"SEZs will be the laboratory for the market economy and labour reforms." Murasoli Maran, Union Commerce Minister

Murasoli Maran wants to rewind so that India can fast forward. The commerce minister's target of capturing 1 per cent of world exports by 2007 will only restore India to the position it held in the 1950s. In 1950-51, India's exports were a mere $1.36 billion but comprised nearly 2 per cent of global exports. That's when the Indian economy shut its doors and shunned trade, even as many other economies opened up and embraced globalisation. Result: By 2000-1 India's exports had climbed up to $44.4 billion, but formed a mere 0.65 per cent share of global exports. World trade had grown much faster than India's exports.

If Maran's target, set out in the new Export-Import (Exim) Policy, is to be met, India will have to double its exports in five years to $80 billion by 2007. A Herculean effort considering that export growth in the first 10 months of 2001-2 has been an abysmal 0.3 per cent. "We aren't aiming for the moon. But it isn't an easy goal to achieve either. We have to work hard," admits Maran.

Economy

TRADE TALKS "Competitive exports don't come from uncompetitive economy." S.P. Oswal, Chairman, Vardhaman "The target of doubling exports in five years isn't realistic." S. Bhide, Chief economist, NCAER "Policies are always good, problem is with implementation." Ramu Deora, Former president, FIEO "Key drivers of exports are out of the purview of the Exim Policy." Bibek Debroy, Trade expert

His first task is to flog the 1.5 lakh exporters in India. Points out trade expert Bibek Debroy: "India has too many exporters and too little exports." That was a natural consequence of big Indian companies being focused almost solely on a domestic market that was protected and more lucrative than markets abroad. The government compounded its fatalistic approach to exports by reserving most traditional exports for production in the small-scale sector.

That's the root cause of another big hurdle to attaining Maran's goal: most Indian exports are low value, low technology and compete on price, not quality. Despite having 16 per cent share of the world gems and jewellery market, there are no Indian jewellery brands in the world market. Garment exports are caught in the same muddle. Small producers, unable to make big investments in marketing and brand building, are stuck in low-margin exports.

But nothing could undo Maran's plans as much as the complicated export procedures and inefficient infrastructure. Transaction cost of exports from India is estimated to be up to 21 per cent of the export price. Mandatory bribery at different levels of customs and ports accounts for up to 8 per cent of the export price. Ramu Deora, former president of the Federation of Indian Export Organisations (fieo) and an exporter of bulk drugs, says he can send a consignment from his Hamburg warehouse to anywhere in the world in less than 15 minutes, sitting in India. But it takes three days to move an export consignment from India.

THE 0.6% CURSE AND HOW MARAN HOPES TO BREAK IT

...BUT MARAN IS HOPING TO TURN THE TIDE BY... # Creating SEZs to trim high cost of infrastructure # Identifying 25 countries and 220 products for focused export promotion # Targeting a yearly growth of 11.9% till 2007 to reach annual exports of $80.48 billion # That will make India's exports 1% of the world's ... BUT CRITICS ARE SCEPTICAL OF MARAN'S SUCCESS BECAUSE ... # Attempts to promote exports through SEZs didn't work in 30 years # SEZs won't succeed without states' support # US and Europe are likely to grow slower in the next five years # Breakthrough will come only when economy gets global scales and skills

To be fair, much of the complication in the Exim Policy stems from the complicated tax laws. Exports all over the world are exempt from indirect taxes. Governments reimburse the taxes paid by exporters. Such paybacks are easier under simple tax laws where identifying the tax paid is easy. Not under India's complicated web of Central, state and local taxes. That explains a plethora of confusing duty drawback certificates, exemptions and licences in the Exim Policy. "Most people would take days to understand procedures and provisions of the Indian Exim policy," quips Vardhaman Group Chairman S.P. Oswal.

Procedural wrangles like quotas on imports and exports have almost gone. And that has helped. India's share in global yarn trade zoomed from 2 per cent in the late 1980s to 20 per cent in 2001, largely due to the removal of export quotas. Licensing procedures are computerised and traders applying for licence online get approval within hours.

Taking a leaf out of the Chinese experience, Maran proposes to build 13 Special Economic Zones (SEZs) with world-class infrastructure, easier financing, leaner labour laws and a host of tax benefits. Sceptics doubt the success of SEZs for two reasons. Past attempts at promoting free-trade zones have met with middling success, largely because of a lack of support from state governments. Moreover, since the philosophy of economic reforms is to make the entire economy competitive, why build SEZs?

Maran admits that the cooperation of states will be critical for SEZs but is sure that will be forthcoming. He claims Maharashtra, Andhra Pradesh and West Bengal are already committed to the conditions for setting up SEZs. "SEZs will be the magnet to attract foreign investment and will be laboratories of market economy and labour reforms," he says. As an added thrust, the ministry has also chalked out a focused, five-year strategy to promote exports of 220 products in 25 markets. That's about as much as the Commerce Ministry can do to promote exports, because the three main modern day drivers of exports-global demand, currency value and customs duties-are out of Maran's control.

But as Shashank Bhide, chief economist, NCAER, points out, the product and market strategies are required till such time the economy isn't competitive. "The real breakthrough in exports will come only when the domestic industry and agriculture are globally competitive," he says. If that is so, then the most potent factor for export promotion is customs duty. Lower the duty, lesser the protection, and lesser the procedures, more competitive the industry and exports. That's back to the 1950s.