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Thursday, March 15, 2012

Insights from the Economic Survey 2011–12-International Trade,Agriculture and Food

The newspaper editions of tomorrow and dayafter will be filled with analysis and insights as people try to decipher the numbers and read the tea leaves, for both the Economic Survey and the Union Budget. However, this blogpost aims to capture the nuggets mentioned in the 14 chapters of the budget(which I did read today!), and does not claim to be exhaustive given the huge data overload! Anyways, here goes for Chapter VII & VIII(normal text is from the survey, bold text is mine) which can be read at this link
  1. Statewise export data quality weak-Though states like Gujarat, Maharastra and Tamil Nadu proudly flaunt their lion's share of domestic exports(55% in all, about 25%,21%,9%), my Gujju friends would be disappointed about the data quality issues. Similarly, all these states are trading hubs with export ports/traders, and thus misreporting is more.  As the disclaimer states, The state-wise exports given in Table 7.16 are only indicative as there are many weaknesses in the data. -its like the ubiquitous Facebook forward that Mumbai pays %..of income tax-just because companies with registered/corporate office in Mumbai are recorded as being from Mumbai, its not necessarily the credit of Mumbai
    •   Only one state of origin code can be given by the exporter in a single shipping Bill. In case of shipping bills with multiple invoices containing items originating from more than one state, there is no provision for making different entries
    •  In the customs daily trade returns (DTRs) the non-reporting of state of origin (STON) is considerable and exporters have a tendency to report the state to which they belong/ the state to which the port (through which the export has taken place) belongs/ the state from where they ‘procured’ the goods as the state of origin for those particular goods instead of the actual state of origin of goods
    •  The problem is acute in the case of non-manufacturing exporters, who only know the place of procurement and not production of the goods. These weaknesses need to be rectified to improve the quality of data.
  2. Indian Trade partners-. An interesting development in the direction of India’s trade is that the USA which was in first position in 2007-8 has been relegated to third position in the following years, with the UAE becoming India’s largest trading partner, followed by China. This position continued from 2008-9 to 2010-11.India had bilateral trade surplus with five countries, namely
    the UAE, USA, Singapore, the UK, and Hong Kong
    in 2008-9, 2009-10, and 2010-11. An interesting point to be noted is that India has trade surplus with the UAE from which it imports large quantities of oil, while it has a high trade deficit with similar oil exporters like Saudi Arabia, Iran, and Nigeria.The reasons for deficits are also the rising imports of machinery from China and gold from Switzerland.
  3. Time to rename our commodity futures as gold futures! The question is who really uses it. Agricultural commodities share is declining steadily maybe due to bans(!), as are the energy futures in value. It is harder to believe those textbook examples of hedging being purpose.
  4. The high economic cost of rice/wheat(PDS+storage+distribution) under PDS to soon bankrupt the system. Do the math, priority households get 7kg/person-month @ Rs 3(rice)/2(wheat). hardly at 15% economic cost. Even general households get it @ 50%MSP.
  5. Now even you can estimate the NPK fertilizer subsidy, just apply declared subsidy rates to the figures below(as they are also announced on per kg of nutrient basis) 

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