If the data for November are any indication then India's external trade, especially exports have ended 13 months of continuous slide. With a growth of 18.2 per cent over the same month of last year, it must have been tempting for policymakers to assume that their concessions for exporters over the past year have paid off. Fortunately policymakers seem to have drawn cautious conclusions from the data for in dollar terms exports this November rose just around $2 billion from last November's $11 billion; more pertinently cumulative export growth between April to November declined some 22 per cent over that of the previous year. So right now, the picture is muddy not rosy; policy sights are trained on the horizon for recovery patterns in the developed markets. New Delhi would do well to consider how best to get exports off on a sustained footing; the problem is discovering ways to do it.
Some policymakers look at sustainability in terms of trends; if the rate of decline itself is slowing, as data for the past two months show, then that is a positive development. However, that alone will not increase the value of exports. Policymakers may have to consider how India can become a more attractive destination for global manufacturers seeking competitive cost advantages. China used the strategy years ago to position itself as the best place for manufactured exports; labour wage levels were low, red tape was cut and manufacturing was favoured with modern infrastructure. Ten years ago India positioned itself as the best place for Information Technology industries. At the start off the new decade India must aim to match China in manufacturing given the low-cost labour with the added virtue of skills. Admittedly, it is short in other resources and infrastructure that investors seek, a weakness that has checked the flow of investments into skill-intensive manufacturing. Yet recent trends in auto and auto components, specialty chemicals, generic drugs and engineering suggest a vast scope for global manufacturers to locate here. That calls for policymakers to think beyond the immediate needs of exporters to the big picture of the economic environment; archaic laws, incompetent or indifferent governance at every level and shoddy initiatives such as the Special Economic Zones need to be addressed boldly and quickly.
Policy players have the chance to help India turn into a manufacturing hub with all the advantages it offers for employment, entrepreneurship and, at the end of the day, exports.
Source : Business Line