States must be active partners in export
That India’s export segment is afflicted with infrastructure inadequacies and the cognate cost it exacts in the export of merchandise goods where it commands competitive advantages in the overseas markets, are quite passé. But down the decades both the Centre and the States with the former markedly making strenuous efforts to capture new products and incentives to product diversification through its various export promotion schemes and its periodic Foreign Trade Policy (FTP), the results had not been commensurate with the efforts. Notwithstanding all the tall bids to capture a respectable share of world trade in proportion to the heft and clout India enjoys as an emerging economy and the so-called darling of overseas investors, its share in world merchandise plus services exports has inched from 1.9 per cent in 2011 to just two per cent in 2015, as conceded by the Minister of State for Commerce & Industry Nirmala Sitharaman citing WTO statistics.
There is something painfully amiss somewhere that calls for paying focused need to tone up the export machinery so that the end-result is not out of sync with the labour, time, and energy expended in making India the manufacturing or services sector hubs to attract foreign direct investment and generate employment domestically. With the advent of the Modi Government in May 2014 till date, the Centre has been pro-active in pushing the country’s exports despite the pronounced slowdown in world trade in the last couple of years. So far, it held two meetings of Council of Trade Development and Promotion under the umbrella of the Ministry of Commerce and Industry with the last being held in the capital on January 5. It is a sad reflection of the seriousness with which States view exports that only eight, including Kerala, with the rest of the BJP-ruled States and allies sending their Ministers, took part in it, though a few gave specific suggestions on their core concerns.
As usual, the Union Commerce Minister called upon the States to diversify their export baskets by enabling more sectors to chip in availing of the spurs and incentives the national export promotion schemes provide. This she reasoned would reduce the implacable impact of global economic and merchandise trade slowdown on the back of the proliferation of protectionist measures, both technical and tariff-related, by many trading partners. Later briefing the media, she highlighted five outcomes of the Council meeting as having a decisive bearing on trade development and promotion for the States.
First, the States were told to swiftly put in place their export strategy in line with the FTP and the appointment of Export Commissioners (ECs) for States with the ECs becoming the single window focal point before long for the interaction with exporters from the State. With nigh 28 States having appointed ECs and 18 States’ their own trade policy dovetailed into the FTP, the Centre is wistful that this would go a long way in mending matters on the merchandise export front measurably. Secretary from the Departments of Commerce & Industry would liaise with other infrastructure ministries as also finance to help the export efforts of States in this regard so that operational obstacles are overcome.
Second, the Centre is proposing to institute Logistics Performance Index to rank States on the readiness with which they help in the logistics of goods from the place of production to the eventual overseas markets by ensuring hassle-free movement of goods as a trade facilitation step. This would also encourage the States to be competitive with their peers in attracting export orders, going forward.
Third, to promote services-related tourism, particularly in the coastal areas to leverage their untapped cruise potentials, the Centre might help in the inland cruise development with States on the West Coast; Goa-Maharashtra, Karnataka and Kerala and possibly Gujarat would become major tourist hub to lure cruise aficionados. Talks would be held among others with the Ministry of Surface Transport, Shipping and the Central Board of Excise and Customs to evolve rules since the operations entail customs clearance.
Fourth, the issue of the imminent implementation of the Goods and Services Tax (GST) figured in the discussion to elicit what needs to be done to sensitise the export sector about its initial impact as also how to improve the refund/waiver mechanism to be in place for the input taxes for the export segment that need to be neutralised.
Fifth, the Minister, alluded to the avalanche of 100-150 sanitary and phytosanitary (SPS) notifications and a similar spate of Technical Barriers to Trade (TBT) notifications being announced by WTO members each month. As around 50 to 60 per cent of these measures have the potential to impact our trade, three sectors such as agro and marine products, forest produce and industrial products were identified for interventions. States sought to improve the quality of infrastructure in this regard, and it was impressed upon them to cooperate with the Centre for setting up common facilities like testing labs and training institutes as also steps to shore up packaging and storage support to the export industry.
While all the proposals would undoubtedly go a long way in boosting the States’ efforts to ramp up export from their domain sans impediments, valuable suggestions from the Kerala Minister (Industries, Sports and Youth Affairs) from Mr. A.C. Moideen seeking serious measures to curb the extant liberal import regime of agricultural products and also the need to insulate domestic growers from the crippling impact of Free Trade Agreement (FTA) should be paid due heed. It is sad that the Department of Commerce follows a policy of on-off bans on the export of farm items or removal of import duty altogether as it had done recently in the case of wheat and pulses to the detriment of domestic growers.
The bound rate and applicable rate in the case of farm goods remain perilously wide in the determination of import tariffs, whereas advanced countries have little qualms in having a high rate for their farm produce lest their local farmers should not be subject to cheap import threat from developing nations! The large scale import of palm oil, tea, pepper, and other spices had driven down prices and demand for domestic commodities to the utter ruin of indigenous growers of the plantation crops.
In sum, the Council meeting, though thinly attended by stakeholders from the States, helped in evolving some institutional support to the export sector. The time has come to stop dilly-dallying and take real-time realistic measures to partner with the States in the larger national effort of boosting the country’s untapped export potentials to the benefit of the wider swathe of the sections, both farm and non-farm.
(The views expressed are personal.)