The Hindu Business Line : Exporting India's resources

The effort should be to increase the export of value-added agricultural products, such as flowers and processed foods, where the labour content is large and the resource content small. Exports of resource-intensive products, such as sugar and wheat, should be discouraged.

THE Government has set itself the target of raising India's share in global trade to at least 1 per cent. It is true that at 0.6 per cent the country's of global trade is small in relation to the economy's size. But one should not forget that though the country had a greater share of global trade under the British, it did not help reduce poverty.

Attaining a higher share of global trade, therefore, does not ensure the people's welfare. One needs to look closely at the items that are exported and imported. Exports of resource-intensive and agricultural products, as also ores may not be desirable.

The Worldwatch Institute points out that agricultural exports are a way to transfer the natural resources of the developing countries.

When India exports 1 kg of wheat, it is actually exporting the water and soil that has gone into its production along with the labour.

Twenty per cent of the world's population consumes 80 per cent of the resources, as poor countries are eager to increase exports of their resource-intensive products come what may. The strategy should be to conserve India's natural resources.

The Exim Policy, on the other hand, says that all agricultural products will be the thrust area of exports.

The effort should be only to increase the export of value-added agricultural products, such as flowers and processed foods, where the labour content is large and the resource content small. Exports of resource-intensive products, such as sugar and wheat, should be discouraged.

All agricultural exports are not beneficial for farmers. There are two competing objectives: To conserve the natural resources and provide employment. This can be better achieved by increasing the exports of services, such as health, education, entertainment, software and tourism; rather than increasing those of agricultural products.

Many schools catering to the NRIs have sprung up near Dehra Dun and Udhagamandalam (Ooty). Similar schools can be established for foreigners. There is also a need to create new PSUs, such as "Educational Services Export Corporation" and "Call Centre Services Export Corporation".

The Market Access Initiative should be deepened and focussed on the services sector.

Assistance is provided for making market studies, participating in trade fairs, and so on under this scheme. All exporters are now entitled to take the scheme. This means that the country is also encouraging undesirable exports, such as those of sugar.

India should also form cartels with other exporters. OPEC has been able to increase the incomes of the oil producers many fold.

But India played spoilsport when Brazil wanted to form a cartel of coffee producing countries. There is a need to make an explicit provision in the Exim Policy to encourage such cartels.

Also, the country should not provide incentives for all exports. Export-oriented clusters, such as Tirupur and Khurja, should be seen from the standpoint of labour-intensity and resource-extensity.

Only labour intensive clusters such as those of education (Dehra Dun), health (Vellore), handicrafts (Moradabad), software (Bangalore) and tourism (Jaipur) should be promoted.

Instead of growing wheat for exports, the country should grow vegetables, feed the people and export their services.

In the manufacturing sector, the policy, rightly, is to encourage the import of raw materials and export of finished goods. But according to RBI data, while the imports of raw materials were Rs 56,000 crore, the exports of finished goods were only Rs 33,000 crore. Therefore, all effort must be made to make the country technologically self-sufficient.

The import of second-hand cars, for instance, has been restricted to establish India's technological superiority. But the import of second-hand cars will create opportunities for the mechanics.

It will save the nation's natural resources and capital. There is a need to balance the objective of resource conservation and labour intensity on the one hand; and technological superiority on the other.

The gains in resource conservation and labour intensity in second-hand car imports are large, and there is little loss of technological superiority.

The export incentives are a subsidy to the foreign consumers. These incentives were required in a fixed exchange rate regime, where it was necessary to increase exports by artificial methods.

There is no justification for these incentives in a floating exchange rate regime. Incentives should be restricted to only those areas where new initiatives have to be taken, such as health and education services.

There is a need to get out of the "exporting our way to prosperity" syndrome. The British Empire had used arms to extract the country's resources. The modern economists are doing the same for free.

They advocate that India should increase its exports even if it involves the transfer of resources at lower prices.

It is unfortunate that the Exim Policy does not make a distinction between resource-intensive exports which should be discouraged; and labour-intensive exports which should be encouraged.

(The author, a freelance writer, can be contacted at: bharatj@nda.vsnl.net.in)

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