The Hindu Business Line : `Synergy in strategy, reforms to boost exports'

THE implicit synergy in the medium-term export strategy, Union Budget and the Export-Import (Exim) policy and the sequencing of reforms with coherence in policy measures herald an optimistic outlook for India's export scenario, says the Economic Adviser, Ministry of Commerce and Industry, Dr H.A.C. Prasad.

In an interview to Business Line here, he said the medium-term export strategy (MTES) provided a mine of market intelligence information and industry-specific initiatives, which coupled with the Prabhu Committee report gave "substance, parameters, direction and strategy for the five-year Exim policy." He said the MTES had suggested the adoption of the eight-digit nomenclature and the DGFT has now adopted it and the import policy has been given at the eight-digit level.

Stating that what is now left is only adoption of these codes for the tariffs, he said this would help in levy of lower duties across many lines, while safeguarding the sensitive items without increasing the duty slabs.

Asked whether the extant export incentive schemes entailing revenue loss to the exchequer would be sustainable in the medium-term, he said the present schemes had come into vogue because the tariffs remain high. "That is why MTES suggested lower tariffs and by adopting the 8-digit code, we can levy zero or lower duties across many lines which use inputs needed for exports and then for these items, the present schemes would become irrelevant. The transaction costs will also fall. Domestic production using these inputs will also benefit. This needs to be done first," he said.

Referring to synergy in specific segments, he said that for the gems and jewellery sector, the MTES has suggested that the foreign buyer should be allowed to carry gem stones unrestricted into the country and deal with the processor/manufacturers on a one-to-one basis, carrying out cash at the end of the transaction.

This was given effect in the Exim policy, which gave nod to personal carriage of gems and jewellery export parcels by foreign-bound passengers and Indian importer/foreign national. To achieve a quantum leap in jewellery exports, value addition norms of export of plain jewellery has been reduced from 10 to 7 per cent, export of all mechanised unstudded jewellery allowed at a value addition of 3 per cent only and personal carriage of jewellery allowed through Hyderabad and Jaipur airports as well.

The MTES had identified repairs and repaired products as a potential sector of exports and also suggested a special SEZ for this purpose.

The Exim policy proposed setting up of repair, re-conditioning, remaking, testing, calibration, quality improvement, upgradation of technology and re-engineering activities for export in EOU/EPZ/EHTP/STP in freely convertible currency. SEZ units could also be set up for repair, remaking, reconditioning and re-engineering activities.

On SEZs, he said, the MTES favoured add-on features for SEZs including offshore financial centres, which the Exim policy announced with other new features to SEZs. "What is now left and desirable is only a move towards port-based SEZs as suggested in the MTES and the IIFT report on Implementation model for free port in India." Again, the MTES favoured a modified EHTP model for electronic hardware sector, which the Exim policy unveiled to enable the sector to face the zero-duty regime ITA-1.

Dr Prasad said one of the major strategies put in the MTES is to adopt a strategic tariff policy with reduction in the customs duty rates in general and for those items of imports that are required for export production along with higher duties for sensitive items. The Budget 2002-03 brought down the peak rate of customs duty to 30 per cent with the announcement that by 2002-05 there would be only two slabs of customs duty, one at 10 per cent and another at 20 per cent. He said such calibrated reduction in the customs duty would go a long way in improving the price competitiveness of India's exports.

Dereservation of over 50 items of knitwear, certain agricultural implements, auto components, some chemicals and drugs in the Budget is also in line with the suggestions put forth by the MTES, he added.

Finally, Dr Prasad said that "proceeding bit by bit will not add up to the sum total of the bits, what is needed is a big push'' and this big push should at least be up to the critical minimum level which would make a whale of difference to exports over the long haul.

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