It is a matter of rejoicing that India has crossed the export target of $200 billion even before the close of the 2010-11 financial year because of the unexpected 50 per cent jump in February shipments. This was made possible by the turnaround in the American and European economies. Commerce secretary Rahul Khullar says he expects the fiscal year to end with export earnings of $230-235 billion. Buoyed by this performance, the government has set an export target of $400 billion for 2014-15, while Federation of Indian Exporters’ Organisations chief Ramu Deora has predicted it can touch $500 billion by 2014-15.
This bullishness on exports is commendable and very necessary for an economy which has huge oil import bills and in recent times huge food and commodities bills as well. It will also help to bridge the current account deficit. It requires a lot of courage to set ambitious export targets in a world that is as uncertain as today’s. First the global financial meltdown hit our labour-intensive industries then hardest, then the sovereign debt crisis erupted, and just when it appeared that some kind of stability was returning to the global system, the popular struggles emerged in West Asia and North Africa, throwing everything out of gear. More recently there was yet another blow, with Japan — the world’s third largest economy — hit by a trinity of disasters: the earthquake, followed by the tsunami, and most serious of all, the threat of a meltdown in nuclear reactors damaged by the tsunami.
We must take advantage of the fact that many regions of the world, including Southeast Asia, West Asia, Africa, Latin America and even China are bullish on buying Indian goods. India’s exports have got a major boost in recent times in Africa and Latin America: this is in large measure due to several concessions given to exporters by the government to diversify their markets. Earlier, there was a lot of dependence on US and European markets; this changed when exporters realised it was not wise to put all their eggs in one or two baskets when there was a whole wide world waiting.
While the government has done its part by giving Indian exporters a level playing field by way of interest subvention, a few more important changes need to be brought in — and these need no subsidies or additional funding. Transaction costs must be brought down, and the government needs to completely do away with what the exporters call the “license-quota-inspector raj”. To reduce transaction costs, all transactions should be done online. The manufacturer, port authorities, shipping companies, customs, excise, the director-general of foreign trade, banks and exporters should all be linked online so that there is no person-to-person contact. This will automatically eliminate corruption and all the delays associated with it. Similarly, the “license-quota raj” system, which exists in the form of “advance authorisation”, should be removed. A single cess should be imposed in cases where the government wants to regulate exports, such as in the case of iron ore.
Most important: the government needs to acknowledge, and not just pay lip service to, the role of small and medium enterprises. These account for 45 per cent of all exports and provide employment to 60 million people. Under a new rule, they are required to get a rating from credit rating agencies, which is proving a hindrance. They don’t get good ratings because they are not listed. They want that the banks be permitted to take care of all the necessary formalities. If all these factors are taken care of, there is no reason why — barring unforeseen calamities — this country should not be able to meet a $500 billion export target in a few years.