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Industry's heart beats for Exim Policy

Muhammed Ash'ar Khan, New Delhi.

Against the target of 14 to 15 per cent, Indian exports have grown by only 0.41 per cent for April-February 1998-99. And the total national revenue loss on account of various export schemes in 1999-2000 is expected to be around Rs 145 billion, up 11.32 per cent from Rs 130.25 billion in 1998-99.

No wonder, Commerce Minister Ramakrishna Hegde has maintained silence on the question of giving the export growth target for the year 1999-2000. He has said that an export target will be set in two months or so, after he meets with representatives of the trade and export promotion councils.

But experts feel that he is embarrassed because of the fiasco in 1998-99. The minister set a target of 20 per cent and the growth was less than one per cent.

Subodh Bhargava, chairman of the Eicher group, says, "Once bitten twice shy -- that sort of record will obviously bring a lot more caution for subsequent period".

The Planning Commission is reportedly upset at the lack of an explicitly ambitious export target. Hegde is sceptical of achieving 15 per cent export growth spelt out by the Planning Commission and the finance ministry for 1999-2000.

In all probability, when the export target is set after two months, it will be scaled down. A downward revision in export targets will adversely affect the gross domestic product growth target pegged at seven per cent for the next fiscal.

According to the Planning Commission, if a seven per cent growth rate has to be achieved, exports should grow at 15 per cent and industry at a minimum rate of nine per cent. This is not likely to happen.

Thus, the Ninth Plan GDP growth target might have to be further scaled down to six per cent from 6.5 per cent. Rajesh V Shah, president of the Confederation of Indian Industry, says, "There may be a hesitation at this moment, because we really don't know how the measures announced in the new Exim Policy will play out. But the industry should aim for something like 12 to 15 per cent."

India's exports in 1998-99 have been very disappointing. But the reasons are obvious. Many parts of the world faced recession during this period, whose impact was worsened by the situation in southeast Asia.

The countries of the latter region have devalued their currencies and this has also led to a drop in the unit value of Indian exports. Other countries around us, such as Pakistan, China and Sri Lanka have witnessed a very negative export performance.

Dr V R Panchmukhi, director, Research and Information Systems for the Non Aligned and Other Developing Countries, says: "Making projections of growth rates, either of GDP or exports or any other macroeconomic parameter variable today, is very difficult. There are various political and economic uncertainties at the national and international level. Exports of east and southeast Asian countries have been hit. The emergence of euro currency has necessitated certain adjustmentss."

Bhargava feels only external factors will not determine the export growth for India, internal factors are also important. He opines, "If you look at what will determine the export volume in the coming year, one important factor would be the growth in the global trading. There would be a very important perspective of cost of money, exchange rate, and of course, Indian industry's own ability to compete, improve quality, reliability and government support by the way of incentives or whatever measures which are WTO-compatible."

Shah of CII agrees. "Export growth will depend on what the global fundamentals are, how they would change, and how quickly Indian industry responds to the new Exim Policy, its competitiveness and product development."

The policy to allow unrestricted import of consumer goods from toiletries to electronic gadgets, and agro-products including dairy items, fish and a variety of processed foods, indicates that the two most closed sectors of the economy are now being thrown open to global-scale competition, say industry observers.

Bhargva cautions that the new policy will not bear fruit if it is not implemented to its fullest extent. He says, "I've read in newspapers that there are already difference between the commerce ministry and the finance ministry. "

It was reported that the commerce ministry has suggested certain measures to promote and enable exports to grow. If these measures are not implemented or accepted because of the finance ministry or any other concerns of the government, then Hegde would be doing the right thing by not predicting or calculating a possible growth until there is a clarity on these issues, observers say.

The exporting community would be able to increase or take a more aggressive export posture once these required notifications come in, they add.

The overall sentiment is that if the government does as much as it has said through the Exim Policy -- presuming it remains in power -- Indian exports will surge in 1999-2000.

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