It would be rather instructive to remind that many developed nations have already chosen the FDI route to counter the threat of cheap imports. For example Japan is investing mere there to sell at competitive price by taking FDI route-relocating their manufacturing base to China to capitalize on the cheap lab and cheek the latter’s competitive edge in the Japanese market.
U.S. and Europe may also take Japan’s FDI route by investing more in China which has emerged as an attractive destination for international finance. Thanks to the massive FDI, China’s production base has become more technologically advanced. The role of foreign firms is more of an engine for China’s hi-tech exports.
In its decade of liberalization, India has failed to provide a competitive manufacturing base to Multi National companies-neither for their export nor to meet the needs of middle class. Focus had been laid on the software sector. There was no effort to use India as their production base for exporting to their own countries.
The decade old economic reform, has not improved India’s competitive position to any significant extent, huge depth of rupee notwithstanding. The Commerce Ministry’s target of raising India’s share in global export to 1% by 2003 from the current level of 0.7% will at best remain a pipe dream unless and until the bottlenecks in foreign trade arena are cleared.
In an age and environment, where global recession has hit many, the challenges confronting India are also many. The problems are not merely confined to low productivity, poor quality, weak and inadequate infrastructure, meager FDI, technology gaps and poor marketing tie up and so on, but also related to narrow export base as also the diversification of destination of exports. Though India can hardly emerge as an example of export led economy given its inward economic orientation for ages, it’s time that foreign trade was not simply treated as a residual category of correcting imbalances between domestic demand and simply; core export competence must be identified, nurtured and developed with all the policy and financial support needed for it.
There is growing evidence to suggest that China, the European union, South Korea, followed by Japan, the U.S, Russia and Taiwan have been trying for a larger slice of the Indian market, often undercutting prices for chemicals, petrochemicals, pharmaceuticals steel and consumer goods.
Over the years, India’s export performance has been dependent more on the growth of the world economy and trade rather than the country’s inherent competitive strength in World market. Another stimulating factor that often contributed some semblance of respect to Indian export basket is the secular depreciation of rupee vis-à-vis our major trading partners particularly in U.S. this has also inevitably led to lost escalation of crucial imports that go into our production process, again undercutting export competiveness. Depreciation of rupee cannot be the perpetual instrument to boost exports and restrain imports.
While most direct export subsidies will have to go under WTO regime there is no problem in extending institutional and infrastructural support to exporters. In this context, it may be pointed out no country has left the export competitiveness to market forces alone. Recent strategic trade theories also clearly advocate the compulsions of using specific policy based support mechanism for encouraging export activity from the stage of production upto marketing abroad.
While formulating India’s trade strategies in the forthcoming ministerial meeting of WTO, government must persist with efforts to work towards introducing greater equity and balance in the Agreement on Agriculture and dismantling of the trade distracting measures, while simultaneously ensuing the fulfillment of the twin objectives of domestic food and livelihood security for majority of population living in developing countries. The unwinding of many concessions in Palm oil trade to Malayasia and recent freeing in wheat trade to Iraq are pointers that foreign trade challenges are indeed great and WTO cannot be blamed for all the ills and evils plaguing our performance in foreign trade.
India as a dominant leader and emerging power in South Asia must insist in the forthcoming WTO meet that industrial countries must honor their commitment to provide necessary financial assistance, including the technical expertise and transfer of the environment friendly technology on favorable term to developing countries. Attention must be also focused on greater North-South co-operation to take advantage of existing and potential complementarities in these economies.
India should take sufficient care to see that the proposed new round of trade talks not only recovers the lost grounds of LDCs, but also address the needs and priorities of developing economies, demonstrating thus that the trading system can also respond and promote sustainable development.
U.S. and Europe may also take Japan’s FDI route by investing more in China which has emerged as an attractive destination for international finance. Thanks to the massive FDI, China’s production base has become more technologically advanced. The role of foreign firms is more of an engine for China’s hi-tech exports.
In its decade of liberalization, India has failed to provide a competitive manufacturing base to Multi National companies-neither for their export nor to meet the needs of middle class. Focus had been laid on the software sector. There was no effort to use India as their production base for exporting to their own countries.
The decade old economic reform, has not improved India’s competitive position to any significant extent, huge depth of rupee notwithstanding. The Commerce Ministry’s target of raising India’s share in global export to 1% by 2003 from the current level of 0.7% will at best remain a pipe dream unless and until the bottlenecks in foreign trade arena are cleared.
In an age and environment, where global recession has hit many, the challenges confronting India are also many. The problems are not merely confined to low productivity, poor quality, weak and inadequate infrastructure, meager FDI, technology gaps and poor marketing tie up and so on, but also related to narrow export base as also the diversification of destination of exports. Though India can hardly emerge as an example of export led economy given its inward economic orientation for ages, it’s time that foreign trade was not simply treated as a residual category of correcting imbalances between domestic demand and simply; core export competence must be identified, nurtured and developed with all the policy and financial support needed for it.
There is growing evidence to suggest that China, the European union, South Korea, followed by Japan, the U.S, Russia and Taiwan have been trying for a larger slice of the Indian market, often undercutting prices for chemicals, petrochemicals, pharmaceuticals steel and consumer goods.
Over the years, India’s export performance has been dependent more on the growth of the world economy and trade rather than the country’s inherent competitive strength in World market. Another stimulating factor that often contributed some semblance of respect to Indian export basket is the secular depreciation of rupee vis-à-vis our major trading partners particularly in U.S. this has also inevitably led to lost escalation of crucial imports that go into our production process, again undercutting export competiveness. Depreciation of rupee cannot be the perpetual instrument to boost exports and restrain imports.
While most direct export subsidies will have to go under WTO regime there is no problem in extending institutional and infrastructural support to exporters. In this context, it may be pointed out no country has left the export competitiveness to market forces alone. Recent strategic trade theories also clearly advocate the compulsions of using specific policy based support mechanism for encouraging export activity from the stage of production upto marketing abroad.
While formulating India’s trade strategies in the forthcoming ministerial meeting of WTO, government must persist with efforts to work towards introducing greater equity and balance in the Agreement on Agriculture and dismantling of the trade distracting measures, while simultaneously ensuing the fulfillment of the twin objectives of domestic food and livelihood security for majority of population living in developing countries. The unwinding of many concessions in Palm oil trade to Malayasia and recent freeing in wheat trade to Iraq are pointers that foreign trade challenges are indeed great and WTO cannot be blamed for all the ills and evils plaguing our performance in foreign trade.
India as a dominant leader and emerging power in South Asia must insist in the forthcoming WTO meet that industrial countries must honor their commitment to provide necessary financial assistance, including the technical expertise and transfer of the environment friendly technology on favorable term to developing countries. Attention must be also focused on greater North-South co-operation to take advantage of existing and potential complementarities in these economies.
India should take sufficient care to see that the proposed new round of trade talks not only recovers the lost grounds of LDCs, but also address the needs and priorities of developing economies, demonstrating thus that the trading system can also respond and promote sustainable development.
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