The high export growth this year masks the fact that traditional exports did not fare well; hence, the process does not seem sustainable. For instance, a major part of India's 20.4 per cent export this year is explained by the 2473.1 per cent increase in petroleum exports.

Unfortunately, India's share in world trade with respect to organic chemicals - the broad category under which petroleum falls - is only 0.9 per cent. The same applies to plastics and electronic items - the other two fastest growing segments. On these items, India's share in world trade is only 0.4 per cent and 0.1 per cent, respectively (See table).

On the contrary, some of the items in which India really has a so-called competitive advantage in production (like tea, gems and jewelry, textile products, and vegetables and allied categories) have not performed so well.

For instance, gems and jewellery, explaining 18 per cent of the total Indian exports in value terms, registered a growth of 7 per cent. The growth figures for cotton yarn fabric made-ups and readymade garments are only 10 and 18.2 per cent, respectively. It is to be noted in value terms that these two items account for 21 per cent of Indian exports. Therefore, a 20.4 per cent rise in exports is no tall order, when traditional exports are performing badly. For example, the share of Indian tea (a major export item) in world trade has fallen from 22.1 per cent in 1990 to 16.4 per cent at present.

A major cause of concern for Indian exports is a fall in its competitiveness vis-a-vis other South-east Asian economies-India's major competitors in the international market. Although India is favourably placed relative to South-east Asian nations in terms of price competitiveness, countries such as China, Thailand and Malaysia perform better on the export front. While India posted a 16.71 per cent growth in exports, the corresponding figures for China, Malaysia and Thailand are 38.64 per cent, 21.24 per cent and 49.49 per cent, respectively. Why it is that India is not faring as well as its competitors?

To understand the success story of South-east Asian countries, it is necessary to examine the entire gamut of demand side and supply side factors. The demand side factors are movement in price competitiveness, external demand and non-tariff barriers. With non-tariff barriers affecting both Indian and South-east exports similarly and movement in price competitiveness going in favour of India, the variation in export growth can be explained by supply-side factors.

Prominent among the supply side factors are scale of operation, infrastructure, procedural bottlenecks and domestic distortion. India scores much below other South-east Asian nations in each of these factors. Take for instance the scale of operation in the manufacturing units in India as compared to China. During the fist nine months of 2000, i.e. January-September 2000, China produced 9.62 million household washing machines compared with 0.77 million items in produced in India during the whole of last fiscal. Similarly, China produced 10.94 million household refrigerators against India's 2.0 million and 27.84 million colour TV sets against India's 2.5 million.

Going by economies of scale, China will definitely be in a position to produce items at far less value than India. Since these items are price elastic, India is certain to lose out to China. A recent survey by the World Economic Forum, Geneva, places India in 50th position (out of a sample of 53 countries) in competitiveness in terms of overall infrastructure development. Perhaps this explains why despite being equipped with a better industrial base and more pre-requisites for industrial growth than South Korea, Malaysia, Thailand and Indonesia in the 60s, India figures well below them in terms of export growth.

India's two important export centres-Tiruppur in the south and Moradabad in the north- clearly reflect the sorry state of Indian infrastructure. Tiruppur, from where the world's largest garment brands are sourced, till recently did not have a sustainable water supply. Roads are pathetic; hence exporters were forced to build a bridge reducing the distance from the main town by 15 km, as the state government refused to part with necessary finances. The state government feels that since the Centre has a finger in the export pie, it should build the infrastructure as well. The Centre on the other hand claims it is the state, which gets the indirect benefit of exports, such as employment generation, industrial development, etc. and hence should undertake the responsibility of development. Exporters suffer in this crossfire.

Procedural bottlenecks and domestic distortions are a major supply side constraint. In India an exporter has to fill up anything between 100 to 300 forms before he can actually begin exports. Right from the stage of obtaining the RBI Code till the end of obtaining benefits of duty drawback, the story of an exporter is that of delay, harassment and paying bribe at every step. Industry associations and business chambers in India are, however, more worried about Chinese imports flooding Indian markets and asking for more protection. They should be looking at removing supply side and demand side distortions instead.

(The writer is a senior business analyst with e-indiabiz.com)