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Chairman

Mr. Ravi Sehgal is the 24th Chairman of EEPC India

It has been a busy month for the newly re-elected Narendra Modi government. The dynamic new Minister of Commerce and Industry (CIM), who is also the Railway Minister, MrPiyush Goyal, along with his colleagues, MrHardeep Singh Puri and MrSom Prakash, have had a series of meetings with various industry segments including exporters’ organisations such as EEPC India.

I, along with my senior colleagues, attended some of these meetings. I briefly lay out the points and issues that emerged in these meetings:

1. Under the guidance of the CIM and the Minister of Steel, Mr Dharmendra Pradhan, the steel majors have agreed to provide steel at international prices without violating any provisions of the WTO and within the existing parameters of the Foreign Trade Policy. The work in this direction has already begun and we are discussing with the steel majors and the government on the modalities of how this can be done for the growth of engineering exports from the country.

2. The CIM has made it absolutely clear that the era of subsidies and incentives to promote exports must come to an end. The government has also been discussing ways to lower the cost of export credit; devise a new mechanism to give refunds to exporters on the unrebated portion of taxes still embedded in the production structure; restrict unwanted and poor quality imports so that India does not become a dump house of bad quality imports; and identify procedural bottlenecks so that it is possible to double exports in the shortest possible time.

3. The CIM has observed that the Prime Minister is looking for not just incremental export growth but of doubling growth which is in line with the Prime Minister’s call to make India a five-trillion dollar economy.

4. Finally, there is considerable stress on ameliorating the credit needs and market access problems of the micro and small scale sector.

 

The Commerce Secretary also held interactions with all Export Promotion Councils and Industry bodies to look at the opportunities that have opened up in China and the USA respectively as a result of the tariff wars between the two countries. These interactions were held together with the Embassy of India, Beijing and Embassy of India, Washington over video conference so that a holistic view could be taken.

We've been busy too for the last couple of months. EEPC India participated in several international exhibitions – GIFA 2019 in Dusseldorf, Germany, National Manufacturing Week 2019 in Melbourne, Australia, International Agricultural Fair 2019 in Novi Sad, Serbia, and Automechanika Dubai in the UAE, to name a few. GIFA, in particular, was very interesting as the international trade fair quartet of GIFA, METEC, Therm Process, and Newcast, is the world’s leading meeting place for foundry technology, metal production and processing, and thermal process technology. These fairs offered unique opportunities to our members to display their products and be exposed to the latest products and technologies, besides the chance to explore new markets.

At home, we organised a Technology Meet in Aurangabad with the support of the Office of the Principal Scientific Advisor to the Government of India and the Ministry of MSME, to bring together industry and academia and try and fill the technology gaps.

As I write, the first Union Budget of the newly re-elected government is slated for 5 July 2019. We expect ‘forward guidance’ on some of the issues that have been discussed by the CIM and his other colleagues in the course of the last month or so. There is an urgent need for fiscal stimulus now and the monetary transmission of reduced interest rates must percolate down to the borrowers. Similarly, the problem of caution listing by the Reserve Bank needs to be addressed on a permanent basis, even though it has been delayed till 30 September 2019.

The growing protectionism is a cause for concern and is also reflected in the considerable slowing down of our exports in the first quarter of the current fiscal. We need to fire on all cylinders to rev up engineering exports in the remaining three quarters of 2019-20.

 

This meeting delivered some results and the RBI caution listing date was postponed to 31 March 2019; the ‘pre-import’ condition was dropped vide DGFT Notification No.53 dated 10 January 2019 and efforts are now being made to educate the exporters with respect to using the UCO Bank mode for exports to Iran. I hope to continue this dialogue further during my meetings in the month of February 2019 when, among others, the Board of Trade Meeting is also scheduled.

 

As I write, the Interim Budget 2019-20 has been presented by the Union Finance Minister, MrPiyush Goyal. The fiscal deficit is expected to be around 3.4 percent of the GDP while the first step towards a Universal Basic Income (UBI) Scheme for smaller farmers has been initiated. Similarly, income tax exemption has been provided for incomes up to Rs5 lakh per annum. I understand that all the tax-related proposals are likely to be ratified when a full budget is presented by the newly-elected government in July 2019.

 

There is no doubt now that the pace of engineering exports growth has slowed down considerably and the third quarter has shown negative growth. While detailed analysis of the trend is provided in the following pages, three critical segments have held back the potential that is there: primary iron and steel exports; copper and copper products exports; and zinc and zinc products exports. Of the three, the first two are the result of market imperfections and an exogenous factor respectively. EEPC India has been continuously hammering the point that while most segments of engineering face the vagaries of the market, domestic steel prices are not ‘market determined,’ resulting in higher prices making downstream value added uncompetitive in global markets. The other impact, now that the international steel prices have fallen, is that the Indian steel majors are catering only to the domestic sector, cutting back on their exports.

 

With respect to copper products exports, the closure of the Tuticorin plant has led to 40 percent drop in production of copper products while imports of refined products have increased. From a net exporter of refined copper, we have now become a net importer. With respect to zinc, there was a fall in domestic production, which hopefully is a short-term phenomenon. Clearly, we need to work out alternatives and some of the suggestions that we have been making to the government, if implemented, can help to some extent in the promotion of the rest of the engineering products. These are products where domestic production and external conditions do not face such negative externalities.

 

On our part, we will continue to promote engineering goods and the eighth edition of the International Engineering Sourcing Show, IESS VIII, scheduled over 14-16 March 2019, will be one such effort to give a major thrust to the promotion of sourcing of engineering products from India, showcasing technological advancement and future technologies, especially for our MSME units.

 

Malaysia is the Partner Country in IESS VIII being held in Chennai. Malaysia, with Asia’s eighth best and the world’s 25th best overall infrastructure, Southeast Asia’s fourth-largest and world’s 38th-largest economy, has one of the best economic records in Asia since its independence with its GDP growing at an average of 6.5 percent per annum for almost 50 years.

 

As both Malaysia and India are moving towards a technology-driven automotive industry equipped with shared mobility, connectivity, electrification, and autonomous driving, this is the most appropriate time for Malaysia Automotive, Robotics and IoT Institute (MARii) to play a lead role to participate in a global forum like IESS.

 

Malaysia’s participation is expected to be a major game changer at IESS 2019, anticipating greater collaborations between MARii and Indian companies and the creation of a technology ecosystem between the two countries.

 

I urge our readers to join us in IESS VIII and benefit from the bouquet of the programmes we are going to present at this mega show.
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