In an interview with FE?s Ronojoy Banerjee and KG Narendranath, minister of state for commerce and industry, Jyotiraditya Scindia, talks about the recovery of India?s exports and the bilateral trade and investment pacts on the anvil. Excerpts:
After marking negative growth for 13 months up to October 2009, exports showed positive year-on-year growth rates in November (11.5%), Dece- mber (9.3%) and January (11.5%). But with the US and EU markets not completely out of a torpor, the expansion in world trade cannot be expected to be robust enough for India to meet its ambitious export targets. How do you view the situation?
At one point, things were not looking good at all for the export market. In fact, in May 2009 exports had dipped over 39% year-on-year. However, we knew that by the end of the year things would show improvement. Also, we were not going to be satisfied with anything less than positive trends in year-on-year figures. I am glad that our convictions have borne fruit. January 2009 exports were up 11.5 % compared to January 2009. I think this fiscal will end with total exports of around $165 billion?roughly $ 12 billion less than last year. This performance would be much better than that of other countries and we have reasons to feel happy about the way our exporters, helped by government stimulus, have weathered the global economic crisis.
Is the ministry looking at any revision of the export targets set in the Foreign Trade Policy?
I am confident that we would meet the target that we set for ourselves. The short-term target of $200 billion exports by 2014 is very much achievable. Also, by 2020, we can double our share in global trade from the current 1.6% to 3%. This is indeed an uphill task but we can achieve it. For this, we will essentially have to look at newer markets?mean markets which are growing fast and whose potentials have barely been tapped by us. There are various studies that clearly show that countries like India and China that would power the global GDP growth. The opportunity for India lies in the developing-world markets and not necessarily in the developed world. Africa and Latin American are emerging as very important markets for us. The Asean market is a great opportunity because it allows us to expand to Asia-Pacific and target the markets there. For Indian exporters, these markets would be like a low-hanging fruit. Trade with China also holds a lot of potential. The FTP announcements are already aligned with India?s priorities and the new realities.
Does India have much to gain from the Free Trade Agreements (FTAs) that we are signing, as far as merchandise trade is concerned? The tariff levels of our potential FTA partners are already very low.
The FTAs that we have had so far have led to much greater trade (exports plus imports) with the respective countries. I believe that India should make use of both multilateral and bilateral agreements for the benefit of its foreign trade in a rapidly globalising world. Participating in the multilateral forum (WTO) is important as it is the way to set the framework for rule-based trade. Bilateral trade pacts and regional trade blocks are experiments that several countries have found successful. It?s also important for us to identify our core competencies vis-?-vis the trading partners. As the FTAs eventually become CECAs (comprehensive economic cooperation agreements), India will also see gains in areas like trade, services and investment. As an emerging economy foreign investment is important for us.
Talking of FTAs, India is negotiating one with the 27-country EU bloc. However, EU wants non-trade issues like child labour to be a part of such agreements. How are we looking at it?
They (EU) might be asking for a number of issues to be a part of the FTA but we are very clear in our understanding that India and EU are big trading blocs and have much to gain through the proposed FTA. We have to gain not only on merchandise trade, but also in services and investment areas. Cross-border investments between the two have increased by leaps and bounds. We must realise that the agreement is a trade-based one. There are other forums where we can discuss issues like child labour.
With tariffs going down due to autonomous decisions of nations, WTO and bilateral agreements, we are seeing many non-tariff barriers being imposed by countries like the US, EU and Japan. What is India?s position on this issue?
Non-tariff barriers (NTBs) are indeed impediments to trade. We have taken up NTB issues with various countries in a diligent manner. Many such issues have been resolved through dialogue and information-sharing. With the liberalisation of world trade, these are safeguard mechanisms that countries come up with. We believe these must be used in a judicious manner, rather than indiscreetly.
Can?t New Delhi press for the inclusion of an NTB reduction mechanisms in the FTAs being negotiated?
Yes, there are some trade agreements that we are negotiating where we are discussing this. The nature of NTBs and their extent of use varies from country to country.
Is India comfortable with the balance of trade hugely in favour of China? What can we do to correct this?
No one can say we are satisfied with the balance of trade with China, which is hugely in their favour. We need to assiduously work on this. We have conveyed to our Chinese counterparts that they must look at increasing imports from India. It must be based on areas of core competencies. We expect our exports to China rise by a much greater degree.
Has there been any move to diversify the export market since more than 50% of our exports to China is iron ore?
We have said that in terms of our manufactured products we have great expertise. Our engineering eco system across products whether in auto engineering or other machine parts are very good and we have urged the Chinese to look at this. In fact, value addition should take place in our exports and we will take policy initiatives for that. The industry has a major role to play in this regard.