More reports on: Government policies

New Foreign Trade Policy to address slowdown concerns: commerce secretary

26 November 2014

The ensuing Foreign Trade Policy will address exporters' concerns over a slowdown in several key markets like the European Union and Japan even as several policy developments and diversification measures are being worked out to deal with the emerging challenges of merchandise exports, commerce secretary Rajeev Kher said today .

Releasing the Engineering Export Promotion Council (EEPC)'s India Strategy Paper for Engineering Exports, Kher said that while a steep fall in engineering exports in October, after a good run in earlier months, came as a ''shocker'', there is no room for pessimism as ''a lot of policy developments....are happening.''

''The focus on manufacturing is going to throw opportunities in sectors like defence and technology,'' he added.

He said the government was aware of the challenges being faced by exporters in the backdrop of slowdown in EU, Japan and China, but the policy measures would target new markets like Africa, South East Asia and CIS countries. Kher highlighted movement by exporters in the value chain for staying competitive in the global markets. In this context, the liberalisation in the FDI policies underway would help exporters move up the value chain and help gain scaling essential for the international markets, he said.

According to the EEPC India Strategy Paper, India will need to ride on the back of the FDI inflows along with high-end technology, particularly from large enterprises, to boost engineering exports to just about double the country's engineering exports to $126 billion by 2018-19.

India's engineering exports in the year FY 2018-19 will remain between $86 billion and $126 billion from $62 billion in 2014. ''While the $126 billion aspiration might be considered aggressive in light of the current economic scenario, a number of factors give us reason to think otherwise,'' the EEPC India paper prepared by consulting firm KPMG pointed out.

Large foreign enterprises have important role to play in the develop­ment of innovation hubs in the nation. Often these enterprises be­come champions of innovation like Hewlett-Packard, Lockheed, and Google in the US and Samsung and LG in South Korea. In order to create strong innovation hubs, the government should attract large innovation-oriented engineering firms to India, the paper said.

The India Engineering Sourcing Show (IESS), scheduled during 16-18 December in Mumbai will focus on the way Indian firms are adapting to technology and moving up the value chain. Besides, the presence of global companies at the IESS-IV presents great opportunities for the home grown firms to connect with the international businesses.

Foreign direct investment inflows not only provide capital but also add to resources that can be invested, bridge the gap between domestic savings and investments, generate employment and contribute to the exchequer in the form of taxes. ''Importantly, by attracting top companies via the FDI route, one can adopt technology and best management practices thereby increasing productivity and output. In the Indian engineering context, it is seen that sectors which have attracted FDI have performed better than average.''

The paper recommended that an unambiguous environmental and pollution laws and time bound action for same clearance should be spelt out by the government.

It also suggested introducing tax incentives to attract expatriates in export-oriented units.

The paper noted with concern that no significant reshuffle in terms of skill and technology intensity has been observed in the Indian engineering exports basket over the years and India continues to be an exporter of products of low and me­dium skill and technology.

''Overall India has not performed well in product categories, which require high technical know-how and skills, which is in line with Heckscher-Olin hypothesis which states that labour-abundant countries produce and export more labour-intensive goods and capital-abundant nations manufacture and export more capital-intensive goods,'' it noted.

It can be seen from the average export and import volume data for the three-year period from 2010 to 2012, that India exports more low skill and technology intensive products to USA than high skill and technology intensive products.

Sharing these concerns, EEPC India chairman Anupam Shah said, ''Capabilities which are required to be developed are easy access to raw materials, cheaper raw materials, technology upgradation and product innovation, lower logistic cost and better infrastructure, skilled workforce and favourable terms of trade to increase''.

The EEPC India-KPMG paper said India imports more high skill and technology intensive engineer­ing products from Germany and China than it exports to these na­tions. China's high skill and technology intensive exports to India are approximately fifteen times larger than India's high skill exports to China (considering average volume for the period from 2010 to 2012).

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