From short-termism to strategy

THE EXPORT-IMPORT Policy for 2001-2002 announced by the Union Minister for Commerce and Industry, Mr. Murasoli Maran, on Saturday, is much more than an exercise in continuity in trade policy liberalisation, which is an integral process of the Economic Reforms Agenda. As a logical sequel to the proactive Exim policy which Mr. Maran unveiled last year, the new policy package rightly emphasises the export imperative which the country needs to address in order to leverage its untapped resources for effective participation in global markets. Gratifying as the export performance during 2000-2001 has been, with a 20 per cent estimated rate of growth, India has but a minuscule share in global trade at less than 0.7 per cent. The Government's target of an 18 per cent export growth for 2001-2002 is not too ambitious in terms of the achievement during 2000- 2001, but the looming uncertainties about the global growth rate and particularly the creeping slowdown in the U.S. economy can render the target rather elusive.

Although the dismantling of Quantitative Restrictions (QRs) on the last remaining 715 tariff lines, as mandated by the WTO Appellate Authority, is bound to be politically questioned and even seen by sections of Indian industry as signalling a traumatic period ahead, the apprehensions of a deluge of imports seem quite unwarranted. The removal of QRs in recent years has certainly not led to any conspicuous surge in non-petroleum imports. The removal of QRs is after all followed up with tariffication of the imports in question and with the peak customs duty at 35 per cent with the option of countervailing duties in cases of dumping, the Government can certainly ensure that the interests of the domestic producers, both of agricultural commodities and of manufactured products, are adequately safeguarded. Mr. Maran has responded alertly to the fears of flooding of the domestic markets by items of imports now freed from QRs, by setting up an Early Warning System at the Commerce Ministry for the requisite vigilance. Even apart from this, the question of any massive assault on the domestic markets by imports of merchandise (including second hand passenger cars) is not so much a matter of legal access as it is one of comparative landed costs, life-styles, logistics of moving imports into different markets and the comparative availability of locally manufactured products.

In the changing scenario of foreign trade where global openness (and two-way traffic of imports and exports) is the key element, there is a strong case for the Exim policy to move away from short-term balance-of-trade considerations to a medium-term perspective, for accelerating export growth as a platform for industrial development, employment generation and for foreign exchange earnings. This is precisely what the new policy initiatives seem to capture. As Mr. Maran has projected it, a one per cent share in total world export for India by the year 2004 would call for an export performance of the order of $75 billions, up from the current level of $43 billions. The achievement of this order (which is patently too modest in relation to what China has demonstrated over the years) will obviously call for a sustained, multi-pronged export strategy. A vital component of the strategy would be for Indian agriculture and industry to gear themselves for an active, if not aggressive, presence in global markets. Marketing initiatives which have hitherto remained fragmentary need to be brought upfront. That the new policy package is alive to this task is indeed a positive testimony. That Mr. Maran also looks at the involvement of the State Governments in the national export effort as a critical component, is another clear indication that the policy is shaped by strategic thinking. Beckoning to the Chinese-model Special Economic Zones as the winning strategy has its own merits but should not greater macro-economic attention be devoted to bringing down the transaction costs all-round before an export- led strategy can pay off?

Send this article to Friends by E-Mail

Section  : Opinion
Next     : Evolution of man