SA export growth helps narrow trade gap with India

THE PRESENT trade balance between India and South Africa very much favours India, but booming export growth is bettering SA’s chances of redeeming the issue. If you play the numbers game, you’ll get a good indication of the current state-of-play. In terms of destination countries for Indian exports, SA ranks 14th – but as an export supplier to India, SA ranks only 24th. The consoling factor is that India is ranked sixth fastest growing export market for SA commodities. Also, the trade gap has narrowed in the last couple of years. In 2006 SA exports to India totalled R5.1-billion – that’s equal to about 5% of the country’s global export revenue earned in that year. India’s exports to SA, however, totalled just over R10.96-bn – giving a trade gap of just over R5.8-bn. Last year, however, SA exports to India jumped 78.58% to almost R9.3-bn. But India’s exports to SA only grew by 14.1% to a R12.5-bn total – and the trade gap had slimmed to just under R3.3-bn. Meantime, there’s some room for adjusting both markets’ trade relationships with each other. According to information released to FTW, the average duties at both borders tend to be relatively high – and there is scope for mutual reductions through free trade agreements. The India-Brazil-SA (Ibsa) trilateral agreement is one such recent development – with the main objective being to promote co-operation and exchange. India’s also not an easy market to broach, according to Lizanne Case, business analyst: import export economics at First National Bank. She warned that India’s financial system was highly regulated with excessive goverment intervention distorting capital flows and dampening growth. “There is, however, a burgeoning equity market and services are booming,” Case added. “They account for more than half of the country’s gross domestic product (GDP) – but only employ a quarter of the labour force. In 2006 India’s service exports, predominantly computer and information services, amounted to US$ 72.7-billion.” Case noted that the country needed socioeconomic reforms to get rid of institutional and infrastructure bottlenecks. The availability of social and physical infrastructure is also of concern.