The Minister of State for Commerce talks of an export rise by 25-30 per cent this year. But the secretary of the ministry has targeted a growth by 20 per cent to $ 40 billion. Even the lower target for 1997-98 appears overly ambitious; last year exports rose in US dollar terms by just four per cent to $ 33.1 billion (though in SDR terms the growth rate was in the double digit).

There is nothing wrong in thinking big. The issue is how close will the actual performance be to the target? Diamonds have taken a bad knock: the de Beer-Argyle clash has pushed down prices at the lower end of the diamond market which India dominates.

The drop in diamond and gem re-export can be made good by exports of cotton, cotton textiles and garments. But precisely because their exports are blooming, the Government is chary of extending extra facilities: deemed export status to fabric supplied to exporters, import of fabric at international prices etc.

Setting a target is easy; providing the back-up for an export boom requires an understanding of what exporters have to face. Why, for example, are Chinese textiles flooding the US market, but not Indian textiles?

The Government thinks that the export target will be reached by pressurising the export houses; thus, every category of export house (right up to the super star class) is required to achieve an export growth by 25 per cent.

Fair enough, prodding could get results from the specialised export institutions which get special import licences and market development assistance; besides, they are allowed to share export profits with supporting manufacturers. It is also true that interest rates have softened and MAT on tax-free export profits has been withdrawn. But these may not be sufficient to boost the export growth rate. There is little evidence that new manufacturing capacity has been established to sell in the domestic market as also in the export markets. The country has to rely on traditional goods and on agriculture for exports.

Reports that the premium on the US dollar in the unofficial market has risen in recent months suggest that the rupee is overvalued. In fact, the rupee is in the appreciating mode, judging by the Reserve Bank's sustained intervention in the exchange market. Exports are losing the shine gained from rupee depreciation in the early years of reform. There is a lack of urgency in getting exports back on track, thanks to the slowdown in imports and the sustained rise in the country's foreign currency reserves.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.