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Chairman

Mr. Mahesh Desai

This meeting delivered some results and the RBI caution listing date was postponed to 31 March 2019; the ‘pre-import’ condition was dropped vide DGFT Notification No.53 dated 10 January 2019 and efforts are now being made to educate the exporters with respect to using the UCO Bank mode for exports to Iran. I hope to continue this dialogue further during my meetings in the month of February 2019 when, among others, the Board of Trade Meeting is also scheduled.

 

As I write, the Interim Budget 2019-20 has been presented by the Union Finance Minister, MrPiyush Goyal. The fiscal deficit is expected to be around 3.4 percent of the GDP while the first step towards a Universal Basic Income (UBI) Scheme for smaller farmers has been initiated. Similarly, income tax exemption has been provided for incomes up to Rs5 lakh per annum. I understand that all the tax-related proposals are likely to be ratified when a full budget is presented by the newly-elected government in July 2019.

 

There is no doubt now that the pace of engineering exports growth has slowed down considerably and the third quarter has shown negative growth. While detailed analysis of the trend is provided in the following pages, three critical segments have held back the potential that is there: primary iron and steel exports; copper and copper products exports; and zinc and zinc products exports. Of the three, the first two are the result of market imperfections and an exogenous factor respectively. EEPC India has been continuously hammering the point that while most segments of engineering face the vagaries of the market, domestic steel prices are not ‘market determined,’ resulting in higher prices making downstream value added uncompetitive in global markets. The other impact, now that the international steel prices have fallen, is that the Indian steel majors are catering only to the domestic sector, cutting back on their exports.

 

With respect to copper products exports, the closure of the Tuticorin plant has led to 40 percent drop in production of copper products while imports of refined products have increased. From a net exporter of refined copper, we have now become a net importer. With respect to zinc, there was a fall in domestic production, which hopefully is a short-term phenomenon. Clearly, we need to work out alternatives and some of the suggestions that we have been making to the government, if implemented, can help to some extent in the promotion of the rest of the engineering products. These are products where domestic production and external conditions do not face such negative externalities.

 

On our part, we will continue to promote engineering goods and the eighth edition of the International Engineering Sourcing Show, IESS VIII, scheduled over 14-16 March 2019, will be one such effort to give a major thrust to the promotion of sourcing of engineering products from India, showcasing technological advancement and future technologies, especially for our MSME units.

 

Malaysia is the Partner Country in IESS VIII being held in Chennai. Malaysia, with Asia’s eighth best and the world’s 25th best overall infrastructure, Southeast Asia’s fourth-largest and world’s 38th-largest economy, has one of the best economic records in Asia since its independence with its GDP growing at an average of 6.5 percent per annum for almost 50 years.

 

As both Malaysia and India are moving towards a technology-driven automotive industry equipped with shared mobility, connectivity, electrification, and autonomous driving, this is the most appropriate time for Malaysia Automotive, Robotics and IoT Institute (MARii) to play a lead role to participate in a global forum like IESS.

 

Malaysia’s participation is expected to be a major game changer at IESS 2019, anticipating greater collaborations between MARii and Indian companies and the creation of a technology ecosystem between the two countries.

 

I urge our readers to join us in IESS VIII and benefit from the bouquet of the programmes we are going to present at this mega show.

 

India’s exporting community has created history by achieving exports worth $418 billion, registering a growth of 43 percent over the last fiscal and 33.33 percent over pre-pandemic levels. Engineering, the largest foreign exchange earner in the country with its 26.72 percent share in overall exports, has been a leading contributor to merchandise exports in this fiscal. Engineering exports in 2021-22 reached $111.6 billion, surpassing the target of $107.8 set by the government. The year-on-year growth rate registered by engineering exports at the end of fiscal 2021-22 stood at 45.5 percent. This tremendous feat has been possible due to the concerted efforts of our exporting community.

Most importantly, this growth was achieved at a time when the entire global economy was mired in the Covid pandemic which disrupted global supply chains, created logistics issues, and increased the prices of key raw materials. Also, it needs to be remembered that the global trade scenario was not conducive even in the days prior to Covid due to country conflicts such as the US-China trade war and rising protectionism in Europe. These make the export achievements more significant.

EEPC India, as the leading trade promotion organisation representing the Indian engineering industry, is proud to be associated with the exporting community. To felicitate the tremendous achievements of our exporters, the Council decided to confer the National Exports Awards, an annual event that had been stalled because of the lockdown. While the awards are meant for the exporting achievements of 2018-19, this is an important way to recognise the exemplary contribution of the exporting community and encourage them to keep up the performance in the coming years. This encouragement is very much needed because global trade is facing new challenges going forward – now even when Covid is subsiding worldwide, the fear of emergence of new and more infective strains looms large and still poses a threat to global trade recovery. Added to this is the recent Russia-Ukraine crisis which is also threatening global trade recovery. The stellar performance of India’s engineering export community in the face of such adversities clearly shows their commitment and strong attitude.

While the export achievements have brought positivity among the economy, it needs to be mentioned here that the high exports in India have been a result of rising global demand in markets including China and the USA. Global experts believe that the significant acceleration in demand is a direct result of the supply chain disruptions caused by the Covid pandemic and these trends may normalise in the next year. If this happens, it will also have a normalising impact on India’s export performance. At the same time India will have to address the rising trade deficit which has resulted despite high export growth.

We are thankful to the government of India for its initiatives such as Make in India, which envisages increasing manufacturing sector growth rate and its contribution to GDP; and the production linked incentive scheme or PLI, which aims to make manufacturing in India globally competitive. Also, the extension of the Foreign Trade Policy is also expected to benefit the exporters. At the same time India’s Atmanirbhar Bharat Abhiyan is aimed at making the country and its citizens independent and self-reliant in all senses. India has also signed two crucial FTAs – one with UAE and the other with Australia – which are aimed at providing crucial market access to India’s exporting community. More such FTAs are in the line with important partners such as the EU, UK, and Canada. However, more efforts are required by both the government and private players to retain and eventually improve India’s position in the global market. This would need a combination of technological advances, economies of scale and increase in value chain participation.

This edition of Indian Engineering Exports is dedicated to the 51st National Awards Ceremony to be held on 13 April 2022 in New Delhi. It aims to celebrate the success of 111 award winners. Finally as we embark on the journey to achieve $1 trillion in merchandise exports by 2030, I sincerely hope this Award will act as an encouragement for our fellow exporters in making India a key member of the global trade discourse.

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