Exit - QRs on exports?

By S. Swaminathan

The Union Minister for Commerce and Industry, Mr. Murasoli Maran, came up with a well-nuanced Exim Policy on March 31, which, among other things, sought to allay misperceptions about an import deluge following the elimination of quantitative restrictions (QRs). That the policy orientation clearly represents a bold departure from the annual exercise of tinkering with Exim procedures and, instead, envisioning a medium-term strategy for foreign trade involving a positive export thrust, has been widely acknowledged. It would, however, be premature to conclude that the Minister's assertion that any unusual upsurge in imports occurring in the wake of the elimination of QRs would be effectively monitored and even checkmated is an adequate guarantee against injury that might befall domestic industry, and particularly the SSI sector. Given the disparities in technological and cost conditions as between Indian industry and its counterparts in China and East Asia, a wide range of policy measures would be needed to bring down transaction costs all round in the Indian economy and not merely the institution of ``a war-council'' at the Commerce Ministry, to safeguard Indian manufacturers.

Bringing agriculture into the act

If the Exim Policy statement of March 2000 heralded a new era of export growth through the instrumentality of the special economic zones (SEZs), modelled on the Chinese pattern, this year's formulation of Exim strategy has been equally path-breaking in the sense that it has brought agriculture explicitly as a thrust area with an enabling institutional architecture of ``Agri- economic Zones''. These institutional devices that can spark off substantial economic activity in coastal States and even in relatively backward districts will involve considerable gestation periods. Nor can they become sustainable projects unless the State governments display dynamism in promoting infrastructural improvements and thereby seek to attract investments in these SEZs, including FDI. Mr. Maran's emphasis on States' involvement in the national export effort is, of course, crucially relevant and yet the Centre cannot merely trust to exhortations to the State governments in this behalf to secure more vigorous cooperation in this area. Export-led growth will remain an unfulfilled national aspiration until a few State governments come to realise that such a strategy, at their level, would generate the much-needed employment opportunities and help mitigate overall poverty.

Agricultural exports - a dismal record

The official claim about export growth, often made during the post-liberalisation period, is that exports of manufactured products, as a percentage of total exports, have been climbing and that they have exceeded 75 per cent. The belief that this is the true index of the robust performance of the Indian economy in relation to exports stems from the concept of ``value addition''. What such a view perhaps obscures is that for a predominantly agrarian economy, the contribution of agricultural exports would be equally crucial. The accompanying Table provides ample evidence that despite traditional exports such as coffee, tea, spices and cashew, agricultural exports constitute a negligible component of India's total exports.

The hackneyed explanation is that there are few sectors in Indian agriculture where there is a sizable export surplus. That the situation is far different now with ``gluts'' emerging in a wide range of agricultural commodities with consequent depression of prices needs to be underscored. The old mindset which viewed agricultural exports as a threat to domestic consumers (in the form of higher prices) is yet to be discarded by the policymakers whether it relates to wheat, sugar, onion or whatever. How otherwise can it be explained that agricultural export policy continues to be dominated by APEDA (Agricultural and Processed Foods Export Development Authority) and NAFED (National Agricultural Cooperative Marketing Federation), apart from needless bureaucratic decision-making processes?

The dismantling of QRs on imports is one-way traffic on the route to liberalisation. It is even a lop-sided approach to economic reforms so long as restrictions on exports of agricultural commodities (including cereals and sugar) are not done away with. The report that the Commerce Ministry has now made bold to moot the abolition of such export restrictions should lend credence to the promise that the Government will adopt a National Agricultural Policy that will not seek to perpetuate Indian agriculture as institutionalised subsistence farming but instead promote diversification and commercialisation without detriment to national food security. But then, without freeing trade in agricultural commodities from inter-State embargoes, can any forward movement take place at all?

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