Column : Alarmist commerce ministry

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Bibek Debroy : Mar 10 2011, 00:07 IST

The commerce ministry has produced a strategy paper for doubling exports in the next three years (2011-12 to 2013-14). This involves a doubling of exports from $225 billion in 2010-11 to $450 billion in 2013-14, implying a compound annual average rate of growth of 26%. Stating a target is somewhat different from enunciating and implementing a strategy. While points about diversification and value addition are obvious and accepted, the commerce ministry’s arsenal to push these is limited. The revival of global demand is exogenous. WTO negotiations are stuck. In any event, most protectionist measures are WTO-compliant. Exports of goods are still price sensitive, certainly in low-value segments. While the commerce ministry can seek to resist rupee appreciation, exchange rates are also influenced by capital inflows and RBI intervention to prevent appreciation is not costless. The expression ‘transaction cost’ includes both infrastructure costs and procedural costs. There is little the commerce ministry can do to improve infrastructure. The procedures have already been simplified. To the extent hurdles remain, those are not for exports per se, but for claiming export incentives. While 2011-12 has introduced self-certification as a welcome step, revamping export incentives (and distinguishing them from export subsidies) requires a full-fledged GST. Beyond asking for fiscal incentives, legitimate questions can therefore be asked about utility of such a strategic exercise.

Having said this, there are interesting points made in the strategy paper about the numbers. For instance, projecting on basis of trends between 2002-03 and 2009-10, export/GDP ratio in 2013-14 is projected

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