The government has realised that making policy announcements alone will not solve the problem. What needs to be done now is to implement policies and correct the existing fallacies. If India has to make a significant contribution in world trade, this requires utmost priority.

The annual Exim policy is a very special one as its mission is to achieve a tremendous breakthrough in economic development when the world is waking up to India's crucial role as the largest democracy and as a dynamic economy especially with the information technology playing a crucial role in opening up new opportunities.

Lessons from developed countries have shown that rapid overall development and increase in exports are dependant on the rapid exports of the countries. All fast-growing developing countries have been export success stories recognising the importance of openness and changing their trade policies accordingly.

Aim of the policy
Exports form an integral part of the development process and help raise the country's morale and improve its comparative advantages vis- a-vis the rest of the world.

Just a year‘s excellent performance is not a long-term solution. What is required is sustainability. Compared to a vast country like India, this growth is insignificant and will not help India in improving its comparative advantage and world share.

India today has become an integral part of the world economy and revival of SouthEast and Latin American economies had helped India in achieving the so called impressive 13 percent export growth last year. Most of India's exports are to the South East Asian economies - 87 per cent increase to Indonesia, 47 per cent to Malaysia, 39 per cent to Singapore. But a look at the performance of other countries will show that India still lags far behind. China achieved an impressive 41 per cent increase in exports , Thailand grew by 23 per cent and most Asian countries have been clocking 20 per cent-plus growth.

Future focus
If India has to achieve a sustained growth of 20-25 per cent per year, it will not only have to rethink its trade policies and make them sector-specific but it will have to diversify its trade boundaries and more importantly modify its trade basket. Today, India excels in software and information technology. If more focus could be given to growth-oriented industries, it will not only help boost our exports but also help to expand India's share in world markets.

Basket diversification
Today, office equipment, telephones, fax, automatic data processing machines, auto parts, electrical machinery are all high-tech items in which India can excel. If these items are provided the right focus, even a small half a percentage point increase in world share can bring in billions of dollars worth of exports.

A look at the US import list shows that items like toys, telephone equipment, gift items, radio receivers, clothing and textiles from neighbouring countries like Malaysia, Philippines, Indonesia and Thailand are very significant but India's share in this basket is very insignificant despite India having the expertise. Why is this so ?

India has all the required skills but only administrative and procedural restrictions are eating into India’s share in world exports. What is the need of the hour is not just tinker with policies, but to change the structure according to recent trends in world development.

Despite having a conservative setup with a communist background, China is able to attract more FDI and achieve a 40 per cent export target. Why is India not able to do so ? This is because India has announced FDI into infrastructure industry whose availability is very scarce and does not have any export potential. This is not the case with China. So, to attract higher FDI, India will have to completely alter its customs laws and procedures, rationalise its licensing systems and simplify its procedures making it more transparent. World demand has changed and India needs to take a look at the change in world pattern.

Software and electronics, which have maximum growth and export potential, should attract zero import duty. All customs procedures and regulations regarding this sector should be removed so as to boost exports. India has all the potential but bottlenecks hinder its growth.

Red tapism and bureaucracy are stumbling blocks in any sector performing well. Murasoli Maran has not denied this fact and is trying to set up a group of experts to look into the matter.

South East Asia experience
Despite facing a severe crisis in which most of the South East Asian economies were in the doldrums, there has been a marked turnaround in their favour. Ina short span of less than two years, they have been able to achieve a turnaround in their export performance and have achieved a high target of more than 20 per cent. China, which does not have a proper judicial setup and where military and communist rules with not so friendly investor policies, has excelled in its trade performance.

Why is this so? Non- interference from local government bodies and investor- friendly policies have done the trick.

India’s trade deficit is widening because of growing oil imports and with industry moving out of recession, pressure will increase further. Unless and until India tackles its basic hurdles of inefficient infrastructure and administrative bottlenecks, no matter how liberalised a policy is announced India will not be able to take the full benefit.

Change in the direction and composition of the trade basket will help India achieve the challenge. Today, traditional items have lost their value and do not contribute much to growth as their demand is being replaced by high-tech commodities. A look at the trade indices will show that much of the deficit in the trade accounts is owing to the oil imports that are rising year on year.

The minister by just copying the Chinese Shenzen type model will not be able to achieve much. Rightly so, the minister has pointed out that unless and until an overall change is introduced, India’s share in world trade will not increase beyond 0.65 per cent.

Just announcing policies and tinkering with procedures are not answers to the present problems. Firstly, the Indian Government will have to take up the task of convincing the exporter and trader community of its commitments and will have to provide the necessary infrastructure.

FDI will have to be given necessary boost si that it can flow into export-oriented sectors as is the case in China.

Desi Shenzens to be set up
Developing Special Economic Zones in different parts of the country wherein Gujarat and Tamil Nadu have showed keen interests is a step in the right direction. But, how far this will enable India in achieving a sustained high export growth only time can tell. Just seeting up economic zones and announcing concessions is not a long-term solution. Fiscal, customs and legal hassles will have to be removed to make operations in these zones exporter-friendly.

The minister has rightly given the concessions for movement of inter-state goods and special reservations for operations within the Special Economic Zones. But states have to improve their inter-state infrastructure links.

More active role for states
Today, not only the centre but the states will have to play a more proactive role to boost exports.Centre has set aside Rs 250 crore for states to create necessary export infrastructure. This is a very small sum compared to the high 20 per cent export target set. China leads the list, since it actively involves state governments in export promotion and rightly so Murasoli Maran has announced that his ministry will issue a notification under Industrial Disputes Act to declare units exporting over 50 per cent of their turnover as public utility services to enable them to keep their international commitments regarding delivery schedules.

But, according to law, export falls under the Union List and currently no institutionalisation exist for incorporating states into the export efforts of the country. States view exports as a drain on their revenues as the proceeds are fully exempt from any levies.

So, mindset of the state governments has to change. Gujarat and Tamil Nadu Governments have come forth with a proposal to build SEZs in their respective states. This is where India will derive its fruits from. It is the lack of motivation and initiative that pulls back states from performing.

Bowing to US pressure
India was maintaining quantitative restrictions (QRs) on several items for balance of payments reasons. But this logic was debated by the US and certain members of the WTO disputed our need for QRs for BoP reasons. India could reach a concensus with other trading partners except the US on removing QRs. A dispute was filed which India lost and thus it became compulsory to do away with QRs. An agreement was signed between India and the USA for determining the reasonable period of time under which QRs on the remaining 1,429 tariff lines were to be removed by April 1, 2001 of which 714 before April 1, 2000. Now the real challenge for India is to study the appropriate tariff levels so that the producers and consumers are not to pay a heavy price.

Here, India will have to gear up its administrative machinery which it lacks today and enhance the role of the Tariff Commission. More importantly, India will have to look into the Anti Dumping Duty aspect which will also have an adverse effect on trade if it is not properly administered.

Industry should not just blame the government for not taking a micro look but should face the challenges of the new millennium so as to improve their competitive strength.

Abolishing redundant schemes
To make exports more effective, the commerce minister has announced the rationalisation of schemes. Pre-export DEPB Scheme and Special Advance Licence for electronic sector together with the transferable advance licence are being abolished as no exporters are making any real use of the same.

Special Import Licence (SIL) has also been done away with. There will be no SIL after March 31, 2001. But minister has rightly agreed that India has a very complicated duty structure and rationalisation of schemes at this juncture is a very difficult exercise. The basic structure of customs duty is multi-levelled.

Input-output sops to continue
Operators in the EoUs and SEZs will be given special concessions on duty drawbacks and other fiscal exemptions wherein all advance licences will be exempt from duty drawbacks except deemed exports which will be exempt only from basic customs duty. Legal, customs,judicial and fiscal aspects have also to be considered while attempting to boost exports. Today, India is heavily criticised for its complicated policies which are proving a stumbling block at every operative level. Unless and until India does not finalise a single Value Added Tax (VAT) at the centre, no matter what it does there will still remain complications in its trading operations which will only in the long run retard growth.

The government has rightly allowed 100 per cent FDI for e-commerce as that is how the world will operate and computerisation and electronic clearing of applications and green card holder facility are being introduced in the policy which is a very good beginning for India to move ahead and align itself with international practices. The minister has stated that with the dawn of the 21st century India cannot continue with communication modes of the 19th and 20th centuries. Moving ahead, service sector has been accorded all facilities available for the merchandise sector. Tourism, health and accountancy can avail of all applicable benefits under the Exim policy like the IT sector.

Anti-FDI bias in some quarters, changing incentives and cumbersome procedures are eroding the FDI cake and resulting in billions of dollars flowing out of India into Far and South East Asian countries. However, the Exim policy and setting up of SEZs will help in bringing in precious export revenues which India has been losing for so long.