Business Standard

<b>Letters:</b> Creating export demand

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Business Standard New Delhi
Apropos the report "Chidambaram to hard sell India to domestic, foreign investors" (March 5), the rising CAD and weakening rupee have contributed to the inflationary and subsidy pressures, not least through higher costs of imports of energy, capital goods and fertiliser inputs. P Chidambaram has correctly zeroed in on higher export as the medium-term solution to this challenge. The problem is in achieving a sharp growth in net export. India has become uncompetitive in virtually all manufactured products, compared to the east and southeast Asian economies, while its defence and capital goods imports are continuously rising. The way out is rapid expansion of capacity, infrastructure and technological ability, while keeping costs under check on the energy, transportation, labour, land and capital fronts. Each factor has independent variables and pushes. Curbing land and labour costs will run afoul of the political compulsions, including farmer rights, fair employment policies, trade union demands and environment. India's savings in financial assets is grossly inadequate to sustain building necessary physical assets. This means a painful shift from a domestic demand-led growth model to a domestic investment-cum-export-led model, and curbing the energy intensity of growth. With everyone clamouring for a bigger share of the pie and political parties spurring such demands, there is no political consensus strong enough to take hard economic decisions.
P Datta Kolkata
 
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First Published: Mar 05 2013 | 9:03 PM IST

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