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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.

 

In February 2021, UNCTAD published its Global Trade Update which indicated a gradual recovery in global trade in the last quarter of 2020-21, led by trade in goods. The recovery in the fourth quarter is reflected in the fact that overall global trade decline was reduced by almost 9 percent. While this is a positive trend, the recovery has not been even throughout the world with the East Asian economies – China, Japan, Hong Kong, and Korea – leading from the front. While developing countries including East Asia experienced an 8 percent increase in export in Q4 of 2020-21, developing countries excluding East Asia experienced no change in exports during this period.

Now if we look at India’s position during the last quarter, the country has been able to reduce its losses. In the first half of 2020-21, exports fell by 25 percent, but in the third and fourth quarter, the decline came down to 6 and 5 percent respectively. On the contrary, during the third and fourth quarters of 2020-21, China’s exports increased by 8 and 17 percent respectively and both Japan and Korea’s exports increased by 3 and 4 percent respectively in the last quarter. While it is true that unlike China, Japan, and Korea, India has not been able to recover its exports fully, it needs to be noted that during the same time, India’s imports declined more than exports, which indicated a better trade balance. During the earlier days of the pandemic, when Chinese supply chains faced disruptions, it was assumed that global supply chains will diversify and China would lose some market shares to economies such as India, Vietnam, and Mexico. However, such has not been the case and it is of utmost importance for the government and the industry to understand the parameters required for India to achieve that feat in the future.

As a representative of the engineering industry we laud the government for bringing important schemes and policies for industry in the recent budget. The lowering of basic customs duty on key inputs like copper and steel and capacity boosting schemes such as the PLI scheme are expected to be of significant help to the exporting community. Simultaneously the recent policies including the supply of steel at export parity price are also necessary incentives for the engineering industry. These incentives coupled with the gradual recovery in the global arena may lead to a positive trend in Indian exports in the coming days. However, there is still lack of clarity regarding export promotion schemes. The RoDTEP scheme, which is supposed to replace the MEIS, is yet to be announced and there has been ambiguity regarding the industry rates that the scheme may offer.

We do appreciate the government’s move to extend the FTP Handbook of Procedures till September 2021. We also request the government to bring clarity regarding the status of unreleased benefits under the scheme. The extension of exemption from integrated tax and compensation cess on goods imported against AA/EPCG authorisations up to 31 March 2022 would also go a long way in helping the distressed exporters.

The UNCTAD Global Trade Update specifically mentions that South-South trade including China increased by 7 percent in the fourth quarter of 2020-21 but excluding China, it actually declined by 9 percent during the same time. This is important for India as it is a key member of South-South trade. Trade agreements with other such members from African and Latin American countries are necessary to increased India’s importance in South-South trade. At the same time, if India really wants to gain some global market share they also need to conclude trade negotiations with developed countries, including the EU. As the global economy slowly comes out of the clutches of the pandemic, we hope that with proper government guidance and assistance India would be able to improve its position in global market. On this positive note I hereby wish that all of you enjoy this digital edition of IndianEngineeringExports.

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