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As the financial year came to an end, there was optimism in the air that the country’s exports would cross US$ 331 billion making the fiscal year 2018-2019 the best ever financial year for exports from the country. This is a commendable performance as it would have been achieved against global headwinds and subdued performance of the US economy and slowdown in the Euro area as noted by the RBI in its recent monetary policy report.
As the stage sets for another big general election in India in 2019, this is good news. Staying the course by making the utmost of the policy eco- system already in place can help overcome the heightened unpredictability of the electoral process till such time as a new Government takes shape and place by end May.
A new Government is expected to accelerate the pace of economic growth and lay emphasis on job creation well supported by heightened investments. While export growth largely depends on global economic activity, a vibrant EX- IM policy focused on refunding taxes, reducing transaction costs, and ensuring efficiencies in port clearances and trade facilitation(by improving the cost of services provided by various intermediaries in customs environment like customs brokers, shipping lines, forwarding etc.) would give the necessary fillip to achieving the much needed quantum jump in export especially of labour intensive sectors like Textiles & clothing.
At the same time the tilt towards manufacturing and export of higher value added and tech driven items as noted by the RBI in its monetary policy statement (MPS) also calls for a new industrial policy to address the existing challenges and take advantage of the future opportunities. The government it is understood has decided to formulate a new industrial policy, which would be a road map for all business enterprises in the country. It is expected to be announced after the general elections.
Another area of key concern is the need to attract investments both foreign and domestic. Foreign Direct Investment (FDI) in India during April-December 2018 declined by 7 per cent to US $ 33.5 billion. There is need for a targeted strategy to attract investments by matching it with a sectoral strategy as has been undertaken by Vietnam, Bangladesh, and China. These countries have achieved phenomenal export growth especially in the Textiles & Clothing Sector largely on the back of high levels of investment and harnessing global demand with the support of large brands and retailers.
At a recent meeting convened by the Ministry of Commerce, the Hon’ble Union Minister, Shri Suresh Prabhu exhorted the trade and industry to work towards raising investments and increasing exports and not look towards the Government for hand-outs and incentives.
India’s trade deficit with China
A key feature of any new trade policy will need to focus on reducing the trade deficit between India and China which stood at US $ 63 billion. While the efforts of the present Government has achieved some success in reducing the trade deficit, a lot remains to be done to balance the trade with China. A multi-pronged strategy aimed at increasing exports, inviting investments by creating special economic corridors and free trade zones and negotiating greater market access would result in increasing manufacturing activity, job creation and reduction in imports from China. India thus needs to change its engagement with China on the economic level.
Friends, you will all agree that capacity expansion is necessary to attain the high growth trajectory in our sector. Further, to expand opportunities and realize the sector’s truest potential – the virtues of creativity, innovation and enterprise hold the key for us. We need to adapt ourselves to produce and export what the market demands rather than try to sell what we produce. We need to expand the range of our product lines and try out new products. Recent visits of trade delegations to Japan and Korea amply demonstrate that Importers are very keen to source from India a wide range of products. But our inability to meet the quality standards and reluctance to take on new challenges are becoming major hindrances.
A sea change in mind- set coupled with the determination to work harder better and meet stringent standards will help us achieve our goals.
(Dr. K. V. Srinivasan)
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