PERFORMANCE
AND PROSPECTS OF EXPORT SECTOR IN 2002
The Indian economy steps into 2003
with an exceptionally salutary export performance exceeding all
expectations with a growth during the first half of the current
fiscal having touched 19 per cent (April to September, 2002).
What is particularly noteworthy is that against an export target
of 12 per cent for the whole fiscal, the export sector’s performance
during the first eight months was over 15 per cent. The country’s
export front has been on a growth momentum right from the inception
of 2002. This was further bolstered when the Medium Term Export
Strategy (MTES) was released by the end of January 2002 by the
Ministry of Commerce for the five year period 2002-07 to be co-terminus
with the Tenth Five Year Plan.
The MTES aims
at increasing the country’s share in world trade to one per cent
by 2006-07 from 0.67 per cent at present which implies doubling
exports from the present level. The MTES incorporates product
(as many as 220 commodities) and market identification for exports
and indicative sector-wise strategies for identified potential
sectors. This policy initiative was bolstered by the new Export-Import
(EXIM) Policy unveiled by the government on March 31, 2002 for
the five-year span which zeroed in on export market diversification
as one of its policy planks with special focus on the hitherto
untapped regions like sub-Saharan Africa and the Commonwealth
of Independent States (CIS).
The Exim Policy
contained several far-reaching components to take India’s exports
on a steady growth trajectory. These include, among others, removal
of all import curbs or quantitative restrictions (QRs), save a
few sensitive items reserved for exports through state trading
enterprises, a farm-to-port approach for exports of agricultural
products, special thrust on cottage sectors and handicrafts and
increased Assistance to States for Infrastructural Development
for Exports (ASIDE).
Agri Export
Zones (AEZs) which were introduced in the previous year’s Exim
Policy had really taken off by now with an aggregate outlay of
Rs. 1,025 crore being forecast during the next three to five years
in the 40 AEZs sanctioned in as many as 17 States. What is of
significance is that the private investment in these zones over
the last one year was of the order of Rs. 95 crore while total
exports from these zones between October 2001 and October 2002
fetched Rs. 148.43 crore. It is to be noted that the products
covered by the AEZs include pineapples, litchis, mangoes, vegetables,
potatoes, apples, onion, garlic, basmati rice and walnut besides
non-traditional ones like ginger, turmeric, orchids and cherry
pepper. Alongside the sprouting of these AEZs, modern perishable
cargo handling facility and auction centres for flowers have also
been coming up, giving a decisive push to exports of these items
from India.
Yet another
milestone in 2002 made by the authorities in their consistent
quest for pushing export products of heritage value was the enhancement
of export capabilities of the small scale sector which accounts
for about 50 per cent of the country’s exports. These capabilities
were strengthened through a programme for Special Focus on Cottage
Sector and Handicrafts including promotion of cotton sector exports
under Khadi and Village Industries Commission, access to funds
from Market Access Initiative (MAI) for units in the handicrafts
sector and benefits of export house status at a lower average
export performance. Analogous spurs would be extended to industrial
cluster towns with export potential like Tirupur (hosiery), Panipat
(woollen blankets) and Ludhiana (woolen knitwear).
As the country
has realised that successful export effort lays in fostering exclusive
export enclaves such as Special Economic Zones (SEZs) modelled
after the ones in China, though not at that gigantic scale, the
Exim Policy unveiled additional incentives to SEZs. These include,
inter-alia, income tax concessions, exemption from Central Sales
Tax (CST) on supplies from Domestic Tariff Area (DTA), drawback/duty
entitlement passbook (DEPC) to DTA suppliers, freedom to make
overseas investment and carry out commodity hedging. For the first
time, Overseas Banking Units (OBUs), free from obligations like
credit reserve ratio and statutory liquidity ratio would be set
up in SEZs to provide access to external finance at international
rates. This was followed up by a post-Budget announcement by which
100 per cent deduction of export profit was allowed to all SEZs
starting production on or after April 1, 2002 for five years and
thereafter at 50 per cent for the next two years. The export performance
of SEZs or units in Export Processing Zones (EPZs) between April
and November 2002 was Rs. 5,380.97 crore, as compared to Rs. 4,936.42
crore in the comparable months of 2001.
Alongside specific
spurs to traditional export items like gems and jewellery, exports
of agri and allied product, additional fillips to SEZs, the Exim
Policy also accorded impetus to the hardware sector as the Electronic
Hardware Technology Park (EHTP) scheme was modified to enable
the sector to avail of the zero duty regime under the Information
Technology Agreement (ITA-I).
Apart from these
specific measures, the government also rationalised and simplified
procedures in respect of various export promotion schemes with
a view to cutting down unwanted hassles and minimise the interface
between the bureaucrats who administer these schemes and the genuine
exporters with a view to bringing down the transaction cost to
industry and trade tangibly. The 2002-03 Union Budget too has
taken due care of exporters and major changes in this policy include
reduction in the peak rate of customs duty from 35 per cent to
30 per cent, increase in the customs duties of tea and coffee,
spices, i.e., pepper, cloves and cardamom, natural rubber and
poppy seeds, pulses and slapping of duty of 30 per cent on such
non-edible oils that contain 20 per cent or more of free fatty
acid. The customs duty on dairy products was hiked to the WTO
bound rate of 40 per cent. Customs duty on specified items of
reeling, twisting, weaving and processing machinery for silk textile
industry was reduced from 25 to 10 per cent. These items were
exempted from Central Value Added Tax (CENVAT) along with 28 items
of processing machinery, automatic shuttle looms and specified
jute machinery. These concessions would be available till February
28, 2005.
In order to provide
a level playing field for domestic industry and exporters who
are faced with cheap imports threatening their viability, the
designated authority in the Anti-Dumping and Allied Duties was
proactive in its remit, providing the much-needed breather to
the domestic industry and earning their goodwill by its dispassionate
and logical probe into dumping-establishing linkage between dumping
and injury.
The year 2002
also saw the final report of the Committee on the Operational
Modalities of the Rs. 500 crore Price Stabilisation Fund for Commodities
as the government was seriously concerned over the problems plaguing
growers of coffee, tea, rubber and tobacco due to prevalent poor
prices for these commodities. The scheme to be operational for
ten years would begin from April 2003 and would seek to effect
price stabilisation for each of the commodities without resorting
to the costly practice of procurement operations.
In the post-Doha
developments, India continues to have a proactive role through
active participation in all negotiations for which modalities
have to be firmed up before March 31, 2003 and final negotiations
to be conclude by 2005. On the General Agreement on Trade in Services
(GATS), India continues to focus on seeking enhanced market access
for developing countries in future negotiations. India has time
and again urged that the Work Programme on Implementation Issues
should be given the highest priority. Greater attention needs
to be devoted to issues about sanitary standards and technical
barriers to trade so as to fully realise the gains in agricultural
trade liberalisation. India also stuck to its contention that
the trade-related intellectual property rights (TRIPs) agenda
should reflect the concerns of developing world. India’s viewpoints
on all these issues were forcibly articulated at the mini-ministerial
meet in Sydney, Australia, in the middle of November, 2002.
The Ministry of Commerce
and the Directorate General of Foreign Trade (DGFT), a trade facilitating
agency, did play a crucial role in ensuring that exporters of
the country did not nurse any grievance and that the trading arena
was freed from stifling controls and obstructionist proposals.
This way the bygone era marked a decisive shift in the foreign
trade front for India.
