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By Dr Navin Chandra Joshi
INDIA'sexports recorded a buoyant 17.26 per cent growth during 2003-04 despite the continuing rupee appreciation during the year. Even as exporters were complaining that the appreciating rupee made exports less competitive, the exports totalled a value of $61.8 billion at the end of March 2004.
However, imports have grown even faster than exports during 2003-04 as they touched a $75.2 billion mark. Non-oil imports have risen much faster by 29.38 per cent to reach $55 billion as compared to $42.5 in the previous year. The trade gap between exports and imports nearly doubled to $13.36 billion as compared to last year.
As for the export growth rate during 2003-04, this is no mean achievement coming as it does on the heels of the double digit growth of 20.34 per cent in 2002-03. No doubt, due to the right policies pursued by the Union Government, exporters have proved their mettle in the global market. India'sexporters are indeed successfully exploiting the scope of productivity gains that exist today. This should improve further as infrastructure in the country improves to world class levels. Falling interest rates have also helped considerably to maintain competitiveness. This trend will become more strong as India gets greater market access in services and that is bound to happen.
But then, the hardening of the rupee against dollar with some increase in freight rates did create a dent in exporters? profits. It is, therefore, feared that if the trend goes on, many exporters will hesitate to sign new contracts for fear of suffering losses. Exporters say they have been executing buyers? orders at a loss just to meet their contractual obligations.
India being the largest consumer of a host of goods, must use her ‘buying muscle? and insist on global companies to buy Indian goods when major deals are negotiated. A country of our size with numerous resources and capabilities, can surely convert the resources into a variety of first rate products.
The new Exim Policy needs to outline a series of measures to rationalise the existing export production schemes and to improve availability of inputs for export production.
Overall, while the trade deficit is substantially higher than at the end of the previous year, enough receipts from invisibles have made the current account position quite manageable. However, since current account surplus means that the country is exporting capital, it is not a happy situation indicating as it does the lack of absorptive capacity in the economy. Therefore, the situation needs to change with the creation of a reasonable current account deficit as well.
It may be reiterated that there is a great potential for India to increase its share in the growing world service market, particularly in areas of travel and tourism, consultancy services, computer software and project exports. Today, 40 per cent of India'sexports (merchandise as well as invisibles) is accounted for by trade in services. Quite appropriately, this area has got focused attention in the new trade regime, along with a higher thrust in export of agricultural products. India can genuinely expect that its negligible share in world trade may have a quantum jump in the coming years.
It is true that to achieve a 20 to 25 per cent annual increase in exports, there is an urgent need to have a paradigm shift in the country'sexport policy. The new export import policy should see to it that the states involve themselves in the export effort much more positively. The new Exim Policy needs to outline a series of measures to rationalise the existing export production schemes and to improve availability of inputs for export production. The electronics industry is now poised to follow the growth achieved by the software sector. This will give an opportunity to add more value and improve its performance. An expert group should study aspects of procedural changes to step up export of hardware in the electronic sector.
India being the largest consumer of a host of goods, must use her ‘buying muscle? and insist on global companies to buy Indian goods when major deals are negotiated. A country of our size with numerous resources and capabilities, can surely convert the resources into a variety of first rate products.
It is encouraging to note that the world is waking up to India'scrucial role as the largest democracy and as a dynamic economy in which the new technologies, especially IT and biotechnology, are opening up new opportunities. But then, one has to be forthright in asserting that the Exim Policy by itself cannot achieve a very high export growth rate. Basic structural changes are essential to bring about and ensure sustained growth in exports.
(The writer is former Colombo Plan Professor and has retired from Delhi University.)
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