EXPORTS FROM INDIA

Expanding horizons in SAARC & developed world

PROF. DR. KHAWAJA AMJAD SAEED*
Emails:professor@kamjadsaeed.edu.pk.
principal@puhcbf.edu.pk

June 26 - July 02, 2006

South Asian ASSOCIATION FOR Regional Cooperation (SAARC) was set up in 1985. Since then, productive meetings were held to develop ideas for forging ahead. This unique form has been struggling to bring home several messages of goodwill, peace and tranquility in the region. On several occasions, heads of states of all SAARC countries met and agreed on several issues of mutual interest. The platform has enabled sharing of thoughts, exchange of ideas and creation of awareness regarding innovative initiatives to be taken for achieving the objective off SAARC in the light of founding principles laid down for SAARC Hopefully these initiatives will continue in future so that efforts are solidly undertaken for alleviating poverty, accelerating socio-economic and scientific progress in SAARC region to pace the way for ushering in an ear of prosperity on wider dimensions. The sincerity and commitment by the Governments and the parole of SAARC region are the crying need of today.

SAARC PERSPECTIVE

SAARC BACKGROUND

Regional Cooperation has been a subject of great interest in several part of the world. However, the idea of regional cooperation in South Asia was first evolved during 1977-80 Bangladesh took the initiative to bring up the idea of setting up SAARC. In August 983, Foreign Ministers met in New Delhi and Declaration on South Asian Regional Cooperation (SAARC) was made and formally Integrated program of Action (IPA) was launched

In 1985, Charter of SAARC was adopted in Dhaka. IPA, consisting of eleven areas of cooperation, is the key component of the SAARC's functions. These include agriculture, communications, education , culture and sports, environment and meteorology, health and population activities, prevention of drug trafficking & drug abuse, rural development, science & technology, tourism, transport and women in development.

Initial steps taken for a long-term objectives of South Asia Economic Union by 2010 so far have included the following:

1) Agreement on SAPTA (South Asian preferential Trading Arrangement) (Annex "A") was signed during the Seventh SAARC Summit in Dhaka. This entered into force on December 07, 1995 and had the following two forward linkages:

a) Gradual reduction and eventual elimination of tariffs within SAARC.

b) A step on the road to creating a SAFTA (South Asia Free Trade Area). Accelerated efforts are needed to implement bilateral and multi-lateral initiatives to promote economic cooperation.

2) Bold initiatives have also been taken in respect of developing institutional framework. These institutions need to be strengthened for their vibrant functions so that positive steps are taken to crystallize the dream of South Asian Economic Union by 2010 and also achieve quantum jump in exports through breakthrough approach.

SAARC: PRINCIPAL

Clear cut principles for SAARC were spelled out at the time of its establishment and these require firm commitment by all the SAARC countries. The cooperation among SAARC countries cannot be a substitute for bilateral and multi-lateral cooperation but shall complement them. Further, such cooperation shall not be inconsistent with bilateral and multi-lateral obligation.

Principal on which cooperation shall be based include respect to the following:

1) Sovereign Equality.
2) Territorial Integrity.
3) Political Independence.
4) Non-interference in internal affairs of other states and mutual benefit.

The foregoing principles represent strong conceptual logistics on the basis of which South Asian Economic Union can be strongly visualized by 2010. All the SAARC Countries must strictly adhere to the above principles as a mark of respect to each other and help realize the goals for which SAARC has been established.

SAARC: OBJECTIVES

Objectives of SAARC include promotion of socio economic development within SAARC countries and also develop productive relationship with regional and international organizations. Based on this, objectives can be categorized as under:

I: INTER - SAARC

a) To promote the welfare of the people of South-Asia and to improve their quality of live.

b) To accelerate economic growth.

c) To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields.

d) To promote and strengthen collective self reliance among the countries of South Asia.

e) To contribute to mutual trust, understanding and appreciation of one another's problems:

II: INTRA-SAARC

a) To strengthen cooperation among themselves in international and with other developing countries.

b) To strengthen cooperation with other developing countries

c) To cooperate with international and regional organizations.

SAARC UNIQUE FEATURES

SAARC is the largest geo-economic block of the world with 1.14 billion people. Its GDP, based on purchasing power parity is $ 407 trillion. Its combined average growth is over 7%. Its plan includes a common market i.e SAPTA. This represents a hope for the largest pool of poor people of the world, with a consumer base of over 450 million people in the middle class bracket. It is larger than any economic block of the world. It has the potential of contributing a great deal to the ever-evolving global economy.

SAARC region has the following unique features of the world:

(1) It has one of the most ancient living civilizations in the world.

(2) It is a sleeping giant and has started to move its arms.

(3) All religions, faiths, and ideologies of the world live together.

(4) It is maturing and is poised to become an important economic force forming a common market called SAPTA and later SAFTA. This is expected to usher in a new ear which will change all traditionally known economic parameters.

(5) It has the largest irrigated land areas in the world with over 67 million hectares.

(6) It has the second largest railway network of the world after the US.

(7) It offers one the largest English speaking area.

(8) It has labor force of 450 million people. This is the largest of any other economic block in the world.

(9)I It also is home to some of the poorest living people on the earth but has increased job opportunities and self-employment schemes in all SAARC Countries.

(10) Having a combined average growth rate of more than 7% SAARC has a combined population of 1.42 billion people and the total consumer base will surpass 750 million. This will be the largest number of consumers in a single economic block in the world.

(11) Nepal has the world highest Mount Everest (8,850m -29,055 Ft.)

EMERGING ROLE OF SCCI

SAARC Chamber of Commerce and Industry (SCCI) was set up in 1992 as the official recognition by all the regional government and as the apex body of all the national federations of chambers of commerce and industry with its headquarters in Pakistan. It consists of seven component members representing each country. Its mission is to enhance economic cooperation with a view to improving SAARC's position in the World trade as well as within SAARC itself.

SCCI's philosophy is as under:

1) Economic Cooperation, and

2) Bring about harmonious and healthy economic relations among the business communities of the region.

SCCI's contributions toward achieving cooperation in south Asian countries through the following dimensions:

1) Serve as voice of business community of the region at national, regional and global fora.

2) Endeavor to bring about necessary economic cooperation in all spheres of the SAARC region.

3) Encourage investment and joint ventures within and outside the region to ensure that the benefits of economic cooperation are realized for the region.

4) Encourage private sector in the process of industrialization and also to act as the change agent while allowing the government to develop the infra-structure jointly with them and setting in place policies which can minimize dislocations to economic growth and social development.

EXPORTS -MAJOR REGIONAL SETTING

There are several regions for trade development. These still exist despite global competitiveness advocated by WTO.

India is an integral part of SAARC. Her share in global exports based on world Development report 2006 is 0.80%. SAARC Countries share in this respect is 1.15%. These figures speak volumes of the potential which lies ahead in future. The spirit of this paper is a wake up call for SAARC Countries in general and India in particular to tap huge potential with a breakthrough approach.

For a comparative perspective, G-8* had a share of 43% NAFTA had 14.57 and D-8 had 3.97% share of global exports.

INDIA IN GLOBAL & SAARC REGION

INDIA IN GLOBAL EXPORTS

Based on the World Development Report 2006, total global exports for 2004 were $ 9.123 trillion. Twenty-two countries had 77% share-showing application of Pareto Law. In a total of 133 countries for which data are available in the above Report, 20% share of global exports.

INDIAN EXPORTS IN SAARC REGION

Based on the World Development Report 2006, total exports of SAARC were $ 105b-representating 1.15% of the global exports. Indian share in this respect was 0.80% (US$73b). However, under the dynamic leadership of Mr. K. Nath, honorable Commerce minister of India the exports have registered an increase to US$ 85b for 2005-2006. This trend is likely to continue in future.

Table 1 shows the overall position of SAARC Exports:

TABLE NO.1

SAARC EXPORTS 2004

 

COUNTRY

US $ B

%

1)

India

73

70

2)

Pakistan

13

12

3)

Bangladesh

11

10

4)

Sri Lanka

6

6

5)

Nepal

2

2

6)

Bhutan

7)

Maldives

 . .

105

100

Source: Extracted from World Development Report 2006, Table 4, pp 298-299.

With composite dialogue going on between India and Pakistan, ASSRC should address expanding exports within all the eight countries. This requires a separate treatment to identify strategic areas to achieve the above objectives.

INDIA: ANALYSIS OF EXPORTS AND POTENTIAL FOR GROWTH

The landscape of exports of India has undergone tremendous change. Until the middle of 1980s, Indian Exports were static and were around US $ 9 billion. However , due to the introduction of structural economic reforms introduced under the inspiring leadership of Dr. Manmohan Singh, the then Finance Minister of India ( early 1990s )and the prime Minister of India (today) , the exports from India have now registered considerable increase as is shown in Table No. 2 which presents a concise picture from 1960-61 to 2004-05.

TABLE NO. 2

INDIA: EXPORTS-TIME SERIES

YEAR

$ Billion

1960-1961

01

1970-1971

02

1980-1981

09

1990-1991

18

1995-1996

32

2000-2001

45

2001-2002

44

2003-2004

64

2004-2005

81

Source: Extracted from The Economic Survey 2004-05 and 2005-2006, New Delhi: Taxmann Publications (P) Ltd., Table 73 (A) PP586-86 and Table 7.3 (A), PS -86.

There is a tremendous potential for product diversification and lot of scope exists for quantum jump in various commodity groups of exports. Statistical analysis has been carried out in respect of various commodity groups and is summed up in Table No.3.

TABLE NO. 3

INDIA: SHARE OF MAJOR EXPORTS

COMMODITY GROUP

PERCENTAGE

 

2002-03

2003-04

2004-05

2005-06

(Apr-Oct.)

1) Manufactured Goods

76

77

74

73

2) Agriculture & Allied

13

12

11

10

3) Crude & Petroleum Products

5

5

8

9

4) Ores & Minerals

4

4

6

5

5) Others

2

2

1

1

.

100

100

100

100

Source: Extracted from The Economic Survey 2004-05, New Delhi: Taxmann Publications (p) Ltd., Table 73 (B), PS-87 and Table 7.3(B), PS-87.

The above table is fully supported with detailed analysis in respect of three commodity groups namely, manufactured goods (Table 4), agriculture (Table 5) and Ores and Minerals (Table 6).

Table No. 4

INDIA PRODUCTS AS PRODUCT LEADERS: MANUFACTURED GOODS

PARTICULARS

2005-2006

(April-Oct)

1) Gems + Jewelry

17.9%

2) Ready-made Garments

7.7%

3) Drugs, Pharmaceuticals & Fine Chemicals

4.5%

4) Machinery + Instruments

4.5%

5) Transport Equipment

4.3%

6) Manufactures of Metals

4.0%

7) Cotton Yarn, Fabrics, made ups, etc.

3.6%

8) Primary and Semi-finished iron and steel

2.9%

9) Electric Goods

2.0%

.

51.4%

10) Others (leather Footwear, Dyes-Intermediates and Coal Tar Chemicals & Handicrafts

21.6%

.

73.0%

Source: Extracted from The Economic Survey/Statistical Appendix, 2005-06, Table 7.3(B), PS-87.

 


 

TABLE NO. 5

INDIA: EXPORTS PRODUCTS AS PRODUCT LEADERS: AGRICULTURE

PARTICULARS

2005-2006

(April-Oct)

1) Cereals

2.5%

2) Marine Products

1.5%

3) Oil Meals

0.7%

4) Cashewnuts

0.6%

5) Fruit + Vegetables

0.5%

6) Spices

0.5%

7) Tea

0.4%

8) Coffee

0.3%

9) Un-manufactured Tobacco

0.3%

.

7.6%

10) Others

2.3%

.

9.9%

Say:

10.0%

Source: Extracted from The Economic Survey/Statistical Appendix, 2005-06, Table 7.3 (B), PS-87.

 


 

TABLE NO. 6

INDIA: PRODUCTS AS PRODUCT LEADERS: ORES & MINERALS

PARTICULARS

2005-2006

(April-Oct)

1) Iron Ores

3.2%

2) Processed

1.0%

3) Others Ores + Minerals

0.9

.

5.1

Source: Extracted from The Economic Survey/Statistical Appendix, 2005-06, Table 7.3 (B) , ps-87

Based on research study undertaken by Prof. Michael E Porter and Prof. Pankaj Ghemawal (both of Harvard Business School, USA,) the Government of India followed their advice to concentrate on three areas of exports namely, gems and Jewelry, readymade garments and software exports. The research reveals that there has been quantum jump of above commodities/services. No wonder gems and jewelry has now become the market leader of exports from India followed up by readymade garments which has now acquired rank number 2 in Indian exports. Today Indian is providing BPO services to 85 countries of the world and is now expanding its horizons in KPO and EPO".

From the strategic point of view, it is suggested that following two directions may be followed by India with serious homework for achieving the breakthrough via quantum jump in exports:

1) Product diversification should be taken up as a serious agenda.

2) Accelerated expansion in export of existing items with particular emphasis on several products as itemized in Table No. 4 to Table No. 6 be undertaken.

Destination Diversification

Interesting trends are developing relating to directions of trade. While USA tops the List with US $ 21 billion exports and China is trailing at No.2 position with US $ 19 billion, the position in the next 2-3 years will significantly change and China will the number 1 import leader from India.

The current position of direction of trade relating to exports as reported in the Economic Survey 2004-2005 (Statistical Appendix, Table 2.4 (A), p. S85) is tabulated below:

TABLE NO. 7

DIRECTION OF TRADE: EXPORTS

DESTINATIONS

.

2003-2004

. .

(%)

1) OECD

.

46

.

%

.

EU

21

.

North America

19

.

Other OECD

6

.
.

46

.

2) Other LDCs

.

33

3) OPEC

.

15

4) Eastern Europe

.

2

5) Others

.

4

.

.

.100

Source: Extracted from The Economic Survey/Statistical Appendix, 2004-05, Table 7.4 (A), pS-87

There are 207 countries in the world with a total population 30,000 and above. A detailed exercise needs to be undertaken in the following lines for expansion and diversification of exports to various Countries:

1) Follow look Africa policy

2) Undertake a ledger account exercise and expand on multi-lateral and bilateral trade through a quantum jump in exports.

3) Optimize the productive use of commercial attaches in foreign embassies abroad and through a targeted approach achieve expansion in exports in existing importing countries from India.

CONCLUSION

Several far eastern countries have achieved tremendous economic growth with wider prosperity through export led growth strategy. It is high time that business schools in India may undertake structural changes in their curricula and ensure that high priority is given to production of new breed of exporters. The banking sector ought to give exports as a high priority area for financing and the Government of India; through their enlightened five years Trade policy (2004-2009) may attach high sense of priority and accelerate the exports from India through product diversification, destination diversification and expansion in the existing commodity groups. Indeed, if the above strategies are implemented, India will achieve rewarding results and in the next five years can exceed the export quantum to US $ 150 billion.

BASIC PRINCIPLES UNDERLYING SAPTA

1) Overall reciprocity and mutuality of advantages so as to benefit equitably all contracting States, taking into account their respective level of economic and industrial development, the pattern of their external trade, and trade and tariff policies and systems.

2) Negotiation of tariff step by step by step improved and extended in successive stages through periodic reviews.

3) Recognition of the special needs of the Least Development Contracting States and agreement of concrete preferential measures in their favor.

4) Inclusion of all products, manufactures and commodities in their raw, semi-processed and processed form.

Principal, Hailey College of Banking & Finance, University of the Punjab, Lahore Pakistan

Member Governing Council, International Federation of Accountants (FAC) (1997-2000) President, South ASIAN Federation of Accountants (SAFA) (1997)

President, Institute of cost and Management Accountants of Pakistan (1997-2000)

PRESIDENT, Association of Management Development institutions of South Asia (AMDISA) (1993-96)

Pro Vice-Chancellor University of the Punjab, Lahore (1994-1996)

Founder Director, Institute of Business Administration (IBA), University of the Punjab, Lahore (1993-1996)