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Not a good news for India as WTO reduces global trade growth forecast to 2.8% for 2016

This will be the fifth consecutive year of trade growth below 3%, says World Trade Organisation.

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The World Trade Organisation (WTO) on Thursday cut global trade growth forecast to 2.8%, from 3.9% earlier, on account of slowdown in emerging economies and financial volatility.

This is not a good news for India which is aiming to increase its share in the global trade to 3.5% from the current 2% by 2020. It is also aiming to nearly double its goods and services exports to $900 billion by 2019-2020.

The global situation may further dent the growth of India's exports, which are in negative zone since December 2014. "Growth in the volume of world trade is expected to remain sluggish in 2016 at 2.8%, unchanged from the 2.8% increase registered in 2015.

"Imports of developed countries should moderate this year while demand for imported goods in developing Asian economies should pick up. Global trade growth should rise to 3.6% in 2017," the WTO said. The 2017 figures are still below the average of 5% since 1990.

"Risks to this forecast are mostly on the downside, including a sharper than expected slowing of the Chinese economy, worsening financial market volatility, and exposure of countries with large foreign debts to sharp exchange rate movements," it said.

"Trade is still registering positive growth, albeit at a disappointing rate," WTO Director-General Roberto Azev do said. This will be the fifth consecutive year of trade growth below 3%.

It said that while the volume of global trade is growing, its value has fallen because of shifting exchange rates and falls in commodity prices. This could undermine fragile economic growth in vulnerable developing countries. There remains as well the threat of "creeping protectionism" as many governments continue to apply trade restrictions and the stock of these barriers continues to grow, it said.

"However, we should keep these figures in perspective. WTO members can take a number steps to use trade to lift global economic growth from rolling back trade restrictive measures, to implementing the WTO Trade Facilitation Agreement," Azev do said.

This pact will dramatically cut trade costs around the world, thereby potentially boosting trade by up to $1 trillion a year, he added. "More can also be done to address remaining tariff and non-tariff barriers on exports of agricultural and manufactured goods," he said. 

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