Thursday, April 10, 2008

Indian exports should be competitive: ASSOCHAM

by Jo Black

Exporters, especially from the Small and Medium Enterprises (SMEs) feel that both the government and exporters need to go on war-footing to make exports more competitive in the wake of rupee appreciation for fiscal 2008-09.

Appreciating the government’s initiatives mainly in helping the export sector to tide over the rupee appreciation, exporters added that without untiring support of Commerce Ministry, EXIM community would not have achieved what they have in the last fiscal (2007-08).

The assumptions are based on the feedback received from exporters representing a wide range of industry sectors in a survey conducted jointly by ASSOCHAM and tradeindia.com which was released here by the ASSOCHAM President, Mr. Venugopal N. Dhoot.

Almost all respondents were of the opinion that considering the changing world scenario, products exported to various countries need to change too according to the changing consumer taste and trends, said Mr. Dhoot.

They felt that instead of always looking for support from the government, exporters need to go into the details of the changing designs, patterns, product development, requisite change in production facilities for a variety of materials, production techniques, related expertise to achieve a leadership position in the fast growing competitiveness with other nations.

The rupee appreciation against the dollar is significant as the bulk of India’s external trade is invoiced in US dollars. Many exporters who took the survey believe that the export target set for this year (2008-09) can be met if the export sector works in accordance to the changing market trends.

Respondents however said that the slowdown in the exports due to rupee appreciation came as a prime dampener. Citing that appreciation of the rupee by more than 9 percent during April-January 2007-08 has meant a reduction in realisation of export orders, exporters agreed that large-scale adjustments need to be incorporated in their business module.

Many of the exporters felt that the sector can tide over the situation by adopting various mechanisms like forward contracts, shifting to other currencies and establishing protective clauses in their contracts to safeguard their interests, adding that exporting more to regions such as West Asia and the European Union, can be a strategic move to partially nullify the impact of the strengthening rupee vis-a-vis the US dollar.

More than 67 percent of the respondents hailed the government’s decision to extend the Duty Entitlement Pass Book (DEPB) adding that the relief measures initiated by the Centre come at the beginning of the financial year and at a very crucial juncture giving the much-needed relief to exporters to tide over the crisis in the light of rupee appreciation.

However, respondents felt that with allegations of being WTO-incompatible, the government will have to find an alternative sooner or later which would reimburse prior stage cumulative indirect taxes, which do not come under VAT including reimbursement of CST, and duty on inputs like electricity and fuel.

Exporters, went to say that the DEPB scheme be allowed to continue till 2010 when the common goods & services tax (GST) comes in force. Once GST is in place, reimbursement of input duties to exporters will be easy and transparent as the GST will be common across the country, they opined.

Appreciating the government policies and initiatives to promote the Made in India brand, 86 percent of the respondents felt that there is still scope for both the government and the exim community to propagate the Made in India brand across the globe.

To survive, exporters have to enhance their ability to satisfy the customers in terms of international quality, cost effectiveness, quick response, proper delivery schedule, etc.

When trade has become global and India’s own domestic market is being eyed by overseas companies and retail giants, the industry has to consolidate itself in order to be able to withstand borderless competition. The exporters need to streamline their operations and vigorously study the global market expectations before jumping into fray.

Around 69 percent of the respondents who took the survey supported the government’s move to push for Free Trade Agreements (FTAs). While 12.2 percent thought otherwise, 18 percent of the exporters declined to comment on the prospects of FTAs.

Exporters were of the opinion that a thorough review of India’s FTAs needs to be incorporated. Respondents feel that though India had signed FTAs with a couple of key nations including Sri Lanka, Thailand and Singapore, the rupee appreciation and high customs duty have nullified the benefits these agreements can bring to the exporters.

However with no breakthrough in the WTO trade talks, FTAs can help integrate India into global trade. Respondents were of the opinion that the authorities have of late taken several steps to develop the infrastructure of the country. Exporters expressed happiness that the problems they faced a couple of years ago has been done away with authorities bringing in key changes in both operations and implementation.

Exporters suggest that congestion at the ports be tackled on a war-footing for sustaining growth in exports. There have also been incidents of theft and pilferage at the ports due to poor security. Such incidents affect relations of Indian exporters with overseas buyers adversely, so much so that at times all future orders are cancelled.

Exporters said that transaction cost of exports and imports are very high because of port congestion, customs clearance delays, low utilisation of hinterland clearance points like ICDs/ CFSs and clogging of ports due to EXIM clearance and hinterland connectivity issues.

The authorities have identified these areas and thing are likely to change for the better this fiscal, respondents added.

 

 

 

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