Let's stop blaming global recession, volatile rupee

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Bikky Khosla | 17 Jun, 2008
Even as dissection and analysis continue on the global economic slowdown and the volatile rupee and their effects on Indian exports, we are perhaps overlooking certain factors that are hurting our exporters more than we give credit for. Rising inflation, high fuel prices, the uncertain rupee and global recession, tariff and non-tariff barriers are exogenous factors, most of which are beyond our realm.

What is in our power to mend and amend are factors we always overlook and attach no importance to. The internal factors are, in actuality, hurting both manufacturers and exporters more than the external factors.

We don't need to go very far to realize this. In our neighbourhood, China has done a lot to answer these internal problems and the results are before us for all to see. If we can do half of what China is doing, I think we can avoid the impending crisis of becoming uncompetitive in global markets.

Infrastructure facilities particularly in the transportation sector - roads, railways, ports, airports, etc. - for movement of goods are major constraints in the growth of the Indian Industry. Lower transaction costs have given China the competitive edge over India, in terms of exports. It takes around 41 days to book a container in India as opposed to just a day in China.

Power shortage alone contributes to a production loss of at least one percent of India's GDP. And that's not all - India spends only around 4 percent on infrastructure development, while China invests around 7 percent of its GDP on developing infrastructure.

The Chinese government is giving more tax rebates, subsidies to exporters and export-oriented manufacturers. This move has encouraged Chinese exporters to make inroads into almost all areas across the globe. Well in India's case, the less said the better!

Domestic indirect taxes are often singled out as a major reason why India Inc. is uncompetitive. Total taxes on manufactured goods are 25 to 30 percent of the retail price in India, compared to 15 percent in China. That means indirect taxes contribute 50 percent to the difference in retail prices between India and other low-cost countries. All we are left to do is to make a hue and cry about Chinese goods flooding our markets.

I think the authorities can do more. At the moment the Indian exporters are getting little assistance to increase exports.