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March 31, 2000


The Rediff Business Interview/Murasoli Maran

'If removal of quantitative restrictions has adverse impact, we'll counter it through the weapon of tariff'

Murasoli Maran After the Millennium Budget from Finance Minister Yashwant Sinha, it was the turn of Commerce and Industry Minister Murasoli Maran to hog the limelight.

The second-most important policy statement from the government after the Budget is the Export-Import, or Exim, Policy. In the post-WTO debacle scenario, industry leaders, export houses and importers have been waiting with bated breath for Maran's decision on quotas and the steps he would take to boost India's share in world exports. Email this interview to a friend

Maran spoke to Neena Haridasabout his concerns regarding Indian exports and the steps that the country needs to take to increase foreign direct investment and merge with the global economy seamlessly. Excerpts from the interview:

You seem to be deeply impressed by China considering that you have decided to set up special economic zones in India based on the China model. How much of China can we ape in India?

We can't imitate China completely. After all, the socio-politico-economic scenario varies from country to country. But the rapid growth of exports achieved by China and South Asian countries has shown that given the right policies and freedom, our entrepreneurs can achieve sustained, quantum growth in exports.

My recent visit to China has been an eye-opener for me. The enormous interest evinced by functionaries like mayors of various cities and provinces in matters like foreign investment and export contribution of their cities is an example that needs to be emulated.

After studying the success of these special economic zones, or SEZs, in China, I have decided to have similar SEZs in our country. The idea of SEZ is new to India, hence I modelled it on China.

The idea is that in these areas, export production can take place free from debilitating rules and regulations governing imports and exports. The units operating in these zones will have full flexibility of operations.

They would be able to import capital goods and raw materials duty free and access the same from the domestic area tariff, DTA, without the payment of terminal excise duty.

No permission would be needed for inter unit sales or transfer of goods.

Does that also mean that our stringent and anti-growth labour laws will not be applicable in these special economic zones? Will the hire-and-fire policy be followed here?

Well, we have created a Labour Commission and the labour laws will depend on the commission's recommendations. As of now, these SEZs are being set up. In fact, two areas have been identified -- 880 hectares at Positra in Gujarat and 1,012 hectares in Nangunery in Tamil Nadu. These are likely to come into operation soon.

I will be writing to the chief ministers to give special facilities to the units located in such zones. What are the exact labour laws to be followed will be decided in due course. It is not up to my ministry alone to decide.

Since you are impressed with China, are you also considering giving "super national" status to FDI on a case-to-case basis in these zones or otherwise?

Not at all. As I said, we can't ape everything that another country is doing. We have been treating multinationals on par with the domestic companies. Why should they be given super-national status? We cannot treat them as special or give them incentives that are not available to domestic companies. We are a democracy.

Have you fixed any restrictions for foreign direct investment in these zones?

No decision has been taken on that issue. We are still holding discussions with the finance ministry. But if a multinational company comes to these zones with the intention of setting up a 100 per cent export oriented unit, we will, in all possibility, allow 100 per cent FDI.

The Finance Minister in his Union Budget 2000-2001, withdrew tax incentives to export-oriented units. Are you in any way returning the incentives through these SEZs?

I don't have any authority to give any financial incentives to anybody. We will have to wait for the Finance Bill.

On the one hand, you claim that you are against quantitative restrictions, or QRs, but on the other you needed international pressure and WTO move to remove items under QR. Comment.

One has to understand this in the historical perspective. QRs were being maintained ever since 1947 on Balance of Payments, or BoP, grounds under the General Agreement on Trade and Tariff, or GATT, to which we were a signatory.

We participated in the Uruguay Round and became a founder-member of the WTO and subscribed to all the agreements but we continued to maintain QRs on the same BoP grounds.

However, with the improvement in the BoP position, certain members of the WTO had disputed our need or justification to continue QRs for BoP reasons.

India could negotiate with most of the trading partners except US. US filed a dispute and the dispute settlement panel ruled against India. The appellate body also upheld the findings of the panel challenged by India.

Consequently, we are not obliged to withdraw QRs. But, it is not just this that has made us withdraw 714 items from the QR list with effect from April 1, 2000.

I do believe that QR means Quota Raj. All nations, barring five, have withdrawn QRs. It has no place in the merging global economy. And the remaining QRs on 1,429 tariff lines will also removed by April 1, 2001. I agree with some of those economists who say that QR means Quota Raj and it involves directly unproductive profit, or DUP, activities.

Don't you subscribe to the philosophy that removal of QRs will adversely impact the domestic industry?

No, removal of QRs will not have any adverse impact on the domestic industry. We have an industry capable of meeting global competition. In any case, if things get out of hand, we have the tariff weapon in our hands. That will control any adverse impact of multinational onslaught.

Is India comfortable with its exports?

The growth rate of 11.3 per cent achieved during April-January this year looks good when compared with the last year's not-so-satisfactory export performance. But this must not lull us into complacency.

This growth is partly due to good growth in world trade and revival in South East Asian economies to which our country's exports have shown an impressive increase this year. But many countries have done better than us. Most Asian countries have been clocking 20 per cent-plus growth during the latter part of 1999.

Despite this year's double digit growth, I don't think our world share will improve beyond 0.65 per cent, quite insignificant for a country our size and capabilities.

My target for export growth next year is 20 per cent.

But for that we have to diversify our export basket considerably. For this we need to bring about a paradigm shift in our export policy, procedures and related fields.

I am setting up a small group -- not a committee in the conventional sense -- to look into the various policy and procedural changes required to achieve this target. And they have been asked to make it quick.

There are many sectors in which we can make a mark given our skills. The world trade is growing in sectors like office machinery, automatic data processing, electronics, etc, but our share in these items is a mere 0.1 per cent or less.

There is also great scope in steel, metals, leather, pharmaceuticals, dyeing, tanning and colouring materials. Even half a per cent of the global share of exports in these sectors -- which cannot be considered an ambitious target -- should help us to generate additional exports of a few billion dollars.

In fact, I was just going through the data on US general imports from our neighbouring countries such as Malaysia, the Philippines and Thailand, and I see that exports of items like toys, clothing, gift items, textiles, radio receivers, etc, from these countries run into billions of dollars. Our share, comparatively, is insignificant.

So do you agree that toys, textiles, leather, etc, should be pulled out of the restricted list for small scale industry?

Yes, I am already in discussion with the ministry of small-scale industry to consider withdrawing these items from the restricted list. I hope a decision is reached soon.

I also support this idea because I think opening up of these sectors will generate employment. Textiles and leather industry will provide jobs for millions.

Export performance in major sectors such as plantation (-24.4 per cent), agriculture and allied items (-11 per cent) and leather (-8 per cent) have shown negative trends. What are you doing to improve the situation?

The fall in exports on the agriculture front is not entirely because of incompetence. On the one hand, there was inadequate availability of commodities, and on the other, international prices have fallen -- especially those of tea and coffee.

Hence, the value of our exports has come down. You see, one can't increase the quantity of production all of a sudden, nor can you compete on price when the international price levels are low. Thus, the only way out is to add value.

I think India has great scope in exporting processed foods and fruits. Foreign direct investment of up to 74 per cent is being considered in plantations to improve their productivity and performance.

You have set up the Foreign Investment Implementation Authority, or FIIA. Does this mean that the Foreign Investment Promotion Board, or FIPB, becomes redundant?

At one point in time, we thought that we can do away with the FIPB. But we have changed the idea -- we are not going to dismantle FIPB because there are certain administration measures involved in this.

For instance, some of the multinationals have asked for some letter or document from the Union government to show that they have got the clearance to set up shop in India. Now, these kind of day-to-day affairs are better handled by the FIPB itself.

Exim Policy 2000-2001 on

The Exim Policy Document

Exim Policy 1999-2000 on

Web site of the Ministry of Commerce and Industry



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