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Shining exports dimmed to faint glow in 1997

Kishori Gopalkrishnan in Bombay

Call it the big chill or call it whatever. There's no denying the fact that 1997 was bad for Indian exports. Exports simply refused to take off, no matter how hard the commerce ministry or exporters tried. A mind-boggling array of items showed poor export growth including top seeds like gems and jewellery and leather products. Textiles, gems and jewellery and leather products together constitute 50 per cent of the total export basket. This explains the alarming fall in export growth last year, despite some bright spots. Goods like electronic products, cotton yarn, raw cotton, wool and manufacturers, coffee and agro and allied products such as wheat, spices, sesame seeds, groundnut, oilseeds, sugar and molasses and processed foods bucked the trend to witness high growth rates. But the overall picture was dim to say the least.

Last year's economic performance revealed a marked slowdown in industrial output and sales, especially for big-ticket consumer durables. The profusion of free or special offers and the inventories piling up in the warehouses of many manufacturers tell a story that is more compelling than that conveyed by disembodied growth rates.

So there are no two ways of saying this -- Indian exports are facing rough weather. The once round-the-corner $75-100 billion export is now a distant dream. The 1997-98 target has been reduced from $39 billion to $36 billion. Even this seems difficult taking into account the 2.86 per cent growth recorded during the first five months of last year. Increase in the corresponding period last year was 9.8 per cent while the year had closed with 4.2 per cent growth.

The government, meanwhile, continues with its erratic policies. In less than three months, drawback rates on several prominent items were first put up and then decreased steeply. On the cabinet secretary's intervention, temporary status quo was partially resorted. However, the damage was done and the uncertainty continues.

For twenty long years from 1950-51, exports were at stand still. They started looking up thereafter and during the decade following 1975-76, went up from Rs 1.8 billion to Rs 9.5 billion, that is, by 360 per cent.

A worried government, anxious about an uninspiring industrial outlook and the discovery of an indifferent agricultural output, sought to pull out all stops in order to revive the sagging economy. It has already had several brainstorming sessions, including one extended meeting of its crack economic team, and has listed a series of measures which might illuminate the end of a rather dark tunnel.

By undertaking a detailed review of the export performance, the commerce ministry is studying the various reasons for the fall in exports and identifying the products and countries where exports have fallen.

A review released by the commerce ministry earlier in the month shows that six products -- manmade fibre, readymade garments, oilseeds, iron ore, plastics and petroleum products, were the worst hit during the year. The countries to which exports have fallen drastically are South Korea, China, Bangladesh, Singapore, Netherlands and Japan. Exports to South Korea and Bangladesh have come down by 20 per cent, to China by 14 per cent, to Singapore and Netherlands by eight per cent and to Japan by 2.5 per cent.

Moreover, the impact of non-tariff barriers is being bandied around as probably the single biggest reason for the shortfall. A study compiled by the government has identified non-tariff barriers put up by 16 countries which have hit 13 different products.

The 16 countries identified include the United States, European Union, Japan, Hong Kong, United Arab Emirates, Saudi Arabia, Russia, Singapore, Australia, Bangladesh, Sri Lanka, Thailand, Malaysia, Korea, China and Canada. These markets, which account for 83 per cent of India's exports, have imposed various requirements regarding quality of goods, standards, testing and labelling on Indian products.

Apart from specific requirements, measures such as export subsidies, anti-dumping and countervailing duty investigations act as non-tariff barriers against imports from developing countries. The main affected items are fish, milk and meat products, fruits and vegetables, textiles and steel products.

Some time ago, the ministry had identified 10 emerging markets and products for exports. The emerging markets list included countries like Australia, Brazil, Indonesia, Iran, Israel, South Korea, Malaysia, Nigeria, South Africa and Spain. The emerging products identified were fruits and vegetables, processed fruits and juices, processed minerals, sports goods, woollen yarn, fibre and made ups, readymade garments and silk, electrical goods and computer software.

The ministry, which has prepared a study on the negative export growth of over 10 per cent in the first two months of the last financial year, has identified two or three reasons for the slump in exports.

The study felt that one of the factors for the exports slowdown was the sharp fall in the export of gems and jewellery (a 50 per cent drop), which in turn was attributed to Russia dumping a huge quantity of unpolished diamonds in the grey area which affected international prices of diamonds.

Another important factor, the study revealed, was overdependence on Europe for Indian exports. Nearly 40 per cent of the country's exports were to Europe and most countries in Europe faced a recession last year.

Production of leather, another important export commodity, was a cause for concern, particularly due to strict pollution control norms. Many plants in Tamil Nadu closed shop last year but were now gradually reviving with establishment of effluent treatment plants by them. However, Calcutta, another major leather producing centre, faced a similar problem at the end of last year.

The study said non-availability of gold due to a controversy over the import of the yellow metal by the Mines and Mineral Trading Corporation was another factor held responsible for the exports drop. The government has now overcome this problem by allowing certain public sector banks to import gold and sell it to gold jewellery exporters.