The problems on the external trade front have clearly carried over into the recent past. Charts 5a and 5b show that very recent trends in export and import continue to be disturbing. Despite a dramatic fall in oil prices over the past year, imports have increased, mainly due to a significant increase in non-oil imports despite the continuing domestic recession. Meanwhile export growth has slumped, from more than 20 per cent in 2000-01, to just above 1.5 per cent in the past year.

Chart 5a >> Click to Enlarge

Chart 5b >> Click to Enlarge
 
In fact, the most recent data released by the DGCI&S reveal an even more bleak pattern. Aggregate exports in the period April 2001 to February 2002 barely increased at all, registering a pitiful 0.06 per cent rise over the corresponding period of the previous year. Since March is notoriously a bad month for exports, this suggests that exports in dollar terms are likely to have been stagnant over the past fiscal year.
 
This cannot be seen as a reflection of the poor growth of world markets. It is true that total world merchandise trade slowed down dramatically in 2001, growing at only 2 per cent compared to 12 per cent in 2000. But Indian export growth has been even lower than this - in fact 33 times lower !
 
Meanwhile, imports have continued to grow – in value terms by 2.3 per cent and by much more in volume terms. Since low world oil prices prevailed over much of the year, this reflects that non-oil imports grew by nearly 9 per cent in value terms, and even more in volume terms, over this period. This obviously means that import penetration continues to affect domestic producers adversely.

Features of the Exim Policy
In this context, it is quite understandable that the Commerce Minister decided to make export growth one focus of the new medium term Exim Policy, which was announced on 31 March. There is no doubt that a successful export thrust in the future will have to be associated with a systematic policy, since it is now clear that relying only on private market-determined responses is inadequate for the purpose.

The objectives of the Exim Policy 2002-07 are clearly ambitious. It explicitly aims to facilitate export expansion such that India's share of world exports reaches at least 1 per cent of world trade by the end of the period. In addition to this it proposes to stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods requires for augmenting production and providing services.
 
The Policy further plans on enhancing the technological strength and efficiency of Indian agriculture, industry and services, thereby improving their competitive strength while generating new employment opportunities. It proposes simultaneously to encourage the attainment of internationally acceptable quality standards. All this would then provide Indian consumers with good quality goods and services at internationally competitive prices.

While this is an optimistic outline of a future paradise for Indian producers and consumers; but the crucial question, of course, is how to get there. The unfortunate reality is the Commerce Minister may have missed the basic point in terms of what determines export growth and improved "competitiveness".
 
The apparent belief is that even more liberalisation combined with some fiscal concessions will do the trick. However, it is quite clear to most observers – and especially to exporters themselves – that problems of poor and costly infrastructure facilities, and inadequate access to reasonably cheap credit are among the most significant problems currently plaguing Indian producers.
 
In fact, the Exim Policy statement does not even mention these issues, much less discuss ways in which such problems could be dealt with. One of the most urgent problems for goods exporters relates to the backlog and slow rate of movement through India's ports, which raises costs and affects markets for export goods. The problems of poor transport in general and unstable (and increasingly expensive) access to power and other essential inputs put domestic producers at a major disadvantage compared to their international competitors. Another major area of concern is the difficulty faced by small-scale exporters in raising bank credit, especially after financial liberalisation measures have reduced allocations for priority sector credit.