Financial Daily from THE HINDU group of publications
Monday, Apr 01, 2002
Industry & Economy
`We want a critical mass of exports'
Mr N. L. Lakhanpal
NEW DELHI, March 31
THE five-year Export-Import (Exim) policy seeks to cash in on the advantages that had accrued to the country over the last 10 years of economic reform process, the Director-General of Foreign Trade (DGFT), Mr N.L. Lakhanpal, says.
In an interview to Business Line here immediately after the policy announcement, the DGFT said that "We have resisted the temptation of radical policy changes because the industry basically wants stability in the policy regime''. Hence the existing schemes operating for the benefit of exporters have been honed and "improved upon''.
Mr Lakhanpal mentioned significant changes including removal of quantitative restrictions on all agricultural products, especially all cultivated (other than wild) varieties of seed, except jute and onion and the abolition of Duty Exemption Entitlement Certificate (DEEC) book as exporters had to log and slog in these books draining their energy and enterprise and raising their transaction cost.
On the retention of import curbs on some items, the DGFT said these comprised goods under Article 20 and 21 of the erstwhile GATT, defence items, mines and minerals, which continued to be under State trading regime.
Asked whether the offshore banking units (OBUs) to be set up by the developer or unit of the SEZ, free from pre-emption of CRR and SLR to provide credit at international rates, would be viewed as discriminatory by domestic exporting units, Mr Lakhanpal said that this need not be.
He also did not share the concern that OBUs would be used as an "instrument for money laundering'', stating that RBI guidelines would ensure that this did not happen as the whole benefits would be meant only for "genuine finance transactions'' for developers and units of SEZs.
He hastened to add that for domestic exporters, some proposals like providing term-loans to exporters were on the anvil and the forthcoming RBI policy might help address them. He said that export credit was now 2.5 per cent lower than the prime-lending rate. Amplifying how the five-year Exim policy would help push India as a major exporter, Mr Lakhanpal said that over the last 10 years, "We see a critical mass of exports in the form of certain areas of strength have emerged in the export sector. These include surpluses like foodgrains, sugar, yarn, garments, steel, cement, aluminium and petroleum products and pharmaceuticals.
The term "critical'' was taken from atomic energy, he added.
He said, "When a mass is formed it assumes certain optimum size and then it becomes critical. Then it triggers an explosion and it becomes self-sustaining, requiring no help or assistance from outside. Similarly our strength in certain areas has not yet reached critical mass stage and we want through this policy that stage to be reached so that Exim policy becomes redundant and export grows on its own self-sustaining momentum''.
Mr Lakhanpal said another crucial initiative was the industrial cluster approach which had come on their own and "despite the Government and in decades when the economy was highly regulated''.
He said that a UNIDO study had identified 354 such clusters and the policy had zeroed in on 34 clusters to start with, by extending them the requisite help including duty-free capital goods and other trade facilitation measures.
Mr Lakhanpal said that "mutatis mutandis all the schemes that are announced would apply to the services sector'' even as the Commerce Minister, Mr Murasoli Maran, said a separate package for services sector was on the anvil.
He said that the policy would bear fruit in the medium to long-term just as the earlier initiatives like SEAs, State promotion of exports and agri-export zones had begun yielding results in a couple of years as they got under way.
Even as the world economy was suffering from shrinkage of demand, "we want to make our industry positioned so that it takes advantage of even shrinking demand'' and emerges triumphant when the world economy begins revival.
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