Doubling exports to $450 b from next fiscal in 3 years difficult: Khullar

As the monetary policy review by the central bank is being made on Tuesday, manufacturers-exporters are on the edge, hoping that at least trade finance will not become prohibitive even as the bank finance rate is likely to move up, given the raging inflation.

The Federation of Indian Export Organisation (FIEO) President, Mr Ramu S. Deora, on Monday drew attention to the country's export credit being “much above the international benchmark, affecting competitiveness of our exports.

Even as export growth during the first-three quarters of the current fiscal has been at a high 29.5 per cent in dollar terms despite several cost disabilities plaguing the exporters, the Commerce Secretary, Dr Rahul Khullar, refused to be pinned down on the specific issue of the high cost of trade finance.

He told Business Line in an interview on the eve of monetary policy review that “let us see that we get something by way of….but I cannot guess right now”.

Following are the excerpts from the interview:

In view of the salutary trend in exports in the current fiscal till December 2010, do you expect that the Foreign Trade Policy (FTP) prognosis of doubling our exports from $220 billion this fiscal to $400-450 billion is feasible in the three years beginning 2011-12 to 2013-14?

Well, we are within the sight of $200 billion target this fiscal and my guess is that we will end up reaching exports of about $220 billion. Import growth has slowed down in November/December and that is why the balance of trade on the goods account will end up between $105-110 billion this fiscal.

Even if we end at $220 billion this fiscal while it is very good, I don't think we should be sanguine that we are going to get 25 per cent growth easily every year thereafter. The big task for the next three years from 2011-12 to 2013-14 is to double exports from $220-225 billion to $450 billion but it requires a huge growth rate.

The problem is that in 2011-12 the situation is not looking rosy. There is still some degree of uncertainty about economic recovery in Europe as there are serious problems about public debt there. There are now issues arising out as to whether some sovereign debt may even have to get some haircut — not repudiation but written-down. Worries as to whether some countries are not at all solvent exist and that meant Europe holds uncertain prospects.

The US is looking positive in terms of growth rate forecast which says it will go back to 3-3.5 per cent. But it is again jobless growth and there is in a sense very little to be cheerful about business confidence. I don't know how things will work out with both Europe and the US, even on their own terms having problems in terms of growth prospects.

The next fiscal is not going to be conducive because of global inflation with prices of raw materials and agricultural products being through the roof. Third, there is now talk of overheating in China. Now should China go in for curbing growth to tackle inflation, then howsoever soft-landing you plan, it means a cutback both in exports and imports. Now that does not bode so well for other countries. If China's imports start contracting, exports from other parts of the world, including India, would come down. All these factors will play a major role in the next year or so.

On India-EU broad-based trade and investment agreement

I think this should get done by May this year. In negotiations, you don't set deadline because at the end of the day you should get convinced of what you are signing up is to your mutual advantage. We have to gain something and the EU to gain something and when only both see gaining something both of us will sign. In any negotiations, the last issues are always the most difficult. We have sorted out less complicated issues. We are now dealing with the real difficult issues

On continued constraints of physical infrastructure to exports

We are not directly involved in infrastructure as there are many ministries including civil aviation, railways, road transport and shipping. We know there are serious constraints there. We have been saying quite long that export infrastructure needs to be built up. Other ministries should now start giving priority and if the infrastructure ministries do not deliver, it will hurt export growth but worst hit is the domestic industry which is dependent on it. Hence you need a huge step-up on our infrastructure. Otherwise, it will be an impediment on India's overall growth. Exports are incidental to the matter.

geeyes@thehindu.co.in

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