Ready for the big push

New Delhi, April 9: The share of labour-intensive goods in India’s exports has declined and commerce minister Kamal Nath’s trade policy seeks to provide incentives to such commodities.

However, Nath must confront the non-tariff barriers of developed countries and growing competition from low-wage economies such as China, Bangladesh and Vietnam to make any progress.

According to a study by the commerce ministry, the share of labour-intensive products in India’s exports has declined by 18 percentage points to 58 per cent in 2003-04 from 76 per cent in 1995-96 .

During this period, there was a relative stagnation in the share of labour-intensive exports such as agricultural commodities ? the main items being tea, spices and marine products ? textiles, ready-made garments and leather goods.

Despite the high growth in exports, the share of gems and jewellery, along with emerging commodities, such as horticulture and floriculture products, and processed food items did not rise either.

Unlike China, light manufactured goods such as toys, sports goods and other value-added labour-intensive products were not the main items in the Indian export basket.

The report said China has cornered a 75 per cent share of the $80-billion global toy market, while India’s share is just 0.4 per cent.

Similarly, in food processing, India hardly processes 2 per cent of its total farm production compared with 30 per cent in Thailand, 70 per cent in Brazil and 83 per cent in Malaysia.

The report said India was yet to exploit the potential of export-oriented foreign direct investment (FDI). Such FDI-based products make up 55 per cent of China’s exports and a substantial proportion of exports of other Southeast Asian nations such as Malaysia.

Non-tariff barriers in health and environment are the main obstacles to Indian processed food exports in the West. However, the report admits that in some cases the products are inferior and do not meet the quality standards of advanced countries.

Textiles and garments have been identified as major thrust areas . But here, too, China and even Bangladesh, which enjoys a preferential treatment under agreements such as ABA (anything but arms), pose a stiff competition.

Moreover, advanced countries impose peak tariffs on these products, which tend to limit the scope for expansion.

The report highlights the fact that exports have gradually emerged as an important source for jobs. It has also helped moderate the shrinking of employment in the organised industrial sector.

Currently, the country’s merchandise exports are estimated to sustain 16 million jobs.