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Millennium Post

India’s export policy lacks thrust

In the euphoric narrative of the country’s export performance during the first half of the current fiscal, the missing link that is the cause for concern is the tepid performance of imports, particularly non-oil imports, the persistence of which is bound to hit the import-dependent export production segment. It is no doubt a salutary development that the share of the export sector in the gross domestic product (GDP) of the country has displayed a consistent rise save 2012-13, the inaugural year of the 12th Five Year Plan, when there was a marginal fall in the share from 17.6 per cent in 2011-12 to 17.3 per cent.

For such export segments as gems and jewellery, manufacturing and garmenting, chemicals and other products which use a considerable amount of imported intermediates, the rupee depreciation wreaked havoc as the cost component has become dear. In the case of gold, the government effected a steep import duty, discouraging import of gold for managing the current account deficit but which unwittingly had the effect of choking supply channel to the jewellery export industry. The shining star in the country’s traditional export basket gem and jewellery would appear to be fading fast its luster in the face of restrictions and high import duty for the consuming industry.

It is small wonder that the country’s exports of agriculture and allied products including rice, spices, meat and preparations and oil meals rose spectacularly from $17.3 billion in 2010-11 to $27.4 billion in 2011-12 and to an all-time high of $31.9 billion in 2012-13.  Poultry and dairy products exports almost doubled from $249 million in 2010-11 to $411 million in 2012-13. The resulting runaway prices that the aam aadmi sees and suffers from today for his staple diets are too high a price to pay.

No doubt, the country’s exports at $152 billion and imports at $232.2 billion during Apr-Sept 2013 had helped in narrowing the trade deficit to $80 billion but in the process the non-oil but essential imports for keeping the export juggernaut rolling in general and the manufacturing segment in particular failed to rise. It is also an incontrovertible fact that the country’s imports have been weak for several months now, reflecting the slowdown in the economy, though rupee depreciation too played a key part in rendering imports expensive as the dollar cost has increased to the discomfort of the importers.

According to Moody’s Analytics, the tepid industrial production growth in India over the past two years and more markedly production of capital goods, a rough but timely gauge of capital spending, fell by two per cent year on a year in August 2013, the latest index for which information is available.

With investment famine plaguing the domestic economy as the central bank is unrelentingly following a hawkish monetary policy to tame inflation, the domestic manufacturers in general and exporters in particular have been with great difficulty making do with the working capital requirements to keep the wheels moving instead of grinding to a halt!  So any hope of manufacturing gaining vroom in the lingering months would be a pipe-dream and this will have a serious impact on the export prospects too.

It would be instructive to recall that the Department of Commerce came out with a strategy paper in 2011 for doubling merchandise goods exports in three years from $246 billion in 2010-11 to $500 billion in 2013-14. In the intervening period India’s exports hovered only between $300-306 billion. With the global slowdown showing no sign of early recovery, the export target for the current fiscal has been revised to $325 billion and the target being missed by a massive $175 billion.

Even as the Commerce Ministry lacks any forward-looking strategy to rev up the country’s export front other than a set of old strategies that were tested and failed miserably, the country has the onus to develop its export infrastructure particularly its trade facilitation measures such as expediting the movement, release and clearance of goods, including goods in transit across the international borders under the proposal that is to be taken at the Bali Ministerial of the World Trade Organization (WTO) in December. When Indian exporters/importers find it difficult to ensure easy movement of goods within the customs zone that is hassle-free, hammering out such a dispensation for overseas cargoes would be a cruel joke on Indian trading community even as they may wish to have such a mechanism in place at the earliest! It is time that the Commerce Ministry came out of its cocoon and devised a workable strategy for shaping the country’s merchandise goods exports on a sustainable and successful way instead of temporizing and settling with palliatives, exporters wryly say.
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