Target of 1% global trade by 2007 not ambitious

Faced with a prolonged war in Iraq and impending global slowdown, creating a positive thrust to exports was important at this juncture. The director general of foreign trade L Mansingh explained to G Ganapathy Subramaniam and K G Narendranath how his maiden policy revision would stir up service sector exports and strengthen the manufacturing base of the export sector through simplified import norms for capital goods. Excerpts: What are the special features of the current policy revision? The five-year Exim Policy introduced last year gave a great momentum to the countryâ€™s exports. Considering the size of the Indian economy, the target of achieving 1% global trade by 2007 is not too ambitious. If we do not include Hong Kong, Chinaâ€™s share of the world trade is currently pegged at 3%. Indiaâ€™s share of world trade stood at 2.5% at the time of Independence, which plummeted to 0.45% in the late 80s. Exports again picked up thanks to economic reforms, to reach the level of 0.67% in 2001-02. If we maintain an average growth rate of 12% per annum, the target of having 1% of world trade â€“â€“ which would be about $80 billion then, as per IMF projections â€“â€“ could be met by 2007. The broad direction of the policy had already been made clear with the five-year policy pronouncement. In this context, the thrust of this yearâ€™s revision is essentially to maintain stability on the policy front. We have, therefore, primarily focused on taking measures intended to pare transaction costs for Indian exporters which continue to be at very high levels compared with the competitors. What was the criteria for selecting services for special attention? We have recognised the services sector for the first time as an engine of export growth. Services account for 50% of the GDP at present, but it has not yet been recognised adequately in the export policy formulations. The services sector has largely remained an unknown territory for lack of statistical data, even as it constituted Indiaâ€™s core competence in the world market. Although some data is available on the tourism sector, the government depends on Nasscom figures for the information technology (IT) sector for lack of an alternative source. A beginning was made in Budget 2003 towards incentivising the services sector. Toeing the line, the Exim Policy has now provided a slew of incentives for the sector. The path has been paved for areas such as healthcare to flourish. The policy proposes to allow duty-free import of consumables, office and personal equipment, spares and furniture up to 10% of the average export earnings in foreign exchange in the previous three years. For the manufacturing sector, the EPCG scheme has been made more flexible by waiving or relaxing of many obligations and conditions. What impact do you expect from the measures to boost agricultural exports? The performance of the agriculture sector on the export front has not been commensurate with its vast potential. Considering the agro-climatic conditions of the country, diversity of crop products, the agri sector could have done much better. The WTO negotiations have ensured that subsidy levels in the developed countries would certainly come down in the coming years. The time is, therefore, opportune for the rural sector and farmers to recognise the benefits of the economic reform process. Hence, the focus on agricultural exports in the policy. How do you see the perceived failure of the SEZ scheme? It is true that most of the greenfield projects have not yet got off the ground due to delay in land acquisition. Such delays are normal as far as infrastructure projects are concerned. In spite of the difficulties, we cannot dispense with SEZs. The Indore SEZ would soon come into existence and there are very few hitches left with the Kochi SEZ. Globally, SEZs constitute 25% of a countryâ€™s exports. In China, the share of SEZs in export basket is as high as 40%. While in other countries, the SEZs are in the state sector, we have roped in the corporate sector. This is unique. Along with the fiscal sops and infrastructure support we give to SEZ units, we are also in the process of launching an industrial infrastructure support scheme for export clusters. The department of industrial policy and promotion has almost finalised the scheme which aims to give common infrastructure backup for small and medium-sized units in export clusters like those at Tirupur, Panipat and Ludhiana. As India lacks large manufacturing plants of a truly global size, these clusters could act as integrated mega complexes virtually functioning as a large single unit.

Target of 1% global trade by 2007 not ambitious

Faced with a prolonged war in Iraq and impending global slowdown, creating a positive thrust to exports was important at this juncture. The director general of foreign trade L Mansingh explained to G Ganapathy Subramaniam and K G Narendranath how ...

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