There are serious downside risks to export markets, says Khullar

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As the country's exports outran all expectations by fetching $247 billion in the fiscal 2009-10 and continued the robust trend during the first two months of the current fiscal at close to $50 billion, the euphoria on the export front is palpable. Yet, the exporters in general and the apex bodies tasked with export promotion in particular, are crying hoarse over the extension of the duty neutralisation scheme on inputs, the popular Duty Entitlement Passbook (DEPB) only for three months after its original expiry by the end of this month and other unrelenting cost disabilities they suffer in the export undertaking. With the authorities being busy to meet the deadline for announcing the annual supplement to the Foreign Trade Policy (FTP) by August after unveiling a strategy paper recently, Business Line caught up with the Commerce Secretary Dr Rahul Khullar to give a perspective on issues and the initiatives on the anvil for fostering an enabling milieu to exporters to repeat last year's performance. Always down-to-earth in his assessment of the evolving situation, Mr. Khullar called a spade a spade by stating that, “I am sort of hopeful that we can continue with good export growth but this sort of stunning numbers you have seen for the last couple of months, it would be imprudent to believe that those are sustainable.” Asked about the export target for the current fiscal, he said, “Given the market situation today, we may get $285-$290 billion, a growth of 16 to 18 per cent” over last fiscal.

Following are the excerpts from the interview How upbeat are you about sustaining the uninterruptedly long spell of good export growth over several months in the recent past?

We have had a very good run all these months, but the 50 per cent growth rates in the last couple of months cannot carry on through the rest of the year. There are serious downside risks in export markets like the US and Europe. I cannot possibly think of keeping up this pace. As China consciously slows down its growth rate, there will be reverberations throughout the global economy that again will affect demand for our products.

In terms of policy initiatives, we already put a strategy paper out and we are working out on translating some of the sectoral strategy initiatives into action. For instance, how to set up leather clusters is already under way. It is not possible to disclose more as the Ministry is working on a spate of things in the run-up to the FTP by August. My latitude to move ahead is circumscribed because there is very little room for fiscal manoeuvre. The Revenue Department is rightly concerned about fiscal consolidation. In the past, the Department of Commerce could count on some amount of fiscal assistance for supporting export policy. I think it is going to be very difficult for us to make the Ministry of Finance to cough up money for supporting export incentive. Secondly some restructuring has already begun like the DEPB. Now you have a reprieve for three months but there will be no further extension. It is essentially a period in which to smoothen the transition from DEPB to duty drawback.

On the exporters' complaint about lack of stability in policy with the termination of DEPB by end-September?

Since we announced this last year, it is unfair to say that policy is suddenly becoming unstable. We put all exporters on notice more than a year ago about it. If you are not willing to adjust to that, you cannot tell me one year later that is suddenly causing great instability in policy. Policy instability arises if there is a sudden reversal. More importantly, DEPB is not going to be available but you get duty drawback.

But in terms of other issues, it would be our endeavour to put together a stable policy which we put together in 2009 when we rationalised incentive rates, we simplified things and did very little by way of tinkering. The big thing is we consciously persevere with the policy which says keep your hold in traditional markets, diversify into other markets and upgrade your technology so that you become more competitive.

My own sense is that in the forthcoming policy persevere with basic things because that work. If it is not broken why fix it? Whether you can enhance that strategy by adding a bell and a whistle here for a specific sector that we push aggressively will be in the policy. The stage has come when India has to graduate into becoming an exporter of engineering, chemicals and pharma —top-end of the industrial base type of products. There is no way you are going to build a modern industrial base without having a dynamic engineering and chemical sectors. Once the sector is dynamic and comparative, export will happen on its own.

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