India’s merchandise exports have been contracting for the last 15 months. Merchandise exports, the top 20 categories account for four-fifth of the total exports. Even in top export categories like textiles, India is exporting low value commodities such as cotton yarn or apparel rather than technical textiles.
India's trade pacts have exacerbated inverted duty structures – high import duties on raw materials and intermediates, and lower duties on finished goods – that discourage the production and export of value-added items. Several trade pacts have been signed, more for geo-political reasons than commercial reasons. Bangladesh and other countries have free access to European markets but India’s exports are 10 to 12 per cent costlier than theirs.
Textile exporters feel India’s trade agreements are not helping them much in competing globally. They say lower internal transaction costs and port charges will make them competitive. Vietnam has become India’s competitor now. About 40 per cent of India’s total exports are handled by the medium and small scale sector.
The South Asian Free Trade Agreement (SAFTA) has not resulted in any significant export gains. India’s trade deficit has widened with Asean. Further, most of India's preferential trade agreements are shallow in terms of product coverage.