Addressing export challenges

By S. Swaminathan

Setting realistic targets for exports is a daunting exercise at the best of times. The Union Commerce Ministry has now come out with a target of export growth at 12 per cent in U.S. dollar terms for 2001-02 yielding hopefully an aggregate export performance of the value of $ 49.7 billions, as against $ 44.3 billions during 2000-01.

On the face of it, a climb-down from a near 21 per cent export growth last year to a 12 per cent target, appears to be a cautious if premature response to the global economic slowdown which is itself perceived not so unanimously by economic forecasters as a ``given'' reality in the flux of economic dynamics, in the U.S., in Europe and in the Asia-Pacific ``rim'' countries.

A flash in the pan?

The Commerce Ministry's assessment of the country's export prospects for the current year is obviously based on inputs provided by various export promotion councils, commodity boards and leading members of the exporting community.

If there is one area where the exporters of India have remained short-charged over the years, it is the systematic commercial information flow from Indian trade consulates abroad. The old mindset of political diplomacy reigns in the foreign services of the country even though the traditional ``export pessimism'' dominating Indian economic policy would appear to have yielded place to a newer confidence about exports becoming a lead-sector in India's development strategy.

In setting its sights on a modest 12 per cent export growth during 2001-02, the Ministry of Commerce has, perhaps, persuaded itself that the near-21 per cent export growth during 2000-01 was an exceptional if not a fortuitous achievement despite setbacks in the Indian economy.

There is no denying the fact that the export turnaround in 2000- 01 occurred after a long sluggish phase which began in 1996-97. The nadir in the export effort was reached in 1998-99 when aggregate exports at $ 33.2 billions represented a decline by 5.2 per cent.

What is even more pertinent, a 20 per cent annual average export growth is neither too far-fetched nor unprecedented.

Over the three-year period 1993-96, the export growth was indeed buoyant, raising merchandise exports from less than $ 17.8 billions in 1992-93 to $ 31.8 billions in 1995-96. What is equally noteworthy, it was the agricultural sector which turned out as a key performer in the export effort despite the continued dominance of manufactured goods in the export profile.

Far from the export performance being dampened by an overall deceleration in GDP growth, the experience in 2000-01 perhaps raises the issue of how a well-crafted export strategy can provide the ballast for an economy suffering from a chronic deficiency in domestic demand, given substantial idle capacity in industry.

Export commodity composition

Manufactured goods had a marginal decline in their share of total exports - from about 81 per cent in 1999-2000 to about 78 per cent in 2000-01, but their rate of growth of exports actually increased from 15.3 per cent in 1999-2000 to 16.2 per cent in 2000-01.

Taking the benchmark for export growth at 20 per cent, sturdy performances during the last year, came from quite a few segments such as engineering goods, agro-chemicals, electronic goods and leather and manufactures.

Textiles and readymade garments have recorded a 15-17 per cent growth in exports which is but a pointer to what can be achieved in a quota-free regime but not without strategic investments in technology and brand promotion.

Exports of agricultural commodities and allied products including processed fruits and vegetables were of the order of $ 6 billions in 2000-01, representing less than 15 per cent of the total exports. Agricultural experts have repeatedly urged not only crop diversification and ``precision farming'' but the expeditious adoption of scientific storage and post-harvest technologies.

That there is vast export potential in the special agri-export zones proposed is not in doubt. But how many state governments will move fast with viable strategies for attracting investments in this sector remains an enigma never mind the occasional affirmative postures of these governments.

Geography not adequately leveraged

Over a long era beginning with the Second Five Year Plan period, the policy mindset in India has been shaped by the paradigm of ``import substitution at any cost'' - a far cry from the contemporary economics of export competition.

A derivative of this mindset is that an export strategy nibbling at the affluent markets of the U.S. and the European union would more than work ``wonders''. The fact that the European union accounts for about 23.5 per cent of the total exports and the U.S. for around 21 per cent seems to have become such a ``fixation'' that any downturn in these economies comes to be misinterpreted as a calamity for Indian exports even if these constitute a minuscule proportion of the total imports of the U.S. and the European union.

By contrast, the under-developed potential for Indian exports in Asia (in particular in China and in the ASEAN region), in the Middle East and Africa (particularly in South Africa), needs to be factored in much more systematically and purposefully in the country's export strategy.

The generic complaints of the Indian exporting community regarding high transactions costs inhibiting the export effort are no doubt legitimate.

The policymakers need continually to seek to redress the grievances of exporters but Indian industry can hardly hope to penetrate global markets except on the basis of aggressive marketing strategies based on world-class design and quality apart from reliable delivery.

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