Business Today – August 25, 2019

cannot be scaled sharply without such sops and an enabling policy

environment that consistently encourages new capacity creation,”

says Kiran Mazumdar-Shaw, Chairperson and MD of Biocon.

But the IT and ITeS industry will find it difficult to sustain its

earlier growth, says Siddharth (Sid) Pai, Founder and Managing

Partner at Bengaluru-based Siana Capital Management. “It has be-

come too large and mature to grow at 30 per cent. Also, we think

that outsourcing is not impacted by the overseas recession (the per-

ception is that more work is pushed out due to cheaper cost). But

outsourcing is equally impacted as tax and non-tax trade barriers

are coming up every day due to the rise of hypernationalism. The

IT sector is not immune to curbs on the free flow of labour or ad-

ditional taxes for work outside of local jurisdiction.”

Auto exports have also been down for two straight fiscals, the

first such decline in a decade. The bulk of the exports include mo-

torcycles (70 per cent) and passenger vehicles (PVs). While two-

wheelers are mostly shipped to developing regions such as Africa

and South-east Asian countries, PVs used to be exported to mature

markets such as the US, Europe and Japan. The PV business is

dwindling, though, due to sluggish demand worldwide, increasing

trade conflicts and a relative weakening of India’s export potential.

In a recent interaction with Business Today, Samiran

Chakraborty, Chief Economist at Citibank India said the govern-

ment should be extremely focussed in its approach if it wants to

solve the export puzzle. He argues that it does not matter what in-

dustry is picked up, but the government should back two or three

chosen sectors all the way to create global brands.

No Easy Way Out

CEA Subramanian agrees that world trade is currently facing

BISWAJIT DHAR

Professor, Centre for Economic Studies and Planning,

Jawaharlal Nehru University

PROBLEM

Our manufacturing is not competitive and each sector

is crying out and seeking more tariffs (on imports to

protect domestic turf). Even in services, we do not

have any capability, except in IT and ITeS. Our industry

has not been able to think beyond the domestic market

ever. India Inc. has not been able to produce a single

globally selling brand name.

SOLUTION

The government should behave exactly the way

South-east Asian countries did with their industry.

Industry should tell the government its needs and

commit the target it is going to meet. Trade policy

has to be bottom up rather than coming from top.

DHRUV M. SAWHNEY

CMD, Triveni Engineering & Industries

PROBLEM

Being global is a necessity, even more so

for medium-sized companies. What we do

not need is a regime of subsidy for export,

although there is need to neutralise some of

the irregularities of export taxation and

transportation and infrastructure.

SOLUTION

Impart skills training for the global market so

that you do not have to do it twice to

satisfy the domestic market. Combine the

Ministry of External Affairs and Department

for International Trade. Australia has done

that, Mexico has done that, China has always

had that, and Brazil has that.

tariff is an export tax. Since 1995, the import
component in our export has been rising.
If the percentage of foreign components
in merchandise exports was 11 per cent in
1995, it was 25.7 per cent in 2011, and most-
ly included electronics and machinery. So,
backward linkages are crucial for exports.
Customs duties on imports will increase the
cost of exports,” he explains.
Kathuria also stresses the need to main-
tain a balance when it comes to import duty
structures, especially what applies to elec-
tronic products. He also wants the authori-
ties to focus on the ease of doing business,
as “the time taken for border compliance of
imports is five times more than that of Viet-
nam, and the cost is nearly 25 per cent high-
er, as per the World Bank. China, Japan,
South Korea, Thailand and Malaysia have
become part of the GVCs through the qual-
ity trade infrastructure route. GVCs demand
high-quality products and on-time delivery,
necessitating behind-the-border logistics
support, with high-speed and reliable link-
ing of industrial parks and ports,” he adds.
Even the pharma sector, one of the bright
spots in Indian exports, is not without its
share of problems. “This sector has always
been export-oriented, but IT services get the
tax sops most of the times. Pharma exports

August 25I 2019 I BUSINESS TODAYI 53