India's exports trade: Huge tasks ahead

By Dr B K Mukhopadhyay

Merchandise exports now account for about one-fifth of the country’s around $2-trillion economy. India’s merchandise exports rose after a gap of 18 months, rising 1.27 percent year-on-year to USD 22.57 billion even as the gulf between exports and imports (trade deficit) widened to USD 8.11 billion, as exports came in 30.68 billion. In May, 2016 the deficit stood at USD 6.27 billion but the widening trend reflects little worry as long as the figure stayed below USD 2 billion. We have got a trade deficit, which is in single digits for this entire quarter even when we extrapolate over to the current account balance - now the thinking is that it is going to be surplus. For the full quarter, the deficit stood at USD 19.23 billion, down from USD 32.22 billion during the same quarter last year. The country’s net services export stood at USD 5.53 billion for May and USD 11.24 for the first two months of the fincial year. So the services surplus has gone up in May.

Time to rejoicing a bit! Good going - exports had now filly come out of contraction.  They are hopefully going to move upward in the next couple of month. But there is no room for complacency in as much as exports had remained flat this year, and low compared to last year’s range of USD 25-26 billion

A Lot Depends on Policy Followed

Though with WTO slashing its global trade growth forecast it may be difficult for India to boost exports significantly immediately, yet India’s very recently announced Foreign Trade Policy [FTP 2014-19] to give a concentrated push to both merchandise and services exports to help double total exports to $900 billion by 2019-20, raises hopes. Government announced tax incentives under Merchandize Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS), which is in the form of fully transferable duty credit scrip’s with reward rate ranging between 2 percent and 5 percent. Exporters use these scrip’s to offset service tax, excise duty or customs duty.  Besides, Lower prices for oil and other primary commodities could provide some upside if the positive impact on net imports of these products outweighs negative impact on net exports.

When exports could move north steadily definitely a god performance would be registered – rise in intertiol competitive strength gets established. In such an assessment vital indicators that are normally used include: the quality of six different components including efficiency of the clearance process, quality of trade and transport related infrastructure, ease of arranging competitively priced shipments, competence and quality of logistics services, ability to track and trace consignments and timeliness of delivery.

So, ultimately the performance of our blue-chip companies would be watched in as much as to what extent they could explore the salient features of the policy announced. On this score the benefits of following an appropriate strategy should not lose sight of - increased market size; greater returns on major capital investments or new products or processes; greater economies of scale, scope or learning and a competitive advantage through location.

Mention on this score may be made of three strategies - multi-domestic strategy [when strategic and operating decisions are decentralized to the strategic business unit in each country to tailor products to the local market]; global strategy [that assumes more standardization of products across country markets] and transtiol strategy [that seeks to achieve both global efficiency and local responsiveness].

Exports Marketing : A Complex Process

Keegan nicely stated that ‘the intertiol market goes beyond the export marketer and becomes more involved in the marketing environment in the countries in which it is doing business.’  True - intertiol Marketing is the performance of business activities that direct the flow of a company’s goods and services to consumers or users in more than one tion for a profit and intertiol marketing is simply the application of marketing principles to more than one country.

Clearly, intertiol business includes all business transactions involving two or more countries, where these business relationships may be between private individuals, companies, groups of companies, non-profit organizations or government agencies. Though in some ways, intertiol business is an extension of domestic business, but it is different mainly for two reasons (i) intertiol business objectives are likely to be different from domestic business objectives; (ii) the environmental conditions in which intertiol business is conducted are usually of greater complexity than is the case with domestic business. These complexities arise from differences in culture, currencies, legal systems and the endowment of tiol resources, among others.

Of course, maging an intertiol business is more complex than maging a domestic business. Today’s developments in communication and transportation technology have been facilitating trade worldwide, leading to the cliché that ‘all business is now intertiol business’ - people working in maritime industries are inevitably involved in intertiol business.

Especially, in these days of globalization, autarky is out of date. Every country has to enter into this process of integration and interdependence. Globalization of markets implies that the world is one large marketplace and globalization of production implies that firms locate their production facilities for maximum efficiency and lowest cost, so that products are no longer seen as Indian, Australian products or Japanese or German products, but ‘global’ products in ture. On this score even the staunch critics have to remember that things are changing at jet speed where one technology is fast replacing the earlier one.

Who thought that in economies like India the airlines will be competing with the railways? The forces that promote globalization are not to lose sight of: (a) the lowering of tariff and non-tariff barriers (free trade); (b) developments in technology [viz. jet aircraft, containerization, the microprocessor, the Internet and robotics]. Who could question today that developments in communication and travel has not made it possible for intertiol business to coordite its activities and to view the world as a single marketplace? Changes in the economic and political domains are conducive to the rise and fall of tion-states. Though the US is the world’s domint tion, yet it is likely to be challenged more and more by fast emerging economies like India, Chi, among others, in the next few decades. So one has to impartially look into the costs and benefits of globalization and noted that although there may be a net benefit, the costs - especially job losses - will be borne by particular localities.

That is why all of the relevant factors are to be properly scanned, especially by the minnows, before embarking upon a big venture – spreading wings abroad!!

Let us watch carefully how the situation would go on and corrective measures become result oriented. Time is running out……

(The writer is a noted Magement Economist, an Intertiol Commentator on Business and Economic Trends and Principal, Eminent College of Magement and Technology, can be reached at m.bibhas@gmail.com)