Namrata Kath Hazarika | 22 May, 2012
In an exclusive interview with SME Times, Sanjay Budhia, Chairman, CII National Committee on Exports and Imports and Managing Director, Patton International Ltd said that an export-friendly Foreign Trade Policy (FTP) is required to help India's exports reach the target of USD 350 billion in the current fiscal.
Excerpts of the interview...
India's exports has recently crossed USD 300 billion target set by the government for fiscal 2011-12. Do you think the growth will be substantial for this fiscal (2012-13) as well?
Sanjay Budhia: While exports during the last fiscal aggregated USD 303.7 billion, against all odds, imports too increased to USD 488.6 billion, leaving a highest-ever trade deficit of USD 185 billion. India has set the export target of USD 500 billion by 2014-15. We should be able to reach the export target of USD 350 billion for this year if an export friendly Foreign Trade policy is announced taking into account the exporters concern.
What is required for India’s Trade Strategy is new markets, new products, change in the business sentiment to positive which could spark a virtuous cycle in investment and growth. We are confident that the exporters with their resilience and entrepreneurship will find new ways to reach the export target.
Despite a highly depreciating rupee, India's exports in April grew by a mere 3.2 per cent, at $24.50 billion. How do you observe the scenario now?
Sanjay Budhia: I think it is very difficult to say at this point of time. We need to observe the market scenario for sometime.
How do you observe the current global market scenario especially the performance in markets such as the US and the Euro zone?
Sanjay Budhia: There has, for some time, been a debate on whether India is de-coupled from the global economy, given the larger size of its domestic market in comparison to exports. However, we have seen time and again that a global economic shock has a sizable impact not only due to a moderation in exports but also due to volatility in capital flows. In the year just gone by, for example, not only did our growth rate decline to 6.9% but our foreign exchange reserves also fell by over $ 10 billion. The slowdown in the US and Euro Zone will affect the market for exports in these traditional markets
The former Commerce Secretary, Dr Rahul Khullar has also expressed concern that the nation's export growth rate may reduce to half in FY13 (from last fiscal's US $303.75 billion), due to demand slowdown in key markets such as Europe and the US. What is your take on this?
Sanjay Budhia: A new world order is slowly developing, with developing nations becoming the fulcrum of growth. Emerging Asia, Latin America, Africa and the Middle East are expected to witness relatively strong though slow growth in 2012. Diversification of the export market is seen as one of the important strategies for accelerating India's external trade.
The government has been providing sops for exporters exploring new markets in Asia, Africa and Latin America. India’s aggregate trade with Latin American and Caribbean countries has grown over 10 times in the last decade. The LAC countries which are important for export are mainly Mexico, Brazil, Argentina, Chile , Columbia, though other LAC countries like Trinidad and Tobago, Venezuela, etc are also important . The top commodities exported from India to the LAC Region are Petroleum products, Transport equipments, drugs, pharmaceuticals and chemicals, textiles and machinery, while the main imports are crude petroleum products, ore, slag and ash, edible oils sugar and electronic products.
Africa which is another region for market diversification as it can address the issue of the increasing domestic demand by ensuring steady supply of raw materials for domestic industries in medium term and food products in long term. Also the African markets can ensure domestic energy security through participation in evolving energy markets in Africa. The African countries which need focus are South Africa, Egypt, Kenya, Nigeria, Angola and Algeria. India’s top exportable products to Africa are mineral fuels, mineral oils and products or their distillation; which itself accrue more than 20% share of India’s total exports to Africa. India’s export to Africa is expected to grow at the rate of 22.5 per cent per annum and by 2014-15, it can reach up to US$ 50 billion, if India follows a focused strategy…concentrating and focusing on pharmaceuticals, vehicles and auto components, plastics, mechanical and electrical machinery, chemicals, food products including meat and iron & steel products, etc.
India’s Look East policy is also yielding impressive results. Successful trade agreements have been signed with Singapore, the Association of Southeast Asian Nations, Korea, Japan, and Malaysia, and ongoing negotiations are at an advanced stage with Thailand and Indonesia.
East and Southeast Asia now account for over a third of India’s exports compared to just about a fourth a decade ago when the Look East policy was initiated. ASEAN economies today are very important for our exports. India will forge strategic partnerships with both Bangladesh and Myanmar as this is the opportune time. A closer cooperation with Bangladesh and Myanmar which are the critical links to the regionally integrated infrastructure network is already being worked on. The recent CEO’s delegation to Pakistan will also help in easing business relations with our neighboring Pakistan. We need to take more such delegations to build confidence on each other.
Do you think it is right to spread such pessimism at this point in time?
Sanjay Budhia: There is no pessimism at this moment.
What kind of initiative the government should take at this point to promote India's exports aggressively?
Sanjay Budhia: According to Confederation of Indian Industry (CII) following issues still need to be addressed. Firstly, need to create a fiscal and regulatory policy environment that supports exporters. The GST should be implemented from April 2012 onwards. The government should set-up a committee to ensure zero rating of exporters and should consider re-introducing the interest rate subvention scheme for exporters. In fact, the government should take substantial action in reducing the high transaction cost in exports in order to make our exports more competitive in the global market and to reduce transaction cost we need the following:
a) Improved infrastructure
b) Identification of focused ports
c) Preferential treatment and self-certification
An Industry body recently projected India's trade deficit to increase sharply by over 40 per cent to $262 billion in the current fiscal on the account of slowdown in the western markets. What is your take on this?
Sanjay Budhia: We really need to wait and watch the scenario. The dollar and rupee parity currently holds at Rs 55, in that case our imports will get costlier, which will further affect our trade deficit. In fact, just because of the slowdown in the western markets and the global uncertainty, to maintain the pace of exports will be a very challenging task. We need to have a multi-pronged approach so that the trade deficit can be managed within the reasonable limit.
What is your expectation from the upcoming Foreign Trade Policy (FTP) review?
Sanjay Budhia: The expectations from the FTP is that the concerns of the industry should be addressed to help the exporters tide over the tough times and reach the Export target of USD 350 billion.
(Namrata Kath Hazarika can be contacted at firstname.lastname@example.org)