Exports rise significantly in India

Himalayan News Service

New Delhi, January 2:

India’s efforts to reduce bureaucratic hurdles has brought significant benefit to the textiles, chemicals and engineering goods sectors by helping lower transaction costs, a new industry study has revealed. “Simplification of procedures and complexities that the government introduced in the last six years have significantly reduced transaction cost of Indian exports by five per cent from 1998-99 to 2003-04 for products like textile/garments, engineering

goods, pharmaceuticals, computer software and chemicals,” states the study.

The study, released today Mahendra K Sanghi, president of ASSOCHAM, reveals the chemicals sector has benefited the most with transaction costs coming down from 14 per cent in 1998-99 to five per cent in 2003-04. Textiles was another major beneficiary with transaction costs coming down from 15 per cent of the export revenue to 10 per cent.

Textiles and garments are one of the major items in India’s export basket, accounting for as much as 23.25 per cent of aggregate exports by the end of 2003-04.

“In the case of computer software, the transaction costs have come down heavily from 10 per cent to less than two per cent,” Sanghi said. Agro-industry is another sector where transaction costs have slipped from 7.5 per cent in 1998-99 to less than two per cent in 2003-04. “Rationalisation and simplification of complexities and procedures were the main reasons behind the fall in the transaction cost of Indian exports,” said Sanghi, “The phenomenon still highlights the need for further streamlining of old and prototype procedures to make Indian exports highly competitive.”

However, the ASSOCHAM chief felt the simplification in procedures have not helped curtail delays in getting refunds in textiles, garments and pharmaceutical sectors as they constitute the major cost for exports. The engineering goods, chemicals, plastic industry, biotech and software sectors have reported delays in obtaining refunds, and the study has found the high cost of working capital loans, delays in outward remittances and in obtaining various licences and refunds have impacted the performance of firms.

“It may be mentioned here that while most firms across the sectors selected have reported reduction in the magnitude of transaction costs as a percentage of their present export earnings, a majority of the firms have not reported the projected rise in export earnings in the absence of these transaction costs,” the industry lobby said. “Besides favourable external developments, a conducive policy environment supported by adequate infrastructure is essential to facilitate and enhance the country’s exports,” the study states.

India has set a target of doubling its exports to 1.5 per cent of global trade or $175 billion

in five years, up from $62 billion or 0.8 per cent of the global share in 2003-04.

Towards this end, various modifications and simplifications have been effected in export-import policies in recent years to streamline the environment for exports. ASSOCHAM has called for the continuous monitoring of the exporting environment to reduce impediments to external trade and to achieve the targets.