Making exports a Priority Sector will strengthen economy, says FIEO President

Higher rates of subvention for labour intensive sectors and corpus of funds for funding marketing efforts could help improve India’s economy.

The Dollar Business Bureau | @TheDollarBiz M. Rafeeque Ahmed, President, Federation of Indian Export Organisations (FIEO), says that while the Reserve Bank of India’s decision to reduce the statutory liquidity ratio (SLR) of commercial banks by 50 basis points will provide the necessary liquidity, making exports a priority sector could improve India’s overall economy.

President FIEO Mr Rafeeque Ahmed TDB1 M. Rafeeque Ahmed, President, FIEO

Priority sectors are those sectors which may not get timely and adequate credit in the absence of this special dispensation, says RBI. At present, priority sectors include farmers, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections for loans. Export credit is also under the PSL list, as per RBI’s February 2014 notification. However, it is more of an advisory note than a mandatory one for Indian banks. M. Rafeeque Ahmed also says that supporting actual exports from India will help solve several problems of the Indian economy including unemployment and sluggish growth. He says that employment and income generation are going down due to low domestic demand and the declining share of exports of products produced in India. According to an OECD-WTO study, domestic value added in exports (DVA) or the share of exports that is produced truly within India has declined from over 90% in 1995 to 78% in 2009. While service exports is surging in India, employment opportunities are declining with the reduction of DVA in employment-intensive sectors: 51% in manufacturing items; 73% in chemicals; and 76% in transport equipment, according to FIEO. Ahmed says that exports need a strong push to help the Indian economy grow faster. He suggests that making exports a priority sector and other appropriate measures such as higher rates of subvention for labour intensive sectors; corpus of funds for funding marketing efforts and to address infrastructural bottlenecks for exporting clusters could help improve India’s economy. India’s overall exports in FY2013-14 missed the target by around $11.5 billion. The government announced last week that India’s exports in the last financial year stood at around $313.5 billion against a target of $325 billion.