Our Export Efforts Hold The Key To Growth In The Quarters Ahead

Context: India’s growth hope in the immediate future is pinned heavily on exports riding on the rapidity of recovery in major markets and not based on the monetisation of assets under the National Monetisation Pipeline (NMP).

Concerns associated with India’s exports: While the exports act as the key driver of India’s growth in coming months, there are possible worries associated with it - 

• Bullwhip element in exports demands: As the immediate ramp-up in demand for steel and other such upstream elements in global supply chains may not be sustained for longer.
• Element of arbitrariness in tax structuring: Although the rates under the scheme for the remission of duties and taxes on exported products (RODTEP) are notified, they seemed to be arbitrary.
• Steel, pharma and chemicals get no rebate at all, although many products using these inputs do.
• This kind of cross-sectoral unevenness can get India into trouble with the World Trade Organization (WTO) once again.
• Aside from this potential for trouble at the WTO, these excluded products need the rebate if they are to survive in a fiercely price-competitive global market in the months to come.
• Supply chain constraints: A crippling shortage of sea-borne containers has afflicted key large-volume products in the Indian export basket (tea, basmati rice, furniture, garments).
• An estimated 25,000-30,000 containers were locked up at different ports owing to customs disputes.

Issues with the National Monetisation Pipeline (NMP): Following issues restrict the ability of the monetisation plan as a growth medication.

• Monetisation is a meagre funding source: Even if the expected Rs 88,000 crore of revenue is realised during the current year, it accounts for only a fraction of infrastructure investment demand.
• Valuation challenges: Evidence from the spectrum and coal auctions suggests that potential value realisable is difficult to pin down.
• Federal challenges: If states find no interest in carrying forward the scheme.
• Judicial load: The NMP demands clear and well-thought-through processes, with sufficient transparency and safeguards in the form of regulatory structures. Legal pitfalls could drown what is already a judicially clogged country.

Way Forward: The need of the hour is export facilitation.

• Provide sea-freight subsidy (for a limited period): At a time when container rates have shot up, tea buyers are looking at competitors like Sri Lanka and Kenya, which seem to have reacted quickly.