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By Our Staff Correspondent
Banga
Noting that India has already demonstrated the potential to become a global sourcing centre for services, Mr. Banga said, "However, India cannot rely on services alone to drive exports. Manufacturing constitutes 72 per cent of global trade worth $6 trillion. For exports to be a major platform for growth, it is imperative that we focus and drive manufactured exports.'' Mr. Banga said HLL had decided to make sourcing an integral part of the business strategy. "Sourcing already accounts for about half of our total exports of Rs. 1,500 crores. HLL's vision is to build a billion dollar sourcing business out of India,'' he said. Mr. Banga said India must move quickly to pre-empt other countries in the race for global sourcing and suggested five immediate initiatives that the Government and industry will have to take. This will help overcome India's disadvantages, in cost, image and process competitiveness vis-a-vis other low cost nations like China, Korea, Thailand or Mexico, which are already ahead in the race to become global sourcing centres in manufactured exports. The five initiatives are: identifying, nurturing and promoting two or three `Star' sourcing sectors; creating `Virtual' special economic zones; completely privatising Mumbai and Chennai ports; driving industry productivity and process excellence through the total process management (TPM) tool; and an enabling fiscal and regulatory regime. Mr. Banga said pharmaceuticals, FMCG and processed marine products had the potential to become `Star' sourcing sectors in the immediate term. "There is a rationale for the choice of these sectors. The U.S. FDA requirements are stringent for pharma. Consumer involvement in food items is high. FMCG items are items of mass consumption. If we are able to successfully create a niche for ourselves in these sectors, it will give the `Made in India' brand for manufactured exports a big boost, which we can then extend to other sectors,'' he said. To nurture the `Star' sourcing sectors, Mr. Banga called for establishment of quasi-government apex sourcing body, with strong linkages to the Commerce and Finance ministries and independently managed by professionals deputed from industry. Welcoming the SEZ legislation, he pointed out that to enjoy the benefits of this legislation, a company needs to be physically located within the SEZ. This may not be feasible for many industries, which need to be located near raw material sources (example: steel) or skilled labour pools (example: diamonds). Second, an SEZ will take two to three years to begin functioning with full infrastructure in place. He therefore suggested establishment of `Virtual SEZs' as an interim action. A VSEZ is similar in concept to EOUs. Any unit that exports more than 50 per cent of its production in a block of three years, wherever located, will be deemed an VSEZ, enjoying benefits of a SEZ. To begin with the VSEZ facility could be extended to companies with an export of Rs. 100 crores per annum. In the light of encouraging experience of privatising three terminals in Chennai and Mumbai ports, Mr. Banga called for complete privatisation of these two ports. This will not only enhance efficiencies but earn Rs. 2,000 crores in addition to the annual revenue streams. Highlighting the need for industry to develop an obsessive commitment to productivity, Mr. Banga suggested adoption of TPM as a tool. Further, Mr. Banga pointed out that the approach to the regulatory regime for exports should be such that it actively enable exports as a growth driver. He suggested comprehensive VAT for exports and simplification of transfer pricing rules. A simple solution is to increase the margin of variance from 5 to 15 per cent and simplify the administrative and documentation procedures. In order to learn, the simplified regime could first be implemented for imports and then extended to cover exports. Mr. Banga concluded, "India must move quickly to pre-empt other countries in the race for global sourcing. The Government and industry must work together to dramatically improve India's cost, image and process competitiveness. The time is right for us to move exports to the top of the economic agenda and make it a national priority.''
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