At a recent conference organised by the Confederation of Indian Industry (CII), the emphasis was on the need to position Indian exports in the emerging global value chain. The underlying objective was to understand and plan as to how India could increase its presence in global markets.
Several ideas were debated but some of the issues that were highlighted and discussed need some attention and deliberation.
An important issue that was raised was the fact that industry needs to look beyond subsidies to sustain and grow exports. The focus has to move from incentivising exports to supporting exports. This means that industry has to shift its focus to demands in terms of better infrastructure, better connectivity to large markets, single-window clearances and greater coordination among departments that handle exports rather than focus on increasing the incentives provided to exports.
The second point was whether India should look at new markets or concentrate on existing markets that still contribute to the lion’s share of global imports to provide a substantial boost to export performance. It was pointed out that a study by the Federation of Indian Export Organisation shows that large importing countries across the globe need not be the emerging markets where India is now seeking to focus. To sustain a 30-40 per cent growth in exports, it will be important to continue building strength in conventional markets of the developed world, while at the same time identifying and tapping new markets. Both these strategies have to coexist.
A significant argument that was forcefully driven home was the fact that Africa needs special focus. Africa, it was pointed out, is not emerging as a potential market but is already a large market that needs greater attention. The need is not to open lines of credit alone to tap the African continent but to build business-to-business contacts and also build Brand India in most African countries.
The third point that came across was the fact that Indian companies are lagging most counterparts across the globe in investing in research and development (R&D) to introduce innovative products in the market. Chairman and Managing Director of Exim Bank T C A Ranganathan made a noteworthy point that without R&D, it may be difficult to make progress for companies to become part of an emerging global value chain.
India, today, accounts for 1.6 per cent of global merchandise export and ranks 19th in the world among leading exporters. New Delhi hopes to improve its position by touching $500 billion of exports and four per cent of global trade over the next year or two. Till now, India has not been part of the important traded sectors in the global trade basket but has concentrated on products in which it may have a more competitive edge. But to increase exports significantly and become part of a global value chain, it was felt that there is a need for greater emphasis on innovation and R&D by industry. That is why it was pointed out that India has not been a major exporter of high-technology products.
Another important issue that emerged was whether India, like China, should use the policy of increasing exports through foreign-owned enterprises or focus on developing the strengths of domestic companies to tap global markets. China had in its initial years of export opened up to foreign direct investment for exports and foreign-invested enterprises accounted for as much as 80 per cent of exports out of China. This has come down over the years but foreign enterprises located in some key export zones account for well over 50 per cent of total exports from China. The domestic private sector in China accounts for over 33 per cent of exports, while state-owned enterprises account for over 14 per cent of exports.
Given the current need to increase exports to balance growing imports, we have to build on the existing export policy and steer clear of long-term incentives and focus on building competitiveness of various sectors. There is an urgent need for industry to move in that direction.
The author Principal Adviser with APJ-SLG Law Offices
