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Anand Sharma Releases Strategy Paper on Engineering Exports Print E-mail
Written by Ganesh   
Wednesday, 28 April 2010
New Delhi: Shri Anand Sharma, Union Minister of Commerce and Industry, released the Strategy Paper on the Growth of Engineering Exports commissioned by EEPC India and carried out by Ernst & Young, here today. The Strategy Paper has set a target of USD 110 billion by 2014 for total engineering exports.

"This, indeed, is a robust target and if engineering is able to maintain its share of nearly 22% in total exports than by 2014, India’s total exports should be in the range of USD 500 billion," the minister said. He said that engineering exports from India have grown considerably in the last few years with a growth rate that has been much higher than the world average.

Speaking on the occasion, the Minister stated that the DGFT is carrying a sectoral review of the exporting scenario, wherein all aspects of the policy related problems and major hurdles are being looked into sector by sector. The amendments to the new Foreign Trade Policy that I announced last August will reflect the concerns of the exporting community and initiate steps within our means to help exporters reach greater heights of glory, the Minister said.

He said that there is a major transformation taking place in the world markets. "The global economic recession is likely to leave its imprint for some more time, particularly in the developed world and hence it is important that our exporters concentrate on two critical ingredients for future growth: to remain competitive as also maintain quality and secondly to diversify into new markets. The strategy paper, I hope, has enough inputs that members of EEPC India can productively deploy and benefit from," Shri Sharma added.

Shri Anupam Shah, Vice Chairman, EEPC India, said that the Study has carried out a detailed product analysis and added that the entire set of 1655 engineering products have been mapped by their past export share and growth performance from a global and Indian perspective. Based on their performance in India’s exports vis-à-vis in the world’s exports, engineering products have been classified into the Core, Leader, High-Potential and Striver categories. The Core, Leader and High-Potential product categories together constitute all the products that are important from an Indian and world perspective and have hence been collectively referred to as the thrust products.

Highlights of the strategy paper

• India should aspire to triple its engineering exports over 2010–2014 to reach USD110 billion. In view of India’s current low share of world engineering exports, and considerable scope for improvement in its competitiveness, it can achieve a CAGR of 22–25% over 2010–2014.

• To realize this aggressive but achievable aspiration, concerted effort needs to be put in by the government, the council and exporters. The key imperatives for India include (1) enhancing the alignment and effectiveness of trade drivers, (2) boosting the competitiveness of the Indian engineering industry and facilitating upward movement along the value chain, (3) and strengthening enablers for growth by clearing infrastructural and procedural bottlenecks.

• India continues to be one of the fastest growing exporters of engineering goods, growing at a CAGR of 30.1%, trailing only China among major engineering exporters, but well above the global engineering average export growth of 13%. Significantly, the country’s engineering export growth rate has been higher than its overall exports.

• In 2008, India’s goods export touched USD182 billion (CAGR of 23% over 2004–2008), with its engineering exports contributing 23.69% of its total exports of goods, reaching USD43.13 billion (a CAGR of 30% over 2004-2008). However, the country’s share of engineering exports in its total exports – like the developing countries of Asia and Latin America – continue to be much lower when compared to developed countries.

• India has benefited less than other India-like countries from the proliferation of bilateral and regional trade agreements – comparatively higher tariff rates apply for Indian exports. Further, some of its export competitors have availed reduction or complete removal of tariffs for their exports, which has resulted in a decline in the competitiveness of exports from India vis-à-vis its competitors.

• If India wants to improve its export prospects, it needs to ensure preferential market access for its engineering exports by (1) negotiating trade agreements with some of its bigger exports markets and by (2) broadening the scope of the agreements by negotiating for complete FTAs/ CECAs.

• For India to capture opportunities in increasingly integrated global markets, it needs to align its trade enablers and drivers – trade agreements, promotions and marketing – with the global trade scenario and the fast evolving engineering trade landscape worldwide. Initiatives under this imperative include:

• Accelerate bilateral/regional trade negotiations, broaden their scope and leverage WTO flexibilities

• Align export promotion activities to the nature of markets and their relative importance to India

• Improve effectiveness of promotional activities

• Focused targeting of thrust markets for all major product categories

• Enhancing trade facilitation

• The government needs to facilitate economies of scale in the engineering sector by initiating policy-level measures to improve the saleability of engineering SEZs in the developer and user community and also attract higher levels of FDI in the engineering sector. These measures will need additional stimulus in the form of labor reforms to amend the existing archaic laws to meet the needs of current market realities, and also enhance the quality and quantity of manpower.

• The government should extend the Technology Upgradation Fund Scheme (TUFS) to the High-Potential and Striver product categories to combat increasing technological obsolescence in them. The TUFS should be first geared towards High-Potential products and later towards Strivers to ensure an immediate boost to engineering exports while enabling higher employment generation at the same time.

• The government should set up a skill development fund to impart training in areas where technology upgradation is being initiated to ensure the enhancement the productivity and quality levels. EEPC should take the lead in enhancing the skill levels in the engineering sector by identifying clusters where it is a necessity as well as developing a training plan so as to quickly implement it across the length and breadth of the country.

• While FDI will definitely help improve the technological capabilities in India, certain other important initiatives such as centralized mapping of the R&D activity happening in the engineering sector, incentivizing commercialization of indigenously developed technology, marketing of the developed technologies to ensure sustainability of R&D, enhancing industry-academia-central R&D institution interactions need to be taken up on a priority basis by the government.

• Additionally, an enhancement of the tax incentives would further boost R&D in the engineering sector.

• The government needs to simplify several customs procedures by reducing the number of requisite procedures or by initiating the process of self-certification for status-holders. In addition, it should undertake other relevant technological initiatives to reduce the overall transaction time and related costs.

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