Direction of India's Export

For underdeveloped countries during the early years of development, imports have to be increased at a very fast rate. It is natural that the balance of trade in such a situation will turn heavily against the developing country. This necessitates the enlargement of exports. External assistance can help to share the burden of growth in the short run, but in the long period the developing country has to bear the burden of development itself. To meet the growing foreign debt in view of inelastic imports, a developing country must increase its exports.
During the second plan period, It was felt by India that export earnings could not be significantly increased unless industrialisatioin gathered momentum. This fact was given expression in second plan in the following words. "India's export earnings are derived from a few commodities. Three of them, namely tea, jute an cotton textiles, account for nearly one-half of the quota. These major exports are meeting increasing competition from abroad. This limits the scopes for any substantial increase in exports in the short run. Vohile every effort has to be made to promote exports of new items and to develop and diversity the markets for country's major exports, it has to be recognized that it is only after industrialisatioin has proceeded some way that increased production at home will be reflected in large export earning"
India had an inward oriented look till the sixties. During the mid sixties, Indian changed its trade policy. The pace of industrialization is rightly recognized as an essential determinant of the overall growth of an economy. With this recognition, the planning process in India started with great emphasis an heavy industries and the consequent import substitution oriented industrialization. Unfortunately exports were not given their due importance. As a result the frequent foreign exchange crises speeded up the introduction of heavy inward oriented policies in all forms. For their encouragement and implementation the Government introduced both price based and non-price based policies. In 1961 some efforts towards outward orientation were made for the first time. In order to maximize export earnings, the over all trade policy was directed to step up exports of both primary products and non traditional items with high export potential. Various export promotion schemes such as export subsidies, import entitlement, licenses, etc .were introduced. Side by side multiple exchange rates were introduced for imports and exports. In 1962, the Mudaliar Committee recommended the following measures for export promotion:
Marginal imports of raw materials and components should be permitted because they would result in a benefit in exports which could for outweigh the costs incurred in importing them.
Income-tax relief be granted on export earnings.
To grant import licences to exporters an the boris of their export earning. The purpose of export-promotion through import entitlement was two fold :
a- To enable the exporter to use a part of the foreign exchange earned by him for importing raw materials and equipment needed for the development of his own industry, and
b- To enable the exported to import such items as he could sell profitably within the country, so that he might be able to subsidize his exports, compensate himself against the losses or reduced profits he made on his exports. The Government of Indian accepted the suggestion and import licences were issued against exports of specified items.
iv- Under removal of disincentives, the following suggestions were made by the committee :
Import duties on raw materials and excise duties entering into the cost of articles distined for exports tended to inflate F.O.B. costs and this inhibited the growth of exports. The government devised schemes of drawback of these duties, with a view to removing disincentives.
A rebate of sales tax on exported goods was recommended so as to improve the competitive strength of Indian exports.

Despite all these measures export did not pick up as expected by the Government and devaluation of the rupee was undertaken in June 1966 as a measure of export promotion. Though the devaluation of the rupee was not immediately successful, exports started picking up during the fourth plan and trade deficit was narrowed down. This continued up to 1980. Gradually the export policy was liberalized to on appreciable extent so as to net more orders for export items. Generally the export policy was announced by the Government on six monthly basis. On April 12, 1985, the export policy was announced, for the first five for a period of three years ending March, 1988 with the objective of importing greater continuity and stability. But upto 1990, almost all reforms for export promotion were neither positive nor negative. Finally, India liberalized its trade policy in 1991 (including Foreign trade policy). Liberalised trade policy aimed to cut down administrative controls and barriers which out as obstacles to the free flow of exports and imports. The purpose of this instrument is to permit imports to the extent of 30% on 100 percent realization of exports proceeds. Export oriented trade policy did not succeed and that the paramount need is not only to boost export but also to restrict imports. The government has recently realized that without import restriction and import substitution, it would not be possible to close the trade gap. It is heartening to note that exports have grown by 20% in dollar terms during 1993-94 and by 18.4% during 1994-95 but this trend has not been sustained during 1996-97 and 1998-99.
Our failure to increase exports and facilitate imports as well as to keep the trade balance gap within reasonable limits during 1996-97 and 1998-99 forced Mr. Ramkrishna Hegde, commerce minister to announce on 31st March 1999 the export-import policy (EXIM Policy) for 1999-2000. Further EXIM policy declared for one year only, to promote export upto and restrict import upto minimum level. But present policy(which was declared on March 31, 2002 for the five year period (2002-07) has main thrust to push India's exports aggressively by undertaking several measures aimed at augmenting exports of form goods, the small scale sector, textiles gems and jewelery, electronic hardware etc. Besides these the policy aims to reduce transaction cost to trade through a number of measures to bring about procedural simplifications. In addition, the EXIM policy removes quantitative restrictions (QRs) on exports, except a few sensitive items. India will be able to capture percent of global share of trade by 2007, up from the present level of 0.67 percent. Translated in value, the projected growth will mean doubling the present exports of US $ 80 billion by 2007. This would require a compound annual growth rate (CAGR) of 11.9 percent in dollar terms. A big initiative to permit offshore banking units (OBUs) will help to develop foreign pranches of Indian banks. The move is intended to provide international finance at international rates. This will lower the cost of credit to our exporters and thus make them more competitive. This initiative specially directed at special economic zones is another healthy feature of the EXIM policy. So we can say that India's export policy now bears on outward oriented look.