Delhi-based Atul Saluja is preparing frantically for Christmas. At his Sangam Vihar office in the city, piles of Christmas decorations-stars, lanterns, ribbons and other items-are being readied. No, Saluja hasn't got his calendar mixed up. He knows Christmas is still nine months away. But his export order must start its trans-Atlantic journey to American buying houses now. Chairman of Encore Exports, Saluja has his hands and order books full, the Iraq war notwithstanding. "We have been flooded with export orders," he says. That should be music to the ears of Commerce Minister Arun Jaitley who announced the annual revision of the export-import policy on March 31.

True, given the current global environment only a miracle could keep Indian exports on a roll. The second Gulf War is set to drag longer than expected, the US economy is threatening to weaken further and Europe too isn't looking forward to prosperity any time soon. Yet exporters have just finished performing a miracle.

In the first 11 months of the financial year 2002-3-when the global economy was in a slump, the rupee was strong against the dollar (which theoretically could make Indian exports less competitive as compared with exports of other countries) and war clouds were hanging over Iraq for months-exports rose by a spectacular 16.76 per cent over the same period in 2001-2. This was the second-highest growth rate of exports by any country in the world, bested only by China. Exports of some products achieved astronomical growth rates-gems and jewellery by 28.6 per cent and steel by 61.5 per cent in the first six months of 2002-3 (see graphic).

"Expertise and track record have made India a leader." SANJAY KOTHARI, Chairman, Gems & Jewellery Promotion	"We need labour reforms and better infrastructure" SUDHIR DHINGRA, Chairman, Orient Craft
"China has pushed up the global demand for steel" V.S. JAIN, Chairman, Steel Authority of India Litd.	"Low R&D costs and global marketing gave us an edge." BRIAN TEMPEST, President, Ranbaxy Laboratories

Why is "Made-in-India" suddenly selling so well abroad? And if exports did so well in a bad year why can't they do as well-or better-in 2003-4? Jaitley has some answers. "Last year's performance proves that exports have acclimatised well to the changed economic environment and are getting more competitive," he says (see interview).

Jaitley's policy revisions reflect his confidence. Hoping to keep up with the stellar performance of the past, he has-for the first time-extended a whole lot of export incentives to services that were so far available only to product exports. Some 47 services-including hospitals, tourism, it consultancy, construction, financial services and engineering services-can now import goods worth 10 per cent of their exports at zero customs duty. Even hotels have been allowed to import products worth up to 5 per cent of their foreign exchange earnings at zero duty. So focusing on services could be Jaitley's signature reform to India's trade policy.

Though the merit of promoting services export (services account for half of India's national income) can't be questioned, what is not certain is how soon the incentives boost services exports. What's to ensure that the measures do not meet the same fate as some big reforms announced by Jaitley's predecessors did. Eight years after it was announced, P. Chidambaram's initiative of creating a India Brand Equity Fund to promote Indian exports is languishing. Murasoli Maran's idea of creating special economic zones (SEZs) as a single-dose solution to the ills plaguing exports has not taken off. Of the 18 potential SEZs identified two years ago, not one is functional.

To be fair, Jaitley has done his bit to keep exports growing. All the changes announced in the Exim Policy on March 31 were notified within 12 hours. That's a far cry from previous years when notification of changes took many months to come. One of the biggest hurdles in the success of SEZs is the promise of providing liberal labour laws in these zones. No state government has agreed to loosen labour laws for SEZs. Jaitley is likely to solve the deadlock by bring in a Central legislation. "We can't keep lamenting our failure to replicate the export performance of countries like China unless we offer our exporters the labour laws that are similar to the ones Chinese exporters work with," says Jaitley.

There are also indications that some Indian exports may finally be graduating out of the low-value-low-price segment. This has happened partly due to improvement in quality of exports and largely owing to building lasting business relations with buyers abroad. "In the times of demand squeeze when importers abroad are looking to cut number of suppliers, it's the business relationship that decides who survives and who does not. Reliable suppliers like us will have an edge even in bad times," says Sudhir Dhingra, chairman of Orient Craft, one of the biggest garments exporters of India which sells garments to big labels like Armani, Tommy Hilfiger, Gap and Esprit. Obviously, for building loyalty quality of supplies will be as critical as its pricing.

Though diminished in significance, the price too contributed its share in propelling exports last year. True, the Indian rupee did not depreciate much against the dollar, but it did lose value against most other major currencies of the world. That made Indian exports more competitive in all markets outside the US. In the US market too, since most competing currencies gained against the rupee, Indian exports enjoyed a relative price advantage.

Another recent fundamental shift in Indian exports has been the emergence of big companies as big exporters. Traditionally, most of Indian exports have been done by small- and medium-scale enterprises (which lacked strong marketing and sales networks) while big companies produced only for the protected and more lucrative domestic market. That has begun to change especially in sectors like pharmaceuticals and automobiles. Says Brain Tempest, president of Ranbaxy Laboratories: "Lower R&D costs and aggressive marketing have given us a competitive edge."

Then there are wild cards like steel exports. Helped by a surge in demand for steel from China-and a consequent spurt in the global prices-Indian steel exports have had a windfall with exports growing by 62 per cent in the first six months of 2002-3. "Close to 200 million tonnes of steel products are traded in the international market. Despite the war, our exports will be sustainable as long as we are cost-effective and maintain quality," says V. S. Jain, chairman of sail, which saw its exports grow by 101 per cent to touch Rs 1,000 crore last year. For once, China isn't just competing with-but also consuming-Indian exports.

Read the Interview of Arun Jaitley