At last, the commerce ministry has woken up to the fact that if it does not take some quick steps right away, India will miss the bus to becoming a leader in world trade. Year on year, the country's trade in percentage terms vis-a-vis world trade has been falling to negligible lows.

Very soon, the export growth rate might turn negative. This is not very encouraging if India wants to achieve a high GDP growth target of eight per cent.

Over-optimistic export target
The current Exim policy focuses on improving the country's export infrastructure. Commerce minister Murasoli Maran has also set the export target at a high 20 per cent. In the Exim policy, he has tried copying the Chinese Shenzen trade model in a bid to boost the country's exports. It aims at setting up special economic zones (SEZs) through which China routes more than 40 per cent of its exports. But the question that needs answering is whether this model will get executed. For, it is practically not fit.

No doubt, the minister has rationalised many policies and tried to make them exporter-friendly by simplifying procedures, but achieving a 20 per cent export growth in the current scenario appears to be a tall order. The minister may aim for a higher exports growth but, what he has missed looking at are the labour laws that apply to the SEZs. The real challenge will be when all the quantitative restrictions on the 714 items will be lifted. Only then will the domestic industry witness competition in the true sense of the term. Currently, Indian industry performs in a protected regime with the total backing of the government. There is no free competition which is restricting growth.

Tariff Commission
With quantitative restrictions on 714 items to be lifted in a phased manner, competition is going to rise. The commerce minister has advised the industry to initiate steps to enhance its competitiveness.

A Tariff Commission under an expert authority is also to be set up to keep a check on tariff related matters. This because despite the country's exports showing a rebound performance of 11 per cent in 1999-2000 from a negative 4 per cent in the previous year, the commerce minister feels that India's share in world trade is unlikely to grow beyond 0.65 per cent. This is a very realistic assessment and if India has to maintain its position it will have to gear up to take on world players. Export data show that on a number of commodities and products India's share in world trade is actually declining.

Growth sectors
Traditional sectors such as gems and jewellery, fabrics and leather are mainly in the small scale sector and they have always performed well. But these small scale sector industries have not received the much required importance. It is only recently that software exports from India have enjoyed a major share in world trade and have been on the rise. Otherwise, there has been no substantial change in the country's commodity basket. But now, if India is to achieve a 20-25 per cent export growth, not only will the composition of the basket have to be changed but direction of the trade will also have to undergo a sea change. Currently, a major chunk of India's trade comprises office machinery, automatic data processing equipment, electrical machinery, auto parts, transport equipment and electronic items. India's share here is a mere 0.1 per cent or less. Changing the composition of the commodity basket has been a topic of discussion in the past too, but nothing much was done. This time too, the commerce ministerhas overlooked the issue of changing the composition and focussing on world trade. There is no doubt then that if India is to achieve a higher export growth in the future, there is a pressing need for boosting merchandised exports. However, Murasoli Maran has changed his stance and has announced sector-specific policies which will help in achieving a turnaround in exports. Sector-specific rationalisation in exports of gems and jewellery, silk, leather, handicrafts, garments, drugs, pharmaceuticals, agro-based chemicals and biotech products is expected to improve the competitiveness of these products.

Right focus
The current Exim policy has veered around the right direction as in that it provides many sops for better exports from the country. A qualitative change in the structure of products has been incorporated -- export of branded quality goods has been encouraged. Exports by ISO units or units enjoying equivalent status have been awarded double weightage for receiving such status certification. Double weightage has also been given to exports from Jammu and Kashmir for determining the entitlement of the status certificates. All EOUs and EPZs with an investment of Rs 5 crore or above in plant and machinery are required to maintain positive value-addition. These units have also been allowed to carry job work for domestic tariff area (DTA) units in all sectors. Granite exports are now treated on par with agriculture. Capital goods imported can now be moved out for evacuation purposes. Export trading houses, project exporters, construction companies and domestic service providers with a domestic turnover of Rs 100crore have been granted "International Service House" status.

The drawbacks
The policy apes the Chinese model to boost exports. But it ignores the lacunae in the existing policies. Also China was able to boost its exports because of favourable FDI policies. As for FDI in India, it has been drying up or has been going to pockets that are not export-

oriented. For instance, FDI in infrastructure projects will not give the necessary fillip to exports. China also has transparent FDI policies that concern the export sector, whereas the sub-continent has failed to attract FDI in the exports sector mainly because of cumbersome procedures, delays and changing incentive packages. It is also an anti-FDI stance that prevails in some quarters that has not favoured the country's exports.

Faulty policies
The current good export performance throws light on various aspects. It amply shows that major contributions have been from the traditional sectors viz., gems and jewellery, fabrics, cotton yarn, leather goods and agro products. Further, most these goods fall under the small-scale sector which does not attract significant FDI inflows. As for the manufacturing sector, where FDI policies have been announced, it has contributed the least towards India's export growth.

The ministry feels that Chinese Shenzen model is the right and final solution to set things right. The million dollar question is: Will the desi Shenzens work in the long run? The SEZs are also being relied on to tackle the shortcomings and provide long-term solutions. All appears well said and done on paper. It is proper implementation of these policy pronouncements with positive results that is important. Also, overall the current Exim policy does not add up to an export strategy. Major supply constraints persist which hamper exports: inadequate infrastructure, high transaction costs, SSI reservations, labour inflexibility,and high cost of credit. Unless these hurdles are removed, no matter what export policy is announced Indian exports will continue registering lacklustre performance.

International arena
Non-trade barriers such as anti-dumping and countervailing duties and the safeguard measures by the developed countries are affecting market access. The erstwhile high export performers such as textiles, pharmaceuticals, marine and floriculture products, basmati rice (to the EU) and mushrooms (to the US) have been badly affected by these barriers. If India has to push ahead to achieve a higher exports growth, these barriers will have to be tackled at the administrative level to eliminate supply constraints and non-trade related barriers. These externalities, which are outside the government purview, if not tackled at the initial stages itself, will render the entire export promotion package waste.

Active role for states
Unlike China, which recognises the full potential and importance for states, India has only alloted Rs 250 crore for state infrastructure and nothing more. The Exim policy only reiterates this stand mentioning that states have to be empowered with the necessary resources and requisite flexibility indecision-making for them to make valuable export contributions by creating necessary export infrastructure.

An example: introduction of electronic filing of licences at seven major ports. This facility will be extended to the rest of the ports by end June. To encourage exporters to shift to electronic filing, the application fee is also being reduced. Bar coding of packaged export products is also being encouraged - all bar coded products will be given double weightage for calculating eligibility for granting status certification to units.

WTO does not favour direct incentives to exports such as subsidies, tax exemption and rebates. Such incentives are being protested by international organisations especially the EU as these distort the balance of the total trade picture.

E-initiatives
The millennium Budget 1999-2000 has brought down the peak import tariff to 35 per cent. Tax exemptions under Section 80 HHE and 80HHC are to be done away with in equal instalments of 20 per cent over a five period. Benefits available under section 10 A and

10 B remain for EOUs and units located in free trade zones and special trading zones. Special import licence incentives to go with the elimination of quantitative restrictions by April 1 2001.

From now on, e-commerce will be the buzzword and all exporters and importers need to gear up to face this challenge. In future, other countries may not accept trading partners with no exposure to e-commerce. And this could well again become yet another non-tariff barrier.With the global scenario fast changing, industry will have to gear up to face the fast-growing competition. In future, the export basket should include knowledge-intensive and technology-driven products and services, while not totally excluding labour-intensive areas in which the country has traditional strength.

The question now: whether India has the infrastructure for pushing exports up? Is it the Rupee depreciation or a comparison with a smaller base, what are the politicians happy with? Sure, the Exim policy can boost domestic exports. But, India’s ability to increase its share in world trade appears to be a dream.