A 30 point jump in ease of doing business and a new indirect taxation system promising efficiency have been two of the most promising reforms for Indian exports.
The ministry of commerce suggests that between April-August 2017 the country achieved Rs 739,805 crore in exports. That is precisely 40% of Rs 1849428.74 crore, the account of our exports in FY17.
Numbers suggest that exports have risen in the past 12 months, but recent reforms have taken a toll on sectors such as textiles, agriculture, Jewellery to name a few. ICRA, the credit rating agency suggests textile sector slipped by 1%. The Gems and Jewellery Export Promotion Council said a 26 percent dip in jewellery shipments in July. The World Bank too corrected its GDP figures to 7 percent in 2017 from 8.6 percent in 2016.
Export numbers have been a measure of a country's development index. But sadly our exporters have espoused fears that recent policies such as GST have disturbed a growing export market.
Mandar Athalekar, a supply chain specialist from Thomson Reuters dispels this as a notion. In an interaction with Sify.com's Sairaj Iyer, he discusses about supply chain effectiveness.
Here are edited excerpts from the interaction:
With most sectors suggesting a negative trend, do you think India's export numbers are rising?
WTO (World Trade Organization) forecasts indicate a stagnation in global trade growth, but exports from India have been growing for the last twelve months now. WTO Director General Roberto Azevedo welcomed India's initiatives in Trade Facilitation Agreement (TFA), aimed at reducing the transaction cost of imports and exports and facilitating smooth movement of goods across borders. India is not just contributing to but positively influencing Global Trade.
We still get to hear talks on supply chain effectiveness and how infrastructural delays including cumbersome paper-work are impeding our exports, what is your take on this?
Indeed, these problems have existed, but there are improvements. In a big leap towards improving 'Ease of Doing Business' in India, Government reduced mandatory documents for global trade (DGFT's Notification dated 12-3-2015) to just three, namely Bill of Lading/Airway Bill, Commercial Invoice cum Packing List and Shipping Bill/Bill of Entry.
Additionally, Indian Customs launched an online clearance and documentation facility for importers and exporters namely SWIFT (Single Window Interface for Facilitating Trade) from 01 April 2016. These add to our effectiveness of supply chains and doing business. We have jumped 30 places up over our World Bank DB Ranking last year, from 130 to 100, the highest jump in a single year by any country ever.
You have been getting to work with some of the top automotive as well as pharma specialists, what are these people talking on GST? How different is it from what one gets to hear at the bottom?
In large organizations, I think the senior executives were well-prepared. They understood the magnitude of the change. There were some unanticipated issues, but most of those who planned well, resolved them well.
MSME (Micro Small and Medium Enterprises) however, faced issues like working capital blockages due to delayed refunds. A lot of these got aggravated due to lack of preparedness and willingness to invest in infrastructure rather than the issues per se. I would not want to undermine the concerns, but they were promptly responded with corrective actions. GST, in the long run, will benefit from an efficient supply chain and increased competitiveness. It is an investment-favorable reform this government has brought in a time-based manner.
What do you think comparing our GST implementation with that of countries like Singapore or Canada or Australia? Did we miss out on something?
I think this may not be a logical comparison to make. Of course, the common problems of standardization of tax rates, governance and implementation preparedness could be managed better by lessons learnt from experience of other countries, but considering factors of diversity, regional complexities, uneven socio-economic distribution, tax penetration and compliance history unique to our country, I think we are doing quite well in stabilizing and ensuring successful implementation of this historical reform.
Commerce ministry data, shows agro-exports coming down, pharmaceutical exports have been good but not in line with our expectations. Jewellery is down, and the outlook for services too has tapered. Does this suggest we have a fault-line?
As a sector, agriculture has lately registered drop in exports, but there is tremendous growth potential. We are the largest producers of bananas, milk and pulses and our products are exported to over 100 countries. Pharmaceutical exports are actually a growth story. So instead of finding a fault-line with our exports, I would rather recommend industry prioritizes its strategic focus on manufacturing and export competitiveness. Compliance and Information Management would go a long way in achieving it.
What compliances are you referring to?
Look at the multitude of product categories, the ITC-HS classifications, the multiplicity of taxes and duties in valuation assessments, clearances from various participating government and partner agencies other than Customs viz. Plant Quarantine, Animal Quarantine, Food Safety and Standards Authority of India, Central Drug Authority, Wildlife Crime Control Bureau, etc., import and export licensing requirements, export obligation and many such controls built into exports and imports – all these constitute compliance.
How does your product fit in this scenario?
ONESOURCE Global Trade is a cloud software technology solution, mainly for manufacturing, exporting and importing organizations to automate global trade processes. The tool meets compliance requirements, tracks and utilizes various export incentives. It fulfills export obligations without any defaults or penalties. Additionally, there are workflows and rules engines powered by trusted content, like one for origin determination in exporting under FTA (Free Trade Agreement). It has document management and dashboard analytics' capabilities too.
The rural economy will definitely be hit if this is sought to be forcibly implemented across the country, but I foresee huge difficulties in such implementation.
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Mandar Athalekar is a Supply Chain Management specialist with Thomson Reuters. He speaks on issues related to technology, trade, and supply chain management.