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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.

 

As I write this, it gives me immense pleasure to mention that India’s merchandise as well as engineering exports continued to exhibit exemplary growth in July 2021. While the merchandise exports grew by almost 50 percent compared to the same period last year, engineering exports exhibited a growth of 42 percent during the same period. In fact, it was a record-breaking month for the Indian engineering exports as it crossed $9 billion to reach an all-time high of $9.15 billion on a monthly basis by surpassing the previous record high of $8.81 million in June 2021. Growth was witnessed in most engineering sectors with sectors such as ferrous and non-ferrous metals and automobile recording more than 50 percent year-on-year growth.

More than 50 percent export growth was also witnessed in regions including the European Union, Middle East, West Asia, Latin America, and Africa. It is now believed that while the rest of the economic parameters are underperforming in the case of India, exports emerge as a beacon of hope. The Government of India has set a target of achieving $400 billion exports by the end of 2021-22. In this respect the target for the engineering sector is set at $105 billion. I am pleased to mention here that if India’s engineering exports continue with the current trend, it would be successful in achieving the desired exports by the end of 2021-22. This is of course an extremely satisfying news for the Indian engineering exporting community, more so because this high growth was achieved at a time when basic raw material prices such as steel had skyrocketed and freight rates had also increased significantly.

As global trade continues to rebound, exports are expected to perform better in the coming months. It is heartening to mention here that in a recent meeting with the Indian missions abroad, export promotion councils, and other similar stakeholders, Prime Minister Narendra Modi has extended his support to the industry and asked the industry to take opportunities created by the post-Covid scenario by expanding into new markets and new product categories. He further added that both ‘Make in India’ and ‘Atmanirbhar Bharat’ are not only envisaged achieving import substitution but also expanding India’s share in global exports.

Despite the stellar performance engineering exports continue to reel under an uncertain future with no foreseeable end to the pandemic, tremendous economic insecurity and job losses. In such a situation, to continue with the current export trend the exporting community would need strong support from the government. While the government has been proactive and has kept in touch with key stakeholders to determine a plan to achieve export targets, there are a number of issues that need to be addressed on a priority basis to help the exporting community make inroads into new markets and new products.

In the meeting with the Prime Minister, EEPC raised a number of issues that need attention from the government. These issues include the shortage of containers and the ever-increasing freight rates, border issues affecting exports to neighbouring countries and release of pending grant under schemes such as MEIS. The government was also urged to work with the banks to increase the working capital limits especially for MSMEs. RODTEP remains another key cause of concern for the industry. While the government announced the incentive rates and the sectors after more than six months of delay, it was too little too late. The new rates have not taken into account the taxes embedded in key raw materials such as steel in a large number of cases. The industry has urged the government to relook into the rates and provide full rebate on the taxes that still remain in the export production chain.

India’s engineering exports have significant potential which is evident from the fact that the sector recorded one of the fastest turnaround in the post Covid India. However the sector, more than half of which is represented by MSMEs, would require strong government support in many areas if it wants to remain on track. With this note I would end here. I sincerely hope you enjoy this edition of IndianEngineeringExports.

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