India’s Export Scenario
India, which had a global share of 2.4
per cent in trade at the time of independence, dropped to a mere 0.7 per cent
in 1991 because of inward looking policy of self-reliance and exporting only
the surplus. The balance of payment crisis in 1991 rightly brought about a
change in India’s economic philosophy. This change resulted in opening up the
economy and a new foreign trade policy that resulted in India’s two way trade
in both merchandise and services reach nearly $ one trillion annually from a
mere $70-80 billion in 1991. But the question is have we done enough. While
India’s share in global merchandise trade has gone up to 1.7 per cent in
2013-14 from 0.7 per cent in 1991, China’s has gone up to a whopping 11.8 per
cent from 1.8 per cent in the same period. In Services trade, India, which had
a slight edge two decades ago because of IT software, had gone up from 1.2 per
cent of global share in 1991 to 3 per cent in 2013-14. China whose share was a
mere 0.5 per cent in global services trade in 1991, has gone up to 4 per cent
in 2013. The figures speak for themselves. While we have gone a long way in
trade since the opening up, India has not done enough to realise its true
potential.
Twenty-five years since trade liberalization started in India, but there lot of
fixing is still needed. The new foreign trade policy announced by Commerce and
Industry Minister Smt Nirmala Sitharaman in April this year attempts to fix
some of the problems in bid to reach $900 billion of merchandise and services
exports annually in five years. This meant total two-way trade is
expected to double from the present $1 trillion to $2 trillion annually in the
next five years. This is a gigantic task considering that global economy is
still struggling to gain momentum.
The global outlook has certain positives and negatives. Lower global oil prices
helped oil importing countries like India as it imported nearly 80 per cent of
its requirement. But lower oil prices hit the oil exporting economies
like West Asia and this contributed to slowing down of exports from India and
west Asia is one of the major importer of Indian goods and services. So,
softening of commodity prices globally had certain advantages and disadvantages
to India’s trade. Also there is volatility in exchange rates and this impacts
trade badly. Indian exporters always say that more than appreciating or
depreciating currency, volatility in exchange rates poses greater danger to
trade.
Though this bleak global outlook provided lot of challenges to India’s trade,
it has also provided opportunity to fix the problems faced by India to make its
trade more competitive. The new foreign trade policy has sought to address some
of them. Trade facilitation and ease of doing business are the two major
impediments to pushing India’s trade. While it takes six hours for a ship to
turnaround that is to off-load and up load and leave in Singapore on an
average, it takes six days for a ship to turnaround in any of the major Indian
ports. Also the road connectivity to ports is so bad that it delays container
movements. The huge container ships and tankers cannot land in any of the major
ports because of low draft as result of which there has to be trans-shipment at
Colombo or Singapore increasing cost to exporters. The paperwork is much more
in India than elsewhere in the world.
It is precisely for this reason the new Foreign Trade Policy considers these
two challenges --trade facilitation and ease of doing business, as major focus
areas. Recently government reduced the number of mandatory documents required
for exports and imports to three, which is comparable with international
benchmarks. A facility has been created now for uploading documents in exporter
or importer profile and the exporters will not be required to submit documents
repeatedly. Government has also made an attempt to simplify various “Aayat
Niryat” forms, bringing in clarity in different provisions, removing ambiguities
and enhancing electronic governance.
One of the problems manufacturing exporters complain is inadequate and erratic
power supply. This creates problems for exporters to keep up the schedule
for delivery. As a result exporters forced to go diesel generators for power
backup raising the cost. One unit of thermal power costs Rs 4-5 per unit
whereas diesel power costs around Rs 15 per unit and sometimes Rs 3-4 per unit
more because of large scale of diesel pilferage in the country. Government’s
ambitious programme in the power sector will help ease this problem. Government
proposes to add 2.66 lakh Mw of additional power including 100,000 mw of solar
power with an investment of over $300 billion in the next five years. This will
help India’s trade particularly manufactured exports. The foreign trade
policy provides a necessary framework for increasing exports of goods and
services as well as job creation and increasing value addition in the country.
The new FTP lays down a road map for India’s global trade engagement in the
coming years and measures required for trade promotion, infrastructure
development and overall enhancement of trade eco system, according to the
Commerce minister. But government should be careful while entering into
regional trade agreements as there are fears that they are being increasingly
used by global corporates to make emerging economies to bend and rule by
proxy. The tough negotiations by India in the India-EU free trade
agreement went to show, India would not give in that easily to corporate lobby
through their governments in those countries.
The five year trade policy also introduces two new schemes – Merchandise
exports from Indian scheme for export of specified gods to specified markets
and Services Exports from India scheme for increasing exports of notified
services in place of plethora of schemes earlier with different condition for
eligibility and usage. This is yet another step in moving towards ease of doing
business. Measures have also been taken to give boost to defence and hi-tech
exports. Robots are increasingly replacing some of the mundane and
hazardous jobs done by workers like in the paint shop and precision work. This
is an area where India could leapfrog and overtake China in this new export
frontier. Government should lay special emphasis to cash-in this sector.
Inverted duty structure of raw materials and intermediary goods was one area
that was bothering manufacturing sector and their exports particularly in the
electronics sector. Over $40 billion of electronics goods are being imported,
next only to oil and gold imports in the country. This is being sought to be
addressed by the new electronics policy, which aims to attract up to $400
billion investments in the sector in the coming years. Also finance minister Sh
Arun Jaitley has addressed some of the inverted duty structure issue in his
last two budgets and foreign trade policy promises to do more.
Overall, the new foreign trade policy
is on the right track some of major woes of exporters in pushing
up India’s trade. It has started with right earnest. The previous trade policy
was to take India’s merchandise exports to $500 billion annually by 2013-14 but
ended up with $312 billion in 2013-14, a way off the mark. Global economic
situation was said to be the reason for not achieving the target. One only hope
the same thing is not repeated.