The Hindu Business Line : Engg exports may double in 5 yrs

ENGINEERING products exports from the country have the potential to grow at a much higher rate in the next five years than the current $13.29 billion, if cost disability factors such as higher transaction costs, cumbersome procedures etc., can be greatly minimised.

This is as per the preliminary findings of A.F. Ferguson & Co, commissioned by the Engineering Export Promotion Council (EEPC) to prepare a strategy paper for boosting engineering exports in the next five years.

Engineering exports, according to Ferguson, are estimated to touch $27.4 billion by 2009-10 from the current level, indicating a doubling of the annual growth to 30 per cent from 15 per cent now.

Informed trade sources told Business Line that Ferguson has suggested creation of a `Raw Material Policy', which will ensure supply of raw materials to exporters at international prices. This is significant in the context of spurt in prices of vital inputs such as steel and pig iron in the last couple of years. The final strategy paper is likely to be submitted to the council soon.

The key support elements identified for successful execution of engineering exports strategy are infrastructure (covering ports, roads, rails, power and SEZs), technology improvement and capacity enhancement, domestic and foreign investments in manufacturing, exploiting the potential for outsourcing of engineering products and export finance.

According to sources, it is suggested that the key focus should be on increasing exports of higher value-added products instead of intermediate goods/low value items.

The objective should be to move towards higher value-addition and concentrate on thrust products (about 19 product categories identified).

This, sources say, would also help in channelling the efforts of all stakeholders on various aspects such as technology and quality improvement, enhancing scales of operations, creating adequate supply capacity, attracting private investment (including FDI) and cluster development and would enable harnessing the true potential of the country's engineering exports in the world markets.

The share of thrust products in engineering exports is estimated at $4.82 billion (36 per cent), and with the targeted 15 per cent per annum growth in overall engineering products, the share of thrust products is estimated to increase to $13.02 billion (47 per cent) by 2009-10.

The strategy paper has observed that most of the engineering products exported from India fall in the low and low to medium value-addition, which lead to thin margins.

It is pointed out that as a fall-out, most of the product categories have reported exports of less than $500 million in 2003-04, and of all the engineering export categories, only two — prime iron & steel (including pig iron) and commercial vehicles — have exports exceeding $500 million.

The degree of value-addition is medium to high in certain capital goods categories such as commercial vehicles (especially, passenger cars), tractor and farm equipment, two/three wheelers, auto parts, engines, compressors and pumps.

China, Mexico, Korea, Czech Republic and Slovakia have emerged as the fastest growing markets for engineering goods.

It is also observed that 85 per cent of the exports were contributed by fewer product categories, and India's share of engineering exports in total world imports has remained historically low at 0.41 per cent in 2003.

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