The vast pool of skilled and unskilled workers sending home their modest earnings that add up to India’s foreign exchange kitty might still be the harsh reality of the economy. There is, however, another facet emerging: Of big corporates. Take the case of Jet Airways.
The company has seen its foreign exchange earnings jump more than two and a half times between 2006-07 and 2008-09. There are others too with an impressive track record on this count even if they do not quite match Jet Airways.
Performance of India’s large corporate entities is increasingly becoming a significant factor in the country’s export performance. This is revealed by an analysis of the performance of the top 500 companies listed on the National Stock Exchange (NSE) and the total foreign exchange (forex) earnings from merchandise and service exports compiled by the Reserve Bank of India.
These companies accounted for roughly 22 per cent of the total forex earnings by the Indian economy in fiscal 2006-07. By 2007-08, this had shot up to 34 per cent. While balance-sheet data for 2008-09 are still not out for many of these companies, results declared till now suggest that their share would be maintained if not bettered.
A quick analysis of 250 companies showed that their exports grew 22 per cent in 2008-09. That is one percentage point short of the growth in the combined merchandise and service export earnings for the economy as a whole (23 per cent), according to the RBI data on ‘India’s Balance of Payments — measured in rupees’.
The sample does not contain the data on export performance of some of the biggest players. For instance, there is still no published data on exports for Reliance Industries, Mangalore Refineries and, of course, Indian Oil — companies that notched up impressive growth rates well above the national average. Their eventual inclusion would only serve to boost the share of large corporate players in the overall export earnings pie to a figure higher than the 34 per cent they registered in 2007-08.
The performance of the sample set of companies is a clear testimony to the fact that the economy’s export performance is not just software services driven. It is even less dependent on the export of traditional items such as gem and jewellery, coffee and tea. The contribution of large corporate players to the economy’s total export earnings has policy implications. It suggests that orders for goods and services are won against superior competitive capability of global vendors.
After all, the performance of Reliance Industries or Essar Oil is a testimony to their capacity to sell petroleum products at globally competitive prices rather than something achieved through government handouts. Similarly, the performance of TCS or Infosys cannot be dismissed as mere “wage arbitrage” play in the information technology services industry. These factors point to an inherent stability in future earnings flow.
Top corporates, however, spend far greater sums in foreign exchange than what they earn. The deficit has shown a tendency to widen in recent years.
A mitigating factor is that a good chunk of it is spent towards purchase of capital goods and repayment of instalments of past loans. These build capabilities for the future. India has come a long way from being just a tea and spices story.
Source : Business Line