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The new fiscal year began with engineering exports increasing by 24.02 percent, out of which the major increase has been in the exports of primary steel products that rose by 159.34 percent in April 2017. Interestingly, if the steel segment is taken out, the engineering growth rate dips to 13.22 percent. I would say that this, too, is creditable given that engineering exports face both domestic and external challenges: rising domestic steel prices, non-availability of certain types of steel such as stainless steel hampering exports of stainless steel cutlery, among others, and an appreciating rupee coupled with the growing protectionism in both developed and developing countries.

A major challenge remains the rupee volatility, particularly when it appreciates sharply vis-à-vis foreign currency, for exporters. EEPC India has suggested to the government and the RBI to allow conversion at the Real Effective Exchange Rate (REER) based on RBI’s trade or export-based weighted indices. I must also clarify one point: it is often said that exporters only get perturbed when the rupee appreciates. In reality, it is the volatility in the domestic currency that causes the most discomfort for the exporter as he is unable to price his product. This is more so if his competitor’s currency moves the other way. A good example is the case of engineering trade with, say, Morocco. Our members have pointed out that they are finding it difficult to export their products to this North African country for various reasons. One among them is that while the Indian Rupee is appreciating against the USD, the Moroccan Dirham is moving the other way. This, coupled with the fact that we have no preferential trade arrangement with Morocco, is making it even more difficult for us to export at the present juncture.

Speaking about trade arrangements, the India-Chile Preferential trade arrangement expansion has finally taken place and the relevant notification, too, has been issued. This is a much-awaited expansion and I do hope that our engineering exporters will be able to benefit from the expanded trade benefits. Given the protectionist tendencies gripping major economies of the world, a further liberalisation of trade between our two countries is one of the most welcome news in these times.

India has been taking a large number of steps to promote foreign direct investment. The government has undertaken a number of reforms in different areas of the economy. The scale of reforms can be gauged from the fact that in the last three years, 21 sectors covering 87 areas of FDI policy have undergone reforms. This has resulted in increased FDI inflows with record highs. From FDI inflows of $55.6 billion for the year ending March 2016, the country registered FDI inflow of $60.08 billion in the previous financial year (2016-17), thereby scaling an even higher peak.

It has been the endeavour of the government to put in place an enabling and investor-friendly FDI policy. The intent all this while has been to make the FDI policy more investor-friendly and remove the policy bottlenecks that have been hindering the investment inflows into the country. 

The FDI policy provisions were radically overhauled across sectors such as construction development, broadcasting, retail trading, air transport, insurance and pension among others. In addition, initiatives such as introduction of composite caps in the FDI policy and raising the FIPB approval limit were also undertaken to promote ease of doing business in the country.

Similarly, the introduction of the Goods and Service Tax (GST), likely from 1 July 2017, is expected to revolutionise the indirect tax system in the country. At the time of writing, the GST Council has been able to fix the GST rate for over 1220 goods and also for services. The Finance Minister has said that the rates have been fixed to ensure that overall there is no inflationary impact as a result of the introduction of GST.

Keeping with the times and the large number of reform measures that have been taken by the government, this issue is dedicated to Smart Manufacturing. India will have to adapt itself to the global developments in 21st century manufacturing with very little lead time.

I hope you will enjoy this edition of the magazine and I look forward to your comments and suggestions, as always.

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