 "S R Rao")
Commerce secretary S R Rao is hopeful that import containment will take place this financial year with reduction in coal imports, thereby narrowing the ballooning trade deficit. Rao tells Nayanima Basu that the government is considering curbing some more non-essential imports. Excerpts:
While Prime Minister said that fall in the Rupee value against the dollar will boost exports, commerce and industry minister Anand Sharma said the opposite as he believes high import content in exports balance out the benefits?
Currently, 36-38 per cent of our exports have large amount of import content. Of these, value addition is in the order of 8 per cent in refined petroleum products and 3-5 per cent in gold jewellery. So barring these two, in many other product lines we do import commodities and intermediaries, but value addition is of much higher order of 70-80 per cent. So wherever the value addition is high, the import price does not really matter, because it is taken care in domestic value addition. So it is wrong to think that the Rupee depreciation does not help exporters.
I understand August numbers are also going to be as good as July. What will be your projection for the entire fiscal?
My sense is we will easily reach the year-end target of $325 billion. All sectors are performing reasonably well, barring engineering. Exporters are telling me that their order books are full. The one sector where we are going to be down is gold jewellery because we have stopped what was not good for the country, which was very low value addition gold exports, the so-called medallion market.
The government has set a current account deficit (CAD) target of 3.7 per cent of GDP for this fiscal. So when you say exports will reach $325, where do you see imports ending and thus the trade deficit?
In July we have seen the amount of import containment. In August also we expect the same to happen. This trend of import containment will continue. We at the government are also looking at additional non-essential import items that do not fuel domestic production. We are looking at containing them.
But to truly contain imports, isn't it vital to restrict coal imports?
I had a discussion with the chairman of Coal India Ltd. (S Narsing Rao) recently who has assured me that coal production will be 10 per cent over last year. If these projections turn out to be true, then to that extent import containment will take place.
What are you doing to promote iron ore exports?
We are very clear on this. We are only talking of export of fines. This means that after taking into account the domestic requirements, whatever is the surplus that should be exported. There is no point in building up domestic stock which is lying idle when the country can earn some additional foreign exchange. We have floated a cabinet note in this regard and waiting for a response from the ministries. Within 2-3 days we will take a call and put up a proposal to the Cabinet for a decision.
Is any further clamping on gold expected?
We have done what we can. We are now waiting for the impact.
Coming to exports, which all sectors are going to emerge at the top?
In order of their contribution to the total export basket, textiles are doing extremely well and then pharmaceuticals and chemicals, agricultural products and handicrafts.
Now that there is a widespread consensus that exports are going to be good, exporters fear a withdrawal of the measures announced.
Minister (Anand) Sharma had said in April during the annual supplement to the Foreign Trade Policy that in October he will be looking at additional incentives. We are holding a series of meeting to assess the situation. We are yet to identify the sectors.
But with such a drastic fall in the Rupee, are you not contemplating withdrawing any of the measures, considering the tight fiscal room?
What is logically commerce department does is to look at market diversification and product diversification. So the entire analysis revolves around these two. So a combination of both is taken into account.
Exporters say they are in the buyers’ market and clients are asking for renegotiated price?
That is a commercial matter, simply a question of demand and supply. If the Rupee has depreciated over 30 per cent in last one year, we have gained 30 per cent more competitiveness. But having said that, I must say that instability in the Rupee does not help. Any day a firm currency always helps as they resort to hedging. Volatility in the Rupee is not helpful.
Also, now that monsoon has turned out to be good, do you see agricultural exports to do better compared to last fiscal?
Right, we are expecting some very good news. Export realization in rice has climbed up substantially this year from last year and similarly in buffalo meat, marine products are where we are getting extremely good realization.
What is the status of the task force on local currency trading?
The task force has met only once, three more meetings will take place after which we will submit the report. We are looking at countries with which we have robust bilateral trade.
