The Hindu Business Line : Ministry to bring out paper on export competitiveness

New Delhi, Nov. 9 With the exporters caught in the double bind of lack of an institutional mechanism for reimbursement of local levies and the relentless rise in the value of rupee vis-À-vis the US dollar, the Commerce and Industry Ministry is highlighting the futility of pursuing a strategy of jobless manufacturing growth and exports.

“The Commerce & Industry Minister, Mr Kamal Nath, has written to the Prime Minister, Dr Manmohan Singh. You have to make exports competitive. Rupee appreciation is obviously hurting the exporters. Interest rates are high and so are transaction costs. State taxes are not being reimbursed. A note has been circulated and we are bringing a paper before the Cabinet Committee on Economic Affairs (CCEA), spelling out how to make exports competitive. This will be placed before the Union Cabinet at a meeting next week,” the Commerce Secretary, Mr Gopal K. Pillai, told Business Line. He said the appreciating rupee has eroded the margins of the exporting community and particularly hit hard were the textile and handicrafts segment of manufacturing activity, where “lakhs of employment is at stake”. He said textiles and handicrafts, after agriculture, remain the largest employer of some 30 million people.

Petro product exports

Mr Pillai said that export growth might crank up and maintain double-digit level, powered by export of petroleum products. Incidentally, official figures reveal that petroleum (crude and products) export has become the top-notch exchange earner last year, clocking a growth of 59 per cent in dollar terms at $18,552 million as against $11,640 million during 2005-06. The share of petroleum products exports in the country is now close to 15 per cent in total exports.

A point to ponder is that interestingly petroleum crude and products alone accounted for about 30 per cent of the country’s total imports last year, presumably because of increasing demand for petroleum products, imports for re-exports and increasing domestic refining capacity.

In contrast to the shining performance of petro products, an employment-intensive segment like readymade garments (RMGs) including accessories posted a minuscule growth of 3 per cent at $6,762 million in 2006-07, against $6,554 million in 2005-06. RMGs share in aggregate export now stands at a modest 5.1 per cent.

A $10-billion export of petroleum products gives job creation of 5,000, whereas the same $10 billion textile exports would provide five million jobs, Mr Pillai said adding that even if “we gain 70,000 jobs in special economic zones, loss of five lakh jobs in textile segment meant no net gain” for the nation.

Mr Pillai said that if jobs are lost in handicraft segment because of lack of export orders, these craftspersons would shift to agricultural operation as a daily wage earner, putting pressure on the already slender employment opportunities in farming activities. That is the reason why the Commerce Ministry, he said, would focus first on preserving the jobs that “we have in traditional industries like textiles and getting new jobs” through the intensification of SEZs across the country. “That is why we are going to CCEA on this issue”, he added.

He said that so far 162 SEZs have been notified and more than 300 SEZs have their lands cleared for development. SEZs being a magnet for attracting more jobs, he said that each job inside an SEZ attracts two jobs outside the zone.

Mr Pillai is confident that the Commerce Ministry’s focus on preserving jobs in traditional export industries and continuing championing of SEZs for their job creation potentials would help usher in inclusive growth over the medium term.

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