FIEO News - ‘Our exports are growing at over 20%’

‘Our exports are growing at over 20%’

Speaking on the topic "Growing Business Opportunity in India & Growth of International Trade Relation Between India and Other Countries" at a two-day Workshop at Taipei in Taiwan on 15th November, FIEO’s Northern Region Chairman, Dr. R. K. Dhawan analysed India’s changing trade dynamics vis-à-vis different regions of the world. In his address at the Workshop, oraganised by Confederation of Asia-Pacific Chambers of Commerce and Industry - Women’s Entrepreneurs Council (CACCI-CWEC) on "International Women’s Dialogue & Conference on the Opportunities in Retail," he was bullish about India’s emerging trade prospects in the context of globalization. Excerpts from his speech:

I join Mrs. Mukta Nandini Jain, Chairperson of CWEC in sharing the words of Mahatma Gandhi that "India’s salvation depends on the enlightenment of her women". In the today’s context of globalization, I would say that global salvation depends on the enlightenment of the women across the nations. And, as a step towards the enlightenment process, I, on behalf of the Federation of Indian Export Organisations (FIEO), the apex body of all export promotion organizations in India and the exporting community of India, I commit all support to the CWEC to help achieve its objectives and goals.

We are keen to see the active participation and contribution of more and more women entrepreneurs from across the globe in promoting global trade, economy and prosperity. In India, the number of women entrepreneurs is growing and many have excelled in   each   of their spheres extending from

Dr. R.K. Dhawan addressing the Workshop

traditional items like the handicrafts to non-traditional items like bio-tech. But we need to see the number growing manifold.

Already efforts are on by many chambers of commerce and trade associations in India to promote women entrepreneurship. Many of these chambers have started their Women’s wing. At FIEO, we foster women entrepreneurship by encouraging their participation in our various promotional events. FIEO took an all women’s delegation to Dhaka, during September 29 to October 5, 2007, for participation at the "Women Entrepreneur Trade Expo 2007". It was encouraging to see over 75 women entrepreneurs from India, Bangladesh, China, Pakistan and Iran displaying their exhibits covering wide range of products.

There are various schemes run by the Government of India to promote women entrepreneurship through institutions like the National Small Industries Corporation Ltd. Special provisions are made through the schemes for supply of machinery and equipment on easy financial terms, facilities for loan for setting up business units etc. However, promotional programmes are required to be organized more frequently with wide publicity at grassroots level to really see substantial contribution of women entrepreneurs in India’s growing economy.

In India, despite the concerns of inflation we saw an overall growth of over 9 percent in the last two years. While the agriculture sector experienced ups and downs with growth projections varying between 6% and 2.7% in the last two years, the services sector continued its journey in the growth trajectory of 9.8 and 11.2% during 2005-06 and 2006-07 respectively. The services sector in India has been performing extremely well contributing as high as approximately 69 per cent of the overall average growth in GDP during the last five years. The industrial sector has also displayed a robust growth of 10% during 2006-07 vis-à-vis 9.6% growth during 2005-06.

During the last five years the Industrial sector has been contributing approximately 26 percent of the overall average growth in India’s GDP. The lower contribution of the industrial sector to India’s GDP has to be seen from the situations of 2001-02 when the growth of the sector was less than 3 per cent.

Except slight variations in the agricultural sector, all the other sectors have demonstrated sustained improvements. India’s commitment towards the sustenance of the high growth is reflected from the fact that its Eleventh Five Year Plan has targeted an annual average growth of 9 per cent. However, maintaining and managing the high growth with moderate inflation will be a major challenge in the years to come.

The overall macroeconomic fundamentals are robust, particularly with a strong balance of payments position. With an upsurge in investment, the outlook is very upbeat and the Indian economy has been receiving heavy investments from all quarters spread across many sectors. Growth in investment in general reflects a high degree of business optimism. No doubt, India has been able to replace the developed countries like the United States, United Kingdom and France and moved into the second position in terms of new FDI projects received during 2006. While India received 979 new projects, China received 1,378 projects in 2006. Although the numbers are much higher than that of the United States which received 725 new projects, UK which received 668 new projects and France which received 582 new projects, the numbers for India are much smaller than that of China. However, in terms of the growth percentage, India experienced a growth of around 70% during 2006 in terms of the new projects it received. It speaks volumes about the growing opportunities in India.

The confidence in India’s economy is also reflected in the bullish sentiments of the domestic capital markets. During June 2006, the Bombay Stock Exchange, one of the oldest stock exchanges of Asia, was hovering at around 8900 points. In just one and half years time it more than doubled and crossed the 20,000 mark.

Given these robust growth statistics, increasing importance of the Indian economy and the dynamism demonstrated by the Indian Governments, we expect the economy and the resulting business opportunities in India to grow manifold.

Though India has made lots of progress on the infrastructure front, there are issues which require to be addressed. Many complain about India’s inflexible Labour laws. India is seized of the issues and has started taking steps to address them suitably. Already industrial corridors like the Delhi-Mumbai industrial corridor is under development in India. Huge investments towards infrastructural development are already being made. In fact, India has identified infrastructure investment requirements for the Eleventh Five Year plan at around US$ 320 billion.

The infrastructure issues are also being addressed through the Special Economic Zone (SEZ) scheme. In fact, India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia’s first EPZ set up in Kandla as early as in 1965. With a view to overcoming the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure and with a view to attracting larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000. Thereafter, drastic simplification of procedures has been made for setting up of SEZs or for setting up of units in SEZs. The SEZ Rules provide for:

Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs;

Single window clearance for setting up of an SEZ;

Single window clearance for setting up a unit in a Special Economic Zone;

Single Window clearance on matters relating to Central as well as State Governments;

Simplified compliance procedures and documentation with an emphasis on self certification

The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment are:

Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units

100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.

Exemption from minimum alternate tax under section 115JB of the Income Tax Act.

External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels.

Exemption from Central Sales Tax.

Exemption from Service Tax.

Single window clearance for Central and State level approvals.

Exemption from State sales tax and other levies as extended by the respective State Governments.

Exports from SEZs in India grew by over 52% during 2006-07. And, during the year 2007-08 exports from the SEZs is expected to double. Big multinational companies like the NOKIA, DELL, FOXCONN, ADIDAS etc. have already set up SEZs in India.

Till date around 395 formal approvals have already been granted to SEZs. And, in principle approvals have been granted to 165 more SEZs. These SEZs are spread across many sectors like the IT, electronic hardware, semiconductors, textiles, pharmaceuticals, biotechnology, metallurgical engineering, leather, gems and jewellery, power, food processing, agro etc.

India’s overall exports have also been growing at a high rate of more than 20 per cent since 2002-03. During 2005-06, with a growth of over 23 per cent, India’s exports crossed the US$100 billion mark reaching US$125 billion during 2006-07. This financial year India has set an export target of US$160 billion.

On India’s import front, the growth has been over 24% during the last three years. During the year 2006-07, India’s imports were around USD186 billion. This was around 24% higher than 2005-06 when it was around USD 149 billion. During the year 2004-05, India’s imports were around USD 112 billion.

In contrast to India’s initial strategy to restrict imports due to tremendous foreign exchange crunch, India has now opened up its market due to its favourable foreign exchange reserves and has started encouraging imports. A study conducted in India, last year, has found that growth in international trade is directly linked to employment generation and economic development.

In order to help boost international trade by reducing dwell time, transaction costs and by bringing transparency in working, the Prime Minister’s office in India is directly monitoring the implementation of e-Trade project across international trade facilitating and regulating bodies like the customs, airports, seaports, banks, licensing authorities etc.

European Union happens to be India’s major export destination with over 21% of India’s exports directed to the region. During 2006-07, the European Union received over 26 billion US Dollars worth of exports registering a 15% growth. The major products exported to the European Union are articles of apparel and clothing accessories; natural or cultured pearls, precious or semiprecious stones, precious metals, clad with precious metal and articles thereof, imitation jewellery, coin; mineral fuels, mineral oils and products of their distillation, bituminous substances; mineral waxes; iron and steel; and organic chemicals etc.

A view of the delegates

The European Union also happens to be India’s third largest sourcing region. During 2006-07 India’s imports from the region was little less than US$ 30 billion. India imported around 16 and 17 percent of its requirements during 2005-06 and 2006-07, respectively, from the region. The major imports from the EU are i) boilers, machinery and mechanical appliances; parts thereof, ii) natural or cultured pearls, precious or semiprecious stones, precious metals, clad with precious metal and articles thereof; imitation jewellery; coin, iii) electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts iv) aircraft, spacecraft, and parts thereof v) iron and steel vi) optical, photographic cinematographic measuring, checking precision, medical or surgical instruments and apparatus parts and accessories thereof, vii) organic chemicals etc.

The second major region where India’s exports are directed is the West Asian and North African Region covering countries like Oman, Iran, Iraq, Egypt, Tunisia, Morocco etc. During the year 2006-07, this region received over US $ 23 billion export, which was around 18% of India’s total exports. This region, during 2005-06, received around 16% of India’s exports which was around US Dollars 16 billion. The major exports to the region are i) mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes, ii) natural or cultured pearls, precious or semiprecious stones, precious metals, clad with precious metal and articles thereof; imitation jewlry; coin iii) copper and articles thereof iv) articles of iron or steel v) boilers, machinery and mechanical appliances; parts thereof etc.

West Asian and North African Regions happen to be the regions from where India imported most of its requirements valued at 51 billion US Dollars, during 2006-07. This region met around 28% of India’s import needs. The major imports from the region are i) mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes, ii) natural or cultured pearls, precious or semiprecious stones, precious metals, clad with precious metal and articles thereof; imitation jewellery; coin iii) inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, or of isotopes etc.

North America received India’s exports of around 20 billion US Dollars which happened to be around 16% of India’s total exports during the year 2006-07. This was over 8% vis-à-vis 2005-06 exports to the region when it was around US Dollars 18 billion. India’s major export basket to North America consist of i) natural or cultured pearls, precious or semiprecious stones, precious metals, clad with precious metal and articles thereof; imitation jewellery; coin, ii) articles of apparel and clothing accessories, iii) electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts iv) other made up textile articles; sets; worn clothing and worn textile articles; rags etc.

North America meets around 7% of India’s import requirements. India’s imports from the region were US Dollars 13.5 billion and approximately 10 billion during 2006-07 and 2005-06 respectively. India’s major imports from North America are i) aircraft, spacecraft, and parts thereof, ii) boilers, machinery and mechanical appliances; parts thereof, iii) electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts, iv) fertilizers, v) optical, photographic cinematographic measuring, checking precision, medical or surgical inst. and apparatus parts and accessories thereof etc.

India has identified Latin America as a potential country for its international trade. India’s export to Latin America was, however, merely US$4 billion during the year 2006-07. During 2005-06 exports to the region was around US Dollars 3 billion. India’s major exports to the Latin American countries comprise of i) mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes, ii) vehicles other than railway or tramway rolling stock, and parts and accessories thereof, iii) organic chemicals, iv) pharmaceutical products etc.

India experienced a growth of around 70% during 2006 in terms of the new projects it received. It has replaced countries like the United States, United Kingdom and France to become the second largest receiver of new FDI projects.

In order to help boost international trade by reducing dwell time, transaction costs and by bringing transparency in working, the Prime Minister’s office in India is directly monitoring the implementation of e-Trade project across international trade facilitating and regulating bodies like the customs, airports, seaports, banks, licensing authorities etc.

India’s imports from the region during 2006-07 were around 6 billion US Dollars when around 3% of India’s import requirements were met from this region. India’s major imports from Latin America comprise of i) ores, slag and ash, ii) mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes, iii) animal or vegetable fats and oils and their cleavage products; etc.

India’s export to ASEAN countries is growing rapidly by over 20%. During 2006-07 around 10% of India’s exports were directed to the region. India’s exports to the ASEAN were around US Dollars 13 billion during 2006-07. India’s exports to the region comprise of i) mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes, ii) organic chemicals, iii) residues and waste from the food industries; prepared animal fodder, iv) copper and articles thereof, v) Iron and Steel etc.

Imports from ASEAN were around 18 billion US Dollars during 2006-07. The imports accounted for approximately 10 percent of India’s total imports during the years 2006-07. India’s import basket from the region mostly consist of i) mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes, ii) boilers, machinery and mechanical appliances; parts thereof, iii) electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts iv) animal or vegetable fats and oils and their cleavage products; pre. edible fats; animal or vegetable waxes, v) organic chemicals etc.

Indo-Taiwan bilateral trade has been growing substantially during the last 5 years from 1 billion US Dollars and has crossed the 2 billion mark during 2005-06. Last year the bilateral trade saw a jump of over 48% crossing the 2.5 billion US Dollar mark.

Before I end I would like to remind here the research projections of Goldman Sachs who have predicted that the BRIC (Brazil, Russia, India and China) economies together could be larger than the present G6 economies in US Dollar terms by the year 2050. And, I must say that India is one of the major economies in the BRIC economies. The report also says that while the growth for the BRIC is likely to slow significantly toward the end of the next 30 years, only India will see growth rates significantly above 3% by 2050. The statistics, which I just shared with you today, are representative of the projected facts.

Federation of Indian Export Organisations
New Delhi, INDIA.