Sluggishness at home one reason for higher exports

T Bhanu

It is not often and across the board that we achieve, let alone surpass, export targets. But that is precisely what happened last year when India’s overall exports grew by 20 per cent against the target of 18 per cent. What is more, this commendable performance once again goes to show that the old economy has not lost all its sheen, for the export basket mainly comprised products from the old, trusted industry sectors. Though precise sector-wise break-up is not available, capital goods have also had their significant share in the scheme of things.

A review compiled by the Confederation of Indian Industry (CII) in respect of 45 exporting sectors observed that, 16 reported excellent growth of more than 20 per cent during the period April-March 2000-01. Textiles machinery led exports from the capital goods sector with 51 per cent followed by air & gas compressors (9 per cent).

On the face a wonderful overall performance on the export front, one is bound to hurriedly come to the conclusion that those sectors which have improved their exports surely must have also done well in the domestic market. Unfortunately, that is not the case. In several cases, industries were driven to the export market thanks to an anticipated sluggishness back home. Power cables, transformers, transmission line towers, motor stampings, motor starters and switchgears, inter alia, recorded negative growth in production during the last year. The capital goods sector was, therefore, no exception to the rule.

The review pointed out that even though several segments are on the growth path, there are some like electrical machinery and equipment industry, auto, consumer electronics, electronic equipment etc., which have gone into reverse gear. The contraction in consumption, excess capacity in several industries, competition from cheap imports and non-implementation of sector packages have been cited as the major reasons for the adverse impact on the industry.

Paying, as it were, for the past sins of over-capacity build-up coupled with inefficiency in production, scores of units found the going tough. The “export or perish” slogan is perhaps all the more relevant today as industry grapples with harsh realities in the market. There are no more stiff tariff barriers as were available, say, a decade ago, and if anything, import duties can only come down to at least what are called the Asian levels.

This means industry, per force, has to be all the more competitive, price and quality conscious and stick to delivery schedules. It has to sharpen its skills if it wants to be a major player in the global arena. During the licence-permit Raj, it was not uncommon that a fully entrenched engineering giant seeking a letter of intent from the government to manufacture, of all things, shoe uppers!

The name of the game then was to pre-empt capacities, but in certain cases this became an Albatross around their necks. Project imports at zero or extremely low levels of import duty have also impacted the indigenous industry adversely.

But a turnaround is only to be expected. Industry is going all out to optimise efficiency levels, by inducting latest technology and the increasing use of infotech-enabled services. Properly utilised, IT as a tool can go a long way to bring about the desired benefits in a competitive environment, provided adequate investment is forthcoming.

It is, therefore, no longer a question of the old versus the new economy. The old can go hand in hand with the new.