Pushing exports in the face of rising rupee

FOREIGN TRADE POLICY: EXPERTSPEAK

Meeting the targets ahead of their deadline can always be source of satisfaction. While presenting the Annual Supplement of the Foreign Trade Policy, Commerce and Industry Minister Kamal Nath could derive satisfaction from the fact that India's exports in 2007-08 at over $155 billion surpassed the target set for 2009-10 of $150 billion.

This achievement was assisted by robust growth of the world economy over the past four years. Buoyed by the good performance of the past four years, Mr Nath has now set eyes on $200 billion for exports in the current year. This could be challenging given the rupee appreciation, global economic slowdown, and rising commodity prices.

Kamal Nath will be remembered for bringing a new dimension to India's export strategy "" that of seeing exports as an 'engine of growth and employment generation'. Countries like China, Thailand and Malaysia, have created millions of jobs by developing export-oriented manufacturing industries.

In order to go about it systematically, the ministry under Mr Nath's leadership commissioned a study on the subject. The RIS (Research and Information System) study 'Towards an Employment-Oriented Export Strategy' prepared in 2006 made an attempt at examining the employment generation potential of exports and outlined elements of an employment-oriented export strategy.

An employment-oriented export strategy could include consolidating our place and moving up the value chain in labour-intensive products such as agricultural products, textiles and garments, leather products, and gems and jewellery.

In these products, despite our traditional comparative advantage, India's share in global market is only 3 per cent compared with 18 per cent of China indicating unexploited opportunities.

The latest Supplement to the Trade Policy continues the employment-oriented thrust to the export strategy. There are steps announced to strengthen employment-intensive exports of fruits, vegetables and flowers, toys and sports goods, and IT hardware.

The commerce minister has been forced to withdraw incentives on exports of rice, edible oil, cement and primary steel items. The time has come to consider banning the export of raw materials such as iron ore altogether and allow exports of only value-added products. That would bring down iron ore prices and in turn steel prices.

As we seek to become a global manufacturing hub for high value-adding products, a strategic thrust aimed at promoting excellence among enterprises could be important.

RIS study 'International competitiveness of knowledge-based industries' found a wide variation in enterprise-level export performance within industries despite similar policy environment and opportunities faced. While enterprise dynamism has a role to play, policies could help in nurturing world-class national champions in select sectors.

To conclude, the time has come for making India a manufacturing hub for the world that would create jobs, incomes and foreign exchange for India's teeming millions!

The author is director-general, Research and Information System (RIS) for Developing Countries. These are personal views. Email: nkumar@ris.org.in.