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Chairman

Mr. Ravi Sehgal is the 24th Chairman of EEPC India

When Aristotle agreed with Agathon that even God could not change the past, he obviously could not have foreseen that in modern India, both the past as also the future could be uncertain, as Dr YV Reddy, the former RBI Governor, put it pithily some years back. Thus, at the time of writing, as we await the trade data for March 2019, based on the data received from our members, we seemed to have touched a record high for engineering exports in 2018-19. However, I would not like to hazard either the absolute value or the growth in total engineering exports for the full year as data revision of the past year and months in trade data is a routine affair. This happens because the initial data that comes out is a preliminary and provisional estimate based on Let Export Orders (LEO). As anyone dealing with trade will know, LEO gives only an early assessment of possible exports that needs to be refined thereafter by measuring actual shipments. And this, naturally, takes a while.

Be that as it may, EEPC India organised a most successful IESS VIII on behalf of the Department of Commerce in Chennai between 14 and 16 March 2019. Malaysia was the Partner Country, Tamil Nadu the Host State, and Uttar Pradesh and Jharkhand the Partner States. A provisional estimate based on on-spot feedback from 280 respondents showed that they made 10,941 contacts during IESS VIII; out of which 8858 were new contacts; 138 orders were booked amounting to $2.8 million and 728 business enquiries generated $6.53 million. These are initial estimates and we are in the process of getting the feedback from the rest of our participants who were not covered in the feedback carried out on 16 March, the last day of the exhibition. Our letters to the editor section shows a sample of the large number of appreciation that we have received in the successful organisation of IESS VIII while the following pages highlights the main events.

I am also proud to announce that the Indian Commerce Secretary, Dr Anup Wadhawan released the Strategy Paper for Engineering Exports carried out by Deloitte that postulates a roadmap for the engineering exports to reach a targeted $200 billion in 2025 from $76.2 billion in 2017-18. The Strategy Paper is available from our offices and I request our readers to have a look and give their valuable feedback.

A major issue that has engaged us and other segments of the exporting community relates to the decision of the US government to withdraw the entire GSP scheme for India and Turkey. The decision to end preferential trade treatment for India under the Generalised System of Preferences (GSP) post a 60-day notice period, will hit Indian exports hard, particularly in few sectors such as engineering goods, chemical products, and other labour-intensive sectors. India was the largest beneficiary of the programme in 2017 with $5.6 billion worth of exports to the US, according to a Congressional Research Service report. According to the Washington Post, while the US remains India’s top export partner, receiving more than $48 billion in goods from the country in 2017, just over 10 percent of imports from India benefit from the programme.

Our analysis shows that Indian exports of engineering products was approx. $2.7 billion under the GSP programme, which accounts for about 50 percent of the total $5.6 billion worth of exports, from India which was given duty-free status. India is enjoying the concessions on a total of about 3500 products while India made use of the concession for just 1784 products. The duty concession ranges from 2-8 percent in majority of engineering products under the GSP programme, which on withdrawal will hinder the industry’s export capacity. On behalf of EEPC India, we have proposed for an increase of MEIS benefits on select tariff lines. This apart, once we have the WTO ruling on the Chapter 3 benefits, India must move to a WTO compatible rebate system on unrebated taxes so that our exports are not adversely impacted.

I do hope that we will continue to received member feedback.

 

 

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.
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