Engineering goods fuel trade, to help attain $500-bn export target

The Indian economy is forsaking its emerging market tag. Bearing testimony to this is the changing composition of the country?s export basket with the share of high-tech products in it on a constant rise.

The Indian economy is forsaking its emerging market tag. Bearing testimony to this is the changing composition of the country?s export basket with the share of high-tech products in it on a constant rise. India?s export basket, therefore, looks increasingly similar to that of developed economies.

Far from being a exporter of raw material and traditional textile and gems and jewellery items, the country has now converted its years of high growth in manufacturing sector to take on the world markets with its range of high-end engineering and electronic goods, petroleum products and specialised drugs and chemicals.

As per officials in the commerce and industry ministry, the contribution of the manufactured items which includes, engineering goods, drugs, pharmaceuticals, plastics and other basic chemicals in the total export basket of the country is expected to move up to over 39% over next couple of years from the present levels of close to 32%. The increase would come with a decrease in the share of traditional exports items of textiles and gems and jewellery whose share is expected to fall from present 27% level to 23% by 2013-14.

?The encouraging aspect of this change is that the country is fast becoming a major exporter of engineering goods mainly in the area of power and mining,? commerce secretary Rahul Khullar had recently said. ?The change will be a major contributor to take country?s exports to targeted levels of $500 billion by 2013-14,? he had added.

As per government?s assessment, the share of engineering goods that has already risen sharply to reach 18.21% of the total export basket (at the end of 2009-10) will rise further to 25% by 2013-14. The rise is expected as exports of these items to neighbouring markets and Middle East countries are rising.

Noting the change, commerce and industry minister Anand Sharma had said that engineering goods have an export potential of $125 billion, drugs and pharma $25 billion, basic chemicals $12 billion and electronic goods $17 billion, according to ministry estimates.

He had added that the target for traditional and labour-intensive sectors such as textiles has been set at $42 billion, leather at $9 billion, gems & jewellery at $70 billion and agriculture at $22 billion.

Sharing similar sentiments, Dun & Bradstreet India, senior economist, Arun Singh said: ?The high growth dynamics as currently experienced in India has enabled it to focus on more value-added goods in its export composition such as engineering and pharmaceuticals from the traditional exports of low value added goods.?

However, trade analysts are also of the view that the drop in traditional items exports is due to price sensitivity and is expected to correct soon. They also opine that traditional items are primarily exported to the markets like US and the EU. ?The US and the EU are still recovering and from a long term perspective, demand for these goods will remain. For items such as engineering goods, chemicals etc there is a trend emerging of sustained growth. While the government is expecting a 7 to 8% increase in growth for these sectors, I believe this will be hard to achieve unless focus builds up on improving export competitiveness and addressing some of the structural issues,? said Deloitte Haskins & Sells, director, Anis Chakravarty.

Elaborating further on the constrains that might act as a roadblock for the government, Chakravarty cautioned by saying ?there are structural constraints on the supply side which need to be addressed proactively if this target is to be achieved. One should also note that export growth cannot be achieved purely with incentives for which there is no long term guarantee. For example, recently the finance minister has also commented that he is unwilling to extend the duty entitlement passbook scheme past June.?

Meanwhile, exporters feel that t he traditional sectors like textiles, garments, gems and jewellery will also play an important role. The garment export is likely to increase from $11.16 billion in 2010-11 to $21.50 billion by 2013-14 while the overall textile exports will double from $21 billion to $42 billion in the same period . Gems and Jewellery will move from the current level of $33.54 billion to $70 billion by 20013-14.

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First published on: 18-05-2011 at 02:10 IST