Worried about imports outpacing exports and the consequent widening of the trade deficit, the Commerce Ministry on Wednesday released a draft strategy paper to double goods exports to $450 billion by 2013-14. Simultaneously, it also seeks to rein in import growth through domestic policy changes aimed at reducing import dependence by increasing domestic output. The Ministry says goods exports in 2010-11 would be around $225 billion.
Releasing the paper, the Commerce and Industry Minister, Mr Anand Sharma, told presspersons that, “A major reason for this initiative is the widening of the trade deficit. We hope to close the gap (by increasing exports and simultaneously reducing imports) and narrow the trade deficit to around -9 per cent of GDP (which, according to the paper, is around the same as at present and may be regarded as just about manageable).”
WORRYING TRADE DEFICIT
The trade deficit in 2010-11 is seen at (-) $115 billion (-7.2 per cent of GDP) and is projected to widen to (-) $278.5 billion (-12.8 per cent of GDP) — that is if exports grow only at “business as usual growth rates” and reach only $379.6 billion by then. This alarming scenario has prompted the Ministry to bring out a strategy paper to help exports grow at a compound average growth rate of 26 per cent per annum to touch $450 billion by 2013-14.
The paper said the huge trade deficit is “Clearly cause for serious concern because it can lead to an unsustainable Current Account Deficit (CAD),” adding that, “We have, therefore, no option but to focus on higher export growth, and devise a strategy for rapidly increasing merchandise exports to ensure that the trade deficit and CAD remain within manageable limits.” The Commerce Secretary, Dr Rahul Khullar, said the ideal CAD is 2-3 per cent of GDP.
The stakeholders have been given time till March 23 to respond to the ‘strategy paper', after which the feasible inputs could form part of the next supplement to the Foreign Trade Policy and even the forthcoming 2011-12 Union Budget (as part of the supplementary demands for grants).
FOUR-PRONGED STRATEGY
The four-pronged strategy to boost exports include: focus on sectors such as engineering, pharmaceuticals, leather, textiles, gems and jewellery, agriculture, plantation crops, marine products, iron-ore and high-value/ value-added products from these sectors; retaining market share in developed countries; diversifying into new markets in Asia, Africa, Latin America; investing more in new technologies and research and development, especially in pharmaceuticals, electronics, automobiles, computers and high-end areas; and building Brand India's image in the overseas markets by raising domestic standards, promotional campaigns and quality enforcement.
The Government is also planning complementary measures to control growth in the import of products such as petroleum, coal, engineering, pharmaceuticals, electronics, fertilisers and agriculture.
To reduce the reliance on petroleum imports, the Government plans to rationalise pricing to promote efficiency in use and conservation to temper the growth in demand for petroleum products. To curtail dependence on pharmaceutical imports, the Government is considering resuscitation and resurgence of domestic production of Active Pharmaceutical Ingredients (API) to, in turn, ensure greater quality assurance of India's generics and formulation exports.
To bring down the imports of farm products, including pulses and edible oils, the Government is mulling over an aggressive policy reform package to increase yields and domestic production. On cutting fertiliser imports, the Government plans to rationalise pricing and production policy to encourage efficiency in use, consumption and local production. The Government is also considering measures to increase local production of electronic machinery and other goods as well as reforming policy to provide adequate domestic supplies of coal.
The suggested essential support measures to realise the ambitious export target for 2013-14 include: continuation of existing incentive schemes to maintain a stable policy environment; reducing transaction costs by implementing the recent recommendations of the Task Force Report on the same; substantially stepping up the overall Plan support; prioritising strengthening of trade related infrastructure; and putting in place conducive trading arrangements to ensure preferential access to new markets abroad.