The Hindu Business Line : `Export infrastructure must be strengthened'

New Delhi April 19 Export should be infrastructure-linked and not incentive driven even though this paradigm of moving from incentives to infrastructure would take time, the Minister of State for Commerce, Mr Jairam Ramesh, said.

In an interview to Business Line, soon after the annual supplement to the Foreign Trade Policy (FTP) was unveiled by his senior colleague Mr Kamal Nath, "Every time a trade policy is announced, I get convinced that you should abolish the system of annual trade policy announcement. It is a relic of the past."

Service Tax Exemption

He, however, hastened to add that the single most important thing in the trade policy is the service tax exemption/remission to exporters. That is a big idea, he said adding that there is "a lot of tinkering" in the policy and some changes for agriculture exports. "Whether it will actually result in more exports or not is a separate issue".

Stating that he has his own doubts of how much is India's exports and the link between exports and incentives, the Minister said that when he was in the Ministry of Finance in 1997, a Committee headed by Dr Parthasarathy Shome had concluded, "Savings incentives have no effect on savings rate".

He said that there must be "substantial improvement" in export infrastructure, turnaround time and electronic data interchange (EDI) system to whittle down transaction cost to trade and industry to realise the ambitious export target of $200 billion by 2008-09.

Lion's Share

"I think we are under-investing in export infrastructure." For instance, he said, the allocation under Assistance to State for Infrastructure Development for Export (ASIDE) scheme for the current fiscal is pegged at Rs 540 crore and only five States, Gujarat, Maharashtra, Andhra Pradesh, Tamil Nadu and Karnataka account for a lion's share of the outlay.

He said the fund for market access is only Rs 100 crore and "I have taken up with the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia."

He said the 3Ps — policy, procedures and people - remain crucial in the country's export efforts but "we are fixated on policy but what kills is not bad policy what kills is bad procedures. You can have good policy, bad procedures and negative people. We must focus on procedures and people though the appeal is in the policy. The real nitty-gritty where India loses out lies in produces and lies in people," Mr Ramesh quipped.

Plantation Exports

Asked about export performance, Mr Ramesh said that exports from plantation sector turned out well during the fiscal ended on March 31, 2007, with tea exports having gone up from $385 million in 2005-06 to $450 million, exports of coffee from $354 million to $433 million, tobacco from $296 million to $371 million and Spices from $471 million to $681 million. Exports from plantation sector has, he said, "bloomed" and "if we persevere in productivity enhancement, marketing and technology we will be able to revive the sector." He said leather exports too went up from $2.6 billion to $2.8 billion last year.

However, the laggards, he said, include gem and jewellery, handicrafts and garment exports. While gem and jewellery exports were up 4 per cent last fiscal at $16 billion, handicrafts exports have fallen by 25 per cent from $450 million in 2005-06 to $330 million. The most depressing thing is the garment exports, which grew only by 4 per cent from $8.5 billion to $8.8 billion, he said.

Exchange Rate

Mr Ramesh said: "While exports of petroleum products, engineering goods, pharmaceuticals, software are booming, plantation exports blooming, garment export is gloomy." On rupee depreciation, he said that it is the central bank's job to maintain a competitive exchange rate consistent with its anti-inflation strategy. He said that Commerce Ministers would always like depreciating rupee although there are some macro-economic benefits to be had from an appreciating rupee.

"My view is not to join the clamour against appreciating rupee," he said adding that when Goldman Sachs released five years ago its BRIC (Brazil, Russia, India and China) report, one of the things mentioned was rupee appreciation. That time no one took fright, he said.

Mr Ramesh noted that Indian exporters have made the transition from competing purely on exchange rate to competing on quality, reliability and price. "I think non-price factors are more significant than price factors," he added.

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