent in 2005-06 to $17.3 billion. Demand has been strong in traditional as well as new service sectors-supply management, engineering applications and a host of other such areas. Adding to this buoyancy is the fact that Indian exports have become more resilient to exchange rate fluctuations. It is no longer a fear that a stronger rupee will lead to a drop in exports--a view that was quite common even in the late 90s. India no longer needs a weak rupee to make its products price competitive. However, one must not look at Indian exports in isolation. Revenues have risen across most products-- farm produce, textiles, meat and allied products, iron and steel, machinery, software and electronic goods--ranging between 5 per cent and 15 per cent, both in volume and value. Although there may be no uniform growth across sectors, a certain consistency can be seen in some segments of Indian industry. There are numerous instances of key industries that have broken the price barrier to become an integral link in the global supply chain of large MNCs. For instance, take the textile and automobile ancillaries industry. Auto ancillaries exports grew by 33 per cent in the last three years. Textiles exports, after a brief choke up, grew by 25 per cent in 2005-06. In both industries, growth has come significantly from supply contracts with some of the world's largest automobile companies and retailers. These contracts promote long-term alliances and supply of large volumes. Both these factors are critical in creating an export basket that can withstand exchange rate and other such shocks. A similar story is unfolding in the manufacturing sector where exports have risen by 9 per cent in the last two years. To a large extent, this surge can be attributed to the strengthening of the Indian machinery and mechanical appliances sectors, apart from an overall rise in demand for steel in the world. According to a recent report, the nature of manufacturing exports from India suggests that we could be becoming internationally more competitive. The other trend scaling up optimism over exports is the emerging pattern of trade. While the US and the UK remain dominant markets, Indian companies are making gains in newer geographies such as Asia, Africa and Latin America. China and Singapore are India's third and fourth largest trading partners, respectively. For trade analysts, it's a good sign. With India expanding its export base, it is spreading its risks and increasing the scope of its trade relationship. This is the perfect buffer against a trade disaster. With the export basket filling up with a wider range of products and services, and the markets expanding, exports are looking to establish their presence globally. The years ahead will be a test of patience, perseverance and skill as they do so. Export growth in India has been much faster than GDP growth over the past few decades. Several factors appear to have contributed to this phenomenon, including FDI. However, as yet there has not been any attempt to investigate the role of FDI in India's export performance. Some popular results suggest that demand for Indian exports increases when its export prices fall in relation to world prices. Also, the real appreciation of the rupee adversely affects India's export demand. Hence, inflation should be kept lower than major trading partners and reliance on flexible exchange rate be increased to ensure that the real appreciation of rupee is maintained.
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