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The Engineering exporting community deserves a huge pat on the back for their sterling performance in fiscal 2017-18. Like the nervous 90s, to draw an analogy with Cricket, our engineering exports touched $70 billion in 2014-15, but thereafter kept sliding back. It took four full years of managing global headwinds, a not-so-conducive exchange rate, and vicissitudes of policymaking for our members to break that barrier comprehensively in 2017-18, to record an all-time high of $76 plus billion engineering exports in goods.

Permit me a little digression to explain why this is such a significant milestone. If one looks at India’s industrial history from the British era, our industrial progress was largely a creation of what was known as the Managing Agency system. Interestingly, the first notable Managing Agency was founded in 1834 by Dwarkanath Tagore, grandfather of Nobel Laureate Rabindranath, and called Carr, Tagore & Company. It had interests in collieries, shipping, railways, and many other segments of manufacturing. In fact, over the next century, Indian entrepreneurs slowly but steadily outstripped their European counterparts (mostly Scottish Managing Agents in Eastern India), in segments like iron and steel, jute, cotton textiles, chemicals, tea, shipping, among others. The formation of Tata Steel and its fight to survive, expand, and remain competitive, is not only part of our industrial folklore but one that holds lessons for our own policymakers to this day. Indeed, at a time when steel prices are moving only in one direction – north bound – the way the Indian Tariff Board, in the 1930s, calibrated the protection given to Tata Steel so that it could withstand imports but would not have the leeway to engage in rent-seeking activities, is a lesson still relevant.

Thus, what we see today as India’s industrial base as also the engineering industry is largely a contribution of the dynamic Indian entrepreneurs and their Managing Agencies – Tatas, Birlas, Sarupchand Hukumchand, Soorajmull Nagarmull, Ramdutt Ramkissendas, Kasturbhai Lalbhai, Walchand Hirachand Doshi, Scindias, Sarabhais, among others. The Managing Agency was a necessity for Indian industry during that era, in view of the capital inadequacy in the country (variants of Indian Managing Agencies can be found in the Zaibatsus and Keiretsus of Japan and Chaebols of South Korea). In the process of trying to establish native industries and compete with their European counterparts, export orientation was largely overlooked. Post-independence, a dirigiste paradigm ignored exports and focused more on building the ‘commanding heights of the economy.’ Soon the foreign exchange constraint ensured a partial refocus and emphasis on exports, with the first Export Promotion Council, EEPC India being formed in 1955, under the Commerce Ministry. India’s engineering exports then was a mere $10 million. This is why we should celebrate the 2017-18 exports performance of $76 plus billion as it is an incredible feat and shows the distance that our engineering exporting community has travelled, circumventing historical handicaps and policy turnpikes.

Given our glorious history, the onus is now on us to draw the roadmap for the future. Here are some numbers to work on. Last month, Prime Minister Narendra Modi spoke of India becoming a ‘Five Trillion Dollar’ economy. Today, the GDP is $2.5 trillion at current prices. What growth rates will take us to $5 trillion and how soon? The World Bank says India’s GDP is expected to grow at 7.3 percent in 2018-19. The RBI’s figure is 7.4 percent. So let’s take 7.4 percent as the base figure. This implies that within 10 years, we will reach $5 trillion. Suppose that even if we have to maintain the current share of engineering exports to GDP, which is around 3.04 percent,

our exports should double and be around $152 billion in 2027. That means our engineering export growth should be around 7.2 percent for the next 10 years. Clearly, this is less than half the over 16 percent achieved in 2017-18, but seems reasonable in the present times of rather volatile trade cycles, and protectionist tendencies in engineering products like steel and steel products, aluminium and aluminium products, among others. It must be kept in mind that each year as exports increase, the base increases so it does get harder each year to keep the percentage going. The percentage may remain the same but in figures, the value would keep going up each year.

What about policies for such sustained long-term growth rate? As I run out of space, the only comment I would leave our readers with is a slightly immodest one – if we can attain a growth rate of 7.4 percent for the economy in the next 10 years, as has been predicted by the wise men, our engineering exports will more than double its 2017-18 figure by yards!

 This month’s cover story is on our performance in 2017-18 and I do hope that we continue to achieve higher milestones in the years ahead.

 

 

 

 

 

 

 

 

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