By K R Sudhaman
When Murasoli Maran of DMK became Commerce and Industry Minister in Vajpayee’s NDA government, he told a chamber meeting that Sri Lanka exports more than South India put together, Bangladesh more than East India, Nepal more than North India and Pakistan more than West India. This was true in late 1990s as India was slowly getting globalized after the big ticket economic reforms of 1991
India has come a long way since then as the country’s merchandise exports surged towards $400 billion mark this financial year after a slump in the last few years. The latest April-August exports figures show that it is around $165 billion in the first five months of this financial year. But as India realized its potential as East Asian countries and South-east Asian countries have in global, the answer is certain no.
China is perhaps the biggest beneficiary of globalization as it adopted export-led growth to alleviate poverty by sustaining a double- digit economic growth for 2-3 decades. It is worthwhile why India failed on this front despite major overhaul of the economy since 1991.
Former NITI Aayog chairman Arvind Panagariya is right in saying no economy has grown 8-10 per cent without opening up the market and India should bring down its import tariff to single digit. Bringing down import tariff to average 5 per cent has been the goal since 1991 but somehow it has been elusive as the reduction has been roller-coaster with successive governments tinkering with it due to pressures from domestic industry lobby, political and diplomatic considerations arising from time to time.
Criticizing India for its stringent stand on liberal trade policy, Panagariya in an address stated that India has begun to reverse the process of liberalization in recent years. He suggested that instead of raising tariffs, India should lower them for the Association of South East Asian Nations (ASEAN) countries. He said one avenue for liberalizing trade is by lowering tariffs against all trading partners, which the country successfully deployed from 1991-92 to 2007-08. The second approach can be by entering into a free trade agreement with major trading partners. He even suggested that differences should be ironed out quickly and even given-in to some of the demands to enably FTAs to fructify with US and EU as they being major trading partners. He cited Vietnam example on how it has leapfrogged in Mobile phone exports in recent years. The reason being that in a globalised world value addition is workable if tariffs are low or non-existent in intermediaries.
India had initiated actions to protect its stressed industries from China’s wrongful investment spree. Notifying against industrial promotion on the crutches of protection, underway through India’s recent investment policies, Panagariya said it would be a mistake to downplay the damage that creeping import substitution can do to India’s growth and jobs ambitions. Diplomatically, such stringent, active actions are considered sound but from the viewpoint of economy, they can have crippling effects.
At a recent lecture he said 42.5 per cent of the country’s workforce is employed in the agriculture sector, and for rapid transformation, nearly half of this workforce needs to be moved to industry and services in the next ten to fifteen years. The only way to accomplish this is by creating an environment in which successful export-oriented firms can emerge and flourish in labor-intensive sectors such as apparel, footwear, furniture, toys, kitchenware and stationery among others. As FDI will flow in India, it will reportedly create a potential job market.
Former Chief Statistician Pronab Sen is right in saying that India can at best grow at 7 per cent if it had depend only on domestic demand for growth. Only export-led growth could provide that extra 2-3 per cent economic growth. When India was growing at over 9 per cent on a sustained basis for 4-5 years during UPA 1, the country’s exports grew annually at over 20 per cent. The global currency meltdown played the spoilt sport hitting hard global trade.
New FIEO President A Shaktivel at the apex chamber’s AGM on September 20 said it was noteworthy that India witnessed spectacular exports growth in the first quarter of this financial year despite numerous supply side constraints. This augured well for the post covid economic recovery this financial year. He said exporters are committed to achieving $400 billion for merchandise exports this financial year. But the problem is that many exporters are not in a position to take further contracts due to erosion of liquidity and uncertainties on the policy front. The shortage of containers, frequent shutouts by the shipping lines and exorbitant freight rates are having dampening effect on the exports.
The Government’s ambitious target of $1000 billion annual merchandise exports by 2027 is achievable but needed some tweaking of policies and making the atmosphere more conducive for Industry to do business. The FIEO has submitted a memorandum to Prime Minister Narendra Modi seeking his immediate intervention to tackle some of the hurdles faced by the exporters. Among the issues that Shaktivel flagged are early release of pending claims of exporters stuck with various government bodies, rationalisation of export policy on raw materials so as to balance exports and domestic requirements and automatic enhancement of working capital provided by banks to exporters by 20-25 per cent.
FIEO also wanted transport and logistics bottlenecks particularly at ports and allowing foreign ships to bring empty containers, which is in tremendous short supply, from overseas destinations. This will help in arresting skyrocketing prices of containers which has gone up by 300 per cent in certain cases. Large ships should be allowed to call on some of the deepsea Indian ports.
Bureaucratic hurdles and slow resolution of issues always came in the way in India. Some of these issues are perpetual problems in the country. One of bane of Indian administration is poor governance. Despite Modi’s assurance of Minimum government and Maximum governance, somehow this has not got translated into action during the last seven years and hopefully now onwards at least things improve when the economy is poised for V-shaped recovery after the pandemic that has shattered global economy and trade for almost two years. (IPA Service)