What are the Key Problems of India’s Export Sector?
Among the major problems faced by Indian exporters the crucial ones are poor quality image, high costs, unreliability, infrastructure bottlenecks, inadequacy of trade information system, supply problems, faceless presence, uncertainties, procedural complexities and institutional rigidities, etc.
List of Major Problems of India’s Export Sector:
Poor Quality Image:
Made in India product line does not enjoy a good reputation in markets abroad. Rather it is considered to be a sign of poor quality. The products manufactured in Japan, Korea and now even in China are frequently quoted abroad as examples of dependable quality.
Despite the measures taken under the Exports (Quality Control and Inspection) Act and other laws, our exports continue to suffer because of the quality problem. On several occasions, carelessness and lack of commitment on the part of exporters are also responsible. There is a general impression that a proper export culture is lacking in India.
In India, the rate of interest on export finance is much higher as compared to other countries.
According to trade circles, interest payments alone constitute nearly 15 per cent of the cost of production in India. In addition, there are also the bank charges in India, which work out to be as high as 3 per cent compared to 1 per cent in countries like Japan and Republic of Korea.
Similarly, even the port charges in India are three to font times. higher than those of Colombo, Hong Kong, Singapore and South Korea.
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Technological factors and low productivity also contribute to high cost of production in India.
Further, Indian exporters are also deprived of advantages of the economics of scale and do not utilize their ability of bulk supplies due to lack of finance and other reasons.
Productivity is thus low leading to higher costs. Manufacturing performance is directly related to use of technology and management techniques.
The Indian policy towards technology has been somewhat lukewarm. Indians lag behind in the adoption of modem technology and technological innovations, as is done by South-East Asian countries.
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Our traditional export sectors of textiles and jute have suffered a lot due to this lack of modernization, whereas many other, competing countries have gone ahead of us in modernizing their industries.
As pointed out above the products imported from India are considered to be of poor quality. Besides quality, Indian exporters are also looked upon as unreliable on many counts such as going back on a contract or refusing to fulfill it on its original terms.
A major lacuna is also the inability to provide prompt after-sales service. Exporters from countries like Japan, South Korea and Taiwan normally replace a defective consignment free of cost and without taking much time.
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It is the prompt response or after-sales service which projects image of the supplying country for generating additional business.
In sharp contrast, within the framework of our policies and procedural formalities a quick response for replacing a damaged or defective consignment or for providing a prompt after-sales service more often than not remains an illusive idea for Indian exporters.
This unprofessional reluctance to give good and timely service after-sales ultimately results in their losing all future business.
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In India, infrastructure deficiencies such as energy shortages, inadequate and unreliable transport and communication facilities have so far hindered growth of exports.
Power shortages and breakdowns are so common that they often disrupt production schedules, increase costs and badly affect timely shipments:
Improving the transportation system, including the expansion and modernization of the port facilities, rationalization of their charges, improving the procedural, etc., is absolutely necessary if the country is serious about development of its export sector.
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Inadequacy of Trade Information System:
Efficient and time bound trade information system is a basic need for success in today’s dynamic export business. Electronic commerce including Electronic Data Interchanges (EDI) and Internet play a very crucial role in the world trade at present.
The unparalleled spreading out of Internet, has taken the world into the Age of information Superhighway. It has now become very easy to obtain any kind of information in a matter of seconds.
However, in India there are still no proper facilitates of communication and therefore it is not possible to rely on Internet for getting up to date trade information.
Even if the facilities are available, they are very costly. Some of the developed countries insist that they would not like to trade with a country whose exporters/importers cannot even complete necessary formalities through the Electronic Data Interchange.
In India, satisfactory progress in communications and information highway is still a pipe dream.
A very severe shortcoming of the Indian export sector is its inability to ensure continuous and smooth supply in sufficient quantities relating to many products.
The main problem is that much of the exporting is the result of the lingering approach and not any deliberate effort of producing for the export.
The predisposition is for exporting what is produced rather than producing far export. Such an attitude still continues to characterize the export behaviour and has proved extremely harmful for the export business.
Major export items of India like seafood, leather manufactures, spices, etc. mostly have a faceless presence in world markets. The exports undergo further professing or repacking in many cases.
However, in such instances Indian goods are sold in the foreign markets in the same condition as they are exported but under foreign brand names. Possibly, when a product carries a foreign brand name it gets a much higher price than if it is sold with an Indian name.
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A basic defect of India’s trade policy has been the uncertainty about future policies, incentive schemes, etc. To free the exporters from anxiety and ensure stability in this direction, the Export- Import (EXIM) Policy is given a five-year span. However, even then every year a large number of amendments are made in the EXIM Policy.
Procedural Complexities and Institutional Rigidities:
India has lost exports worth hundreds of crores of rupees due to the serious problem of interdepartmental coordination. It is observed that most of the existing procedural and documentation formalities prescribed by different authorities have been defined to suit their own individual requirements with no regard to the adverse consequences they can lead to on the total export activity.
When the country is trying its utmost to boost the exports, it is absolutely necessary that the documentation and procedural formalities related to exports are streamlined, simplified and kept to bare minimum. This way they will not become obstacles in the path of growth of country’s export business.