Fears of protectionism as India’s exports dip: World Bank (Lead)March 9th, 2009 - 6:35 pm ICT by IANS
By Arun Kumar
Washington, March 9 (IANS) With exports from India declining in October for the first time in a decade due to negative growth in world trade in the last quarter of 2008, fears have surfaced over protectionist backlash, says a new World Bank report.
Fall in global trade has been underway for some time, said the bank in a paper for the meeting of the Group of 20 finance ministers and central bank governors scheduled next Saturday.
“In the last quarter of 2008, trade growth turned negative, raising fears in many corners of a protectionist backlash,” said the report - a line that was articulated last week by External Affairs Minister Pranab Mukherjee.
The report said 51 economies reported double-digit declines in nominal exports in the fourth quarter of last year, with many European nations, including the UK and Spain, as well as developing countries, registering a drop of 20 percent or more.
In October, India registered its first decline in merchandise exports in 10 years, with the value shipments down 15 percent, following growth of 35 percent in the previous five months.
Reacting to the developments, Mukherjee had said Saturday that in such difficult times, it would be short-sighted for rich nations to go into protectionist mode and this was the message at the summit of G20 leaders in Washington.
“That the biggest economy in the world, the United States, where this global financial Tsunami originated, should be resorting to trade-restrictive practices is particularly disturbing,” Mukherjee had said Saturday.
The World Bank also said that the economic crisis was seen increasing poverty by around 46 million people in 2009. “While labour markets in the developing world will take a while to experience the full effects of the on-going global contraction, there is already clear evidence of the fall-out.”
So far, the most affected sectors appear to be those that had been the most dynamic, typically urban-based exporters, construction, mining and manufacturing.
In India, over 500,000 jobs have been lost in the last 3 months of 2008 in export-oriented sectors like gems and jewellery, autos, and textiles. And the latest estimates from the labour ministry in China show 20 million people out of work.
The International Labour Organisation (ILO) forecasts suggest that global job losses could hit 51 million, and up to 30 million workers could become unemployed.
In response to rapidly deteriorating growth, the bank noted that New Delhi has allowed the India Infrastructure Finance Company Ltd to raise Rs.400 billion, or 0.7 percent of the gross domestic product (GDP).
This will help in funding projects, largely for road and ports, implemented as public-private partnerships. The additional resources will refinance the loans originally provided by commercial banks.
“This will ensure that these projects, which will help address some of the infrastructure bottlenecks that have been a huge constraint on India’s long-term growth, are able to proceed, and help support aggregate demand and protect jobs during the economic downturn,” the bank said.
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