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Exports can boom
Dear Minister Sitharaman:

India’s exports have been lingering around $ 300 billion for the past three years. What is it that your government can do to increase it?

Only when the Current Account Deficit (CAD) becomes quite large, everybody runs around saying exports have to be increased!  Implied in this is an assumption that turning a spigot here or there can increase exports.’  We need to learn from the Chinese what is it that they do to keep exports increasing by 10 per cent every year.

 

Revive export credit scheme

It’s time we went back to the old system of export credit (packing credit in the earlier days).  In the old system a firm figure of, say 7 or 8 per cent, interest rate is given and the difference between the ruling rate and the firm figure is reimbursed by the government to the bank which provides the credit.

Padmanabhan Committee had recommended that export credit should come under the ‘priority’ status under which all nationalised banks provide 40 per cent of their total lending. I suggest that this recommendation together with the ‘firm export credit rate’ prevalent earlier, should be brought back.

One of the objectives of the EEPC is to make India the manufacturing hub in the world. It would not only help increase exports, but also help the manufacturing companies, whenever there is a slump in domestic demand.  Government should seek a list of manufacturing companies with potential for export from the CII and EEPC and devise policies to achieve such an objective.

In China wages are increasing and the country wants to leave many products of exports to other countries and focus on products of higher added value. As India has the production capacity, trained manpower and is still competitive, India should grab this opportunity. The first thing that comes to mind in this category are automobile components.

Further, in any field of exports such as engineering, the top 100 exporters are responsible for 75 per cent of exports.  The government should keep in close touch with these and find what help they need and extend it quickly. Today changes in international trade are so instantaneous and quick, that we should be equally quick in changing our policies and approaches.

Big potential for cotton export

Over the years, production of textiles began shifting from industrially developed countries to less developed countries. Due to rising labour costs, China is losing its competitive edge. Also, the upward movement of the Chinese currency yuan has gone against the export sector, and cotton exports have become costlier. India has a fully integrated industry from cotton production to the  manufacture of yarn, fabrics and garments.

Industry insiders say that if they get suitable support from government, they can increase the present $ 40 bn exports to $ 280 bn in ten years. It is said that we missed the bus when the quota regime ended in 2004. Now comes the second big chance that the industry and government should not miss.

 

Huge potential of tourism

Tourism is another important area where we can increase our foreign exchange earnings. At the moment we earn around $ 36 bn, a year.  If the government takes the initiative, we can double the income in a couple of years. Training tourist guides who are educated with a good background of our history, paying them attractive wages and helping two and three star hotels and restaurants to upgrade to international standards should be given attention. They should tighten the security for tourists and assure them all help if they register themselves. Centre should set up a separate fund from which it should give long-term loans at low interest rates to state governments, that present viable proposals.

The Ministry of External Affairs (MEA) can play a large role. Every person who is posted in an embassy should go through a structured course for a reasonable length of time, at the Institute of Foreign Trade, under the ministry of commerce. The course should consist of existing trade, the new avenues we can enter into and details in India’s merchandise trade and project exports.  Simultaneously the officers should be taught to work on computers, so that we reduce the clerical staff in the embassies. There is need for coordinated work between MEA and the Ministry of Commerce. There should be an interchange of officers from the MEA to commerce ministry and vice versa.

The time is opportune for attempting a quantum jump in exports.

 

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