The Hindu Business Line : `Paradigm shifts key to success in trade arena'

"The paradigm shift should be from earning dollars to creating more jobs, providing more incentives to creating infrastructure and concession to competitiveness."

MR JAIRAM RAMESH, Union Minister of State for Commerce.

New Delhi , April 7

The country today needs three "paradigm shifts" to succeed in the competitive international trade arena even as India's exports have done well during the last two years increasing by $38 billion since the UPA Government assumed office, the Minister of State for Commerce, Mr Jairam Ramesh, said.

Talking to Business Line here after the annual supplement to the Foreign Trade Policy was announced here, Mr Ramesh said the paradigm shift should be from "earning dollars to creating more jobs, providing more incentives to creating infrastructure and concession to competitiveness."

He said the $101-billion export receipts during 2005-06 were an unprecedented achievement. Although the bulk of the increase is coming from sectors such as gem and jewellery, petroleum products, iron ore, plastics and to a limited extent from readymade garments, "we need to expand this export momentum to other sectors as well," he added.

Global dimension

Referring to incentives extended to services exports and supplies to international flights to be treated as exports to make India a major refuelling stop, Mr Ramesh maintained that these needed to be seen in the context of global dimension to exports. He said India is emerging as a manufacturing platform both in the regional and global context.

Stating that he never was of the view that a little bit of fiscal sops here or there is what drives exports, he said that what drives exports is infrastructure, competitiveness, quality and marketing. Unfortunately, he said, over the past decade the entire export community has seen fiscal sops as the only route to promoting exports.

He said that he has just been to a mango cultivation centre and no fiscal sop is going to promote mango exports — it is the creation of testing facility, marketing, irradiation facility and cold storage that would alone help in pushing its exports.

"If the money spent in fiscal incentives is spent in creating infrastructure, exports would boom," he added.

Asked whether there is any empirical evidence to this, Mr Ramesh quipped, "there is as much empirical evidence for my view as there is for the view that fiscal sops lead to greater exports."

He recalled that during his tenure in the Finance Ministry way back in 1996 a study commissioned by the Ministry and made by Mr Parthasarathy Shome showed that fiscal incentives have no bearing on saving and the rate of saving was not influenced by fiscal sops such as tax breaks.

"What I am saying of saying incentives is also true of export incentives," he said.

Employment focus

He said the only focus for export is employment and so "we have to promote employment-intensive exports like handicrafts, handlooms, leather, textiles, agriculture and medicinal plants.

"But, he regretted, that there has been a big gap between "what we say and what we do". Though agri-export zones have been announced in the past, "we have not had an investment window to AEZ", he said adding that "I have been asking that we set aside certain portion from ASIDE (Assistance to States for Infrastructure Development for Exports) scheme for AEZ to create the requisite infrastructure."

He also deplored the paradox of "too much money chasing too few projects" due to lack of project preparation capability.

He cited how under the viability gap funding window, not one project has taken off and "it is a sad reflection of our project preparation capability".

Project-driven companies such as NTPC needed to be replicated across the board if the country's exports and manufacturing competitiveness were to produce further beneficial results.

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