Chapter- 4

Sector-wise Strategies
In the section on product identification, we have identified the main sectors for focus.The sectorwise strategies are given below for the identified sectors: 1. Engineering/Electrical/Electronics and allied. (i) Engineering (in general) (ii) Auto sector (iii) Project Exports (iv) Electronics Hardware and other IT related sector (v) Instruments and Repaired Products. 2. Textiles. 3. Gems &Jewellery 4. Chemicals & Allied including cement 5. Agriculture & Allied (including plantations & Marine products). (i) Agriculture & Allied (ii) Plantations & Related Items (including tea, rubber, coffee, tobacco, spices, cashew) (iii) Marine Products. 6. Leather & Footwear. 7. Other items. The sector-wise strategies have been outlined below for these major sectors including the identified potential items. The items which are not in the identified list of potential items, but for which strategies are given are cement, rubber, and project exports.These items have been included as they have a potential for India though the current export is less. Project exports do not come under any single commodity but are related to engineering sector and are important potential exports of India. Rubber under Plantations sector has been included mainly to find new avenues for exports of a major item affecting the Indian farmers. Export Promotion councils/ commodity boards and some associations have prepared medium term export strategies or provided necessary inputs. All this has been carefully examined. In the analysis that follow in this chapter, the essence of the sectoral strategies has been evolved on the basis of the analysis in the earlier chapters, as also the analysis by the respective EPCs/ CBs. Further detailed sectorwise strategies to achieve the macro objectives given in this document needs to be worked out. The highlights of some of the sector-wise strategies which need to be considered in consultation with EPCs/CBs and exporters are discussed below.

4.1 ENGINEERING/ELECTRICAL/ELECTRONICS AND ALLIED

4.1.1. Engineering Sector (in general) Identification of the need for support specially for SMEs support for adoption of latest technology, advisory services, market support. Partnership with technical institutions like IIT for product adaptation and technological upgradation.

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 Accreditation of testing laboratories in India by overseas agencies to enable them to offer test inspection certificates/marking of products etc. Raise the present investment limit for SSI sector substantially to help achieve modernisation and technological upgradation. Enhance MDA assistance to more SSI units in obtaining ISO 9000 certification. Technical barriers to trade (TBT) would be the major non tariff barriers (NTBs) in future. Need for R&D to enable Indian exporters to effectively counter such NTBs. Need for relocation of units from overseas to India by MNCs and global players. So there is a need for furthering JVs which have been established in India. Marketing India by specialized trade fairs. Brand promotion to be carried out aggressively with institutional support. Road shows to project image of Indias capability in various hinterlands in the target markets. Need for support to industry to fight anti-dumping cases overseas. Provide warehousing and total logistic support in overseas market for Just-In-Time delivery. 4.1.2 Auto Sector It is large in size in terms of output (Rs.45,000 crore) which is higher than other priority industries like finished steel, electronics and software. Has great employment potential. Has strong backward (component, basic material) and forward linkages (insurance, financing, oil industry and roads). Contributes 17% of total indirect taxes. Drives product and process technologies. Attracts substantial FDI. (i) Automobiles Exploring possibility of promoting exports of Indian made economy vehicles in developing countries and middle & low income groups in developed countries. For this need for strong promotional measures for Indian products as there is a lack of confidence in products manufactured in India. The MNCs and overseas partners of joint venture may also not give priority to exports as this may affect business of their other units abroad. Decisive policies needed in this regard. 50

 Penetration of automobile markets in developed countries would require good dealers network, availability of a range of cars to meet customers choice, after sales service, etc. This is possible only if large automobile MNCs have presence in India on their own or in collaboration with Indian companies. FDI is therefore, crucially important to promote export of automobiles. Maintaining information on automobile dealers with the help of SIAM (Society of Indian Automobile Manufactures) and Indian embassies. Need for at least one Indian port to develop specialisation in handling vehicles for international market at a reasonable cost. Funds for creating new testing facilities and upgrading existing ones. Need for customised shipping vehicles as the RORO vehicles presently available from Japan and Korea are designed for carrying large number of vehicles and consignments have to wait till such minimum volumes are built. Need for mid sized pure car and truck carrier (PCTC) which are compatible to Indian volumes and volumes of other countries for shipment to Africa, Middle East and Sri Lanka and can reduce delivery time and cost. Since lot of time and effort is needed for homologation of vehicles in foreign markets and none of the Indian national testing agencies like ARAI, VRDE, IIP, CIRT have international recognition, there is a need for Indian testing agencies to get themselves recognised in the major markets where Indian vehicles are being exported. Mutual Recognition Agreements(MRAs) are important in this context. Need for greater ECGC risk taking ability in African and Asian markets where most of the Indian automotive products are currently exported. Favourable premium charges need to be worked out and higher hull insurance costs to be addressed. General policy changes which also affect automobile sector like lower port charges, berthing charges, etc. besides dedicated berths in ports for automobiles. The port tariff regime based on conventional break bulk vessels should be specially worked out for Pure Car Carriers (PCCs) and Pure Car and Truck Carriers (PCTCs) so as to make them comparable with other ports. Need to remove bottlenecks in export clearances like octroi barriers in places like Mumbai and check post formalities. The octroi levy has to be paid and claimed as refund. So need for exempting export clearances from such levies. Support to export to identified markets like North and West Africa, Latin America, CIS, SAARC, etc. Aggressive marketing by free supply of tool kits, company signs etc. to overseas dealers by recognized exporters by waiving laborious process of GR and prior approval. Need to consider allowing cars for testing and demonstration to Institutional buyers abroad.

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 Simplifying procedures like payment of warranty claims, as at present for each claim copies of invoices, declarations, authorisation from overseas vehicle dealers, etc. are required to enable remittances. Since exports against rupee payments are also considered for status recognition, there is need to consider export earnings in rupees from Nepal and Bhutan for discharge of export obligation under concession schemes for big-ticket exports like automobiles. Since specific exemptions are available for import of duty free cars for diplomats, UN agencies, etc., to encourage purchase of domestically manufactured cars, domestic sales to them need be treated as deemed exports to enable refund of excise duty and duty drawback. Need to consider the issue of rebating port charges, service tax, lighthouse fees, etc. for exports and also lower these charges wherever feasible to levels of our competitors. (ii) Auto Components Three pronged export marketing strategy need to be adopted - export through OEMs for their global sourcing requirements; export to tier 1 manufacturers as a part of their international supply chain; and direct export to after market. Tremendous potential exists for component manufacturers to export through international OEMs who have set up their units in India. The MoU policy has enabled vehicle manufac turers e.g. Daewoo, Ford etc. to export components for their global operations. Global tier 1 manufacturers who have set up plants in India are now sourcing new components and sub-components from local sources due to cost considerations. Component manufacturers are now supplying new generation components to these tier 1 component manufacturers and to their global operations, where the vehicle part is similar. Direct export to after-market is the traditional field for Indian component manufacturers. Most of the export of auto component industry is going to the after-market overseas. This also holds tremendous scope for component manufacturers in countries where the aver age age of cars is above 10 years. Focussing the Market Development Assistance on potential sectors like auto components. Focussing on auto sector in some SEZs and automobile component centres like Delhi, Chennai, Pune and Bangalore which are the four areas where there is a concentration of auto component units and special export zones can be created in these places in a centripetalous way. Need for substantial help for improving the productivity in the SMEs in the automotive sector, emulating best practices on the shop floor and continuous training to be competitive. For this a special fund can be set up using the automotive cess funds managed by the Ministry of Industry. 52

 Some specific areas in which India has a strength are in the 3-D industries i.e. Dirty. Difficult and Dangerous i.e. castings and forgings and their derivatives. Since possible Non-Tariff Barriers (NTBs) are also in these areas, it is possible to help this sector to cope up with TBT (Technical Barriers to Trade), environment and other safety-related conditions. Explore possibility of a Free Trade Area (FTA) or Preferential Trade Area (PTA) with Brazil and/or Mexico as Latin America represents a fairly large latent market for Indian auto components. Mexico could also become a channel for increasing exports to US market. As a part of the policy to reduce transactions costs, bank transaction charges in letters of credits should be reduced. Schemes to promote R&D needed for this sector e.g. support for automotive units to establish their own product development and scientific research institutions, setting up world class R&D centres in places like Pune, Chennai, Gurgaon and Bangalore and providing specialised services to the component industry for upgrading their shop floors into world class by setting specialised instiutions by industry associations like ACMA (Automotive Component Manufactures Association of India), accelerated deduction on scientific research, etc. 4.1.3 Project Exports Need to set up construction equipment banks for purchase/hiring construction equipment to facilitate more project exports. Customs duty on construction equipments to be reduced as far as possible. Simplifying the procedures for project export participation to encourage Indian construction agencies in overseas contracts. Training and technology upgradation support to be provided to workmen involved in project activities from the SSI sector. Indian construction companies to adopt a consortium approach by pooling their financial, managerial and technical resources to increase project exports and also achieve scale economies. 4.1.4 Electronics Hardware and Other IT Related Sector Today IT and electronics goods exports account for around 47% of Singapores GDP and 65% of that of Malaysia. IT accounts for 8.3% of the GDP of US economy, while in India it is less than 1% of GDP. IT is the single largest job creator in Taiwan and the US. An estimated 7.4 million jobs were created in IT and electronics in 1998 in the US, of which close to 6 million were in hardware and associated services. The hardware industry in India has the potential to create million jobs every year. Unlike the software industry, IT hardware sector creates job opportunities for semi-skilled people as well, which is an opportunity India can ill-afford to overlook.

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 Indias share in world IT trade of about 1 trillion dollars is about 1%. There is need for image building for hardware. There is need to explore relocation of electronic hardware units from S. Korea, Japan, Singapore and Taiwan. There is need to develop R&D, design and engineering capabilities. There is need to take part in standards setting in the world. There is need to participate in leading edge technology. 3 key Mantras are the following: Hardware-software combination to leverage upon our phenomenal success in software. Local and export production should be seamlessly integrated for maximising economies of scale. To improve its usage, need to examine whether sales of IT products to educa tional institutions should be exempted of all local levies, which will help in improving IT infrastructure and to examine whether computers/internet connections/other IT prod ucts given to employees should not be considered as taxable perks. Massive investments comparable to S.E. Asian countries to derive the maximum competitive advantage from twin factors - a low-cost-high-quality knowledge workforce and a fast growing internal market. A successful hardware and software sector and its application in all our old economy sectors can give us a competitive edge in the old economy sectors also. Thus, IT can be the driving force of the economy. Indian IT industry should be made strong enough to meet the demands of a zero duty regime under the WTO-ITA by the year 2003 as targetted by the government, though the WTO negotiated terminal year is 2005. Import duty on imports of capital goods and dual use items needed for IT hardware manufacture should also be reduced by shifting to a 8-digit tariff code system. Thrust items would be electronic components and computer hardware in the medium term and medical and defense equipment in the long term. Promoting FDI and facilitating mergers, acquisition and amalgamations to achieve globally comparable scale of production. Development of India as an off-shore production centre for components/equipment required for large and medium multinational units through clusterisation..

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 The policy on locational planning emphasising on standardised production, regulating input flow and effective coordination between equipment, component and support. Facilitate testing of electronic product and assist SMEs in marketing their products. Indian electronic exporting units to establish global connectivity for marketing, franchises, licensing and servicing. Thrust products are the following: Contract manufacturing: Motherboards, monitors, keyboards, multimedia speakers, data communication and telecom products, internet appliances, set top boxes, optical networking products, handheld device, etc. Design and fabless semi-conductor-hardware design and firmware: VLSI (Very Large Scale Integration) ICs, ASIC (Application-Specific ICs), DSP (Digital Signal Processing), system on a chip etc. and other embedded software. Increase growth levels to a CAGR of about 10% in next 5 years from current level of 2.12% in electronics hardware sector. S.E. Asian countries, Singapore Hong Kong are the main destinations of our electronics exports followed by US and EU. There is need to focus further on US and EU markets besides S.E. Asia. Bringing the customs duty on all imported parts and components to nil, especially items of dual usage. The SEZ (Special Economic Zone) model for IT hardware could be a possible solution. A special SEZ for IT hardware may be considered with the new provisions like relaxation of minimum area specification for special SEZs in hardware, holiday time for implementing NFE (Net Foreign Exchange) conditions and minimum of say 5% export performance obligation over a period of 5 years. Minimum 10% duty differential between input parts and components and finished goods. Simplifying procedures to increase velocity of business through the process of self-declaration based clearance for all IT imports and exports. Promoting IT technology (developed in India) exports: a) Need to examine exemption of IT technology export royalty from corporate tax. When these technologies are licensed to our overseas business partners the royalty so earned attracts corporate tax. However, software exports do not attract any corporate tax. All these technologies have software as their base and hence to avail the tax break, companies declare these as software exports and not as technology exports. There is a need to showcase technology Made in India. But, unfortunately, nobody does it so for the

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fear of attracting the taxman. Therefore, need to consider exemption of IT technology exports from India from corporate tax. b) Need to examine amendment of the bilateral treaties to exempt with-holding tax. India has bilateral trade agreements with various countries like US, Japan, Germany, UK, etc. where significant proportion of our IT technology is exported. Unfortunately trade in technologies with these countries attracts withholding tax e.g. USA and UK - 15%, Germany 10% and Japan 20%. This acts as a trade impediment and adds to the cost of the importers of our technologies in these countries. Further, neither our trade partners nor their respective Governments would have any objection in cancelling the withholding tax though they insist on cancelling this in the case of all sectors and not merely IT sector. This has to be carefully examined as IT sector no longer has the fear of imports and can withdraw withholding tax on import side while getting cancellation of withholding tax in the import markets of the trade partners. This however may not be the case with other sectors. India can be the ideal base for outsourcing hardware, hardware designs and related services. Hardware exports is expected to grow to US $ 5 billion by 2005 and US$ 10 billion by 2008. PC penetration is expected to grow from current 6/1000 to 20/1000 by 2005. If the above policies are followed, the hardware sector exports can grow from the present level of exports of around 240 million dollars to around 5 billion dollars by 2006-07. 4.1.5 Instruments and Repaired Products Instruments particularly Medical Equipments have a high potential for export and a combined policy including export of services like Medical Services along with exports of medical instruments and pharmaceuticals is needed. Repairs and repaired products is another high potential item. Here also combined policy for repair services along with export/re-export of repaired products is necessary. A special SEZ can be thought of for this purpose.

4.2 TEXTILES SECTOR

Textiles and clothing constitute the single largest group of commodities in the countrys export basket accounting for almost one-third of Indias total exports. Textile exports increased from US $ 9.56 billion in 1996-97 to US $ 12.10 billion in 2000-2001 with an annual growth rate of 6.08%. The ready-made garment sector is amongst the largest segment in Indias textile export basket contributing about 41% of the total textile exports. The textile exports will enter a new phase by the removal of quotas in early 2005. The following measures are planned to increase textile exports.

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Increasing investment : Export led growth in the textiles sector in the globalised market scenario is possible only with large investments in the key areas of the industry, particularly in weaving, knitting, processing and garment sector.
Investment in general and especially for modernization, will be encouraged through schemes such as Technological Upgradation Fund Scheme (TUFS), provision for accelerated depreciation for machinery under TUFS, reduced rate of duty for import of capital machinery and changes in fiscal structure to make it growth oriented. A programme to induct 50,000 shuttleless looms and to modernize 2.5 lakh plain powerlooms to semi-automatic looms will help increase the weaving capacity and also improve the quality of the fabric. De-reservation in the woven sector of the readymade garments and increasing SSI limit from Rs.1 crore to Rs.5 crores in case of knitwear / knitting industry would result in attracting Foreign Direct Investment (FDI) in the garment sector.

Infrastructure Development Apparel Park for Exports will be set up to provide world class infrastructure to encourage setting up of export oriented garment / integrated units to take advantage of the opening up of the global market in the year 2005. Textiles Centres Infrastructure Development Scheme (TCIDS) to be implemented to fill up critical gaps in infrastructure needs of the existing textiles centres. Restructuring the EPCs The EPCs will be restructured so as to make them perform their new role which would include collection and dissemination of commercial information, facilitate formulation of appropriate strategy for promotion and protection of exports, development of new markets and guiding the industry to face challenges of free trade. New Schemes (Brand Promotion and Export Market Assistance Schemes) To improve the perception of Indian textiles items in the international market, a Brand Promotion Scheme focusing on few products with international quality and high growth potential will be introduced. The EPCs / other trade bodies will be given assistance to contest anti-dumping/ antisubsidy cases so that the latter do not hamper market access. Labour Laws The labour law provisions retain the potential for last minute disruption of export obligation fulfilment. Efforts would be made to restructure labour laws to create a labour productive and productivity conducive environment to ensure smooth production by export oriented apparel units without fears of sudden or illegal strikes. 57

Smoothening Existing Schemes

Efforts needed to see that : DTA units which export a minimum of 50% of their overall production also get all the facilities /incentives as are available to a 100% EOU. There is a stable and predictable policy regime so that exporters can adopt uniform pattern of trading. Mid-term changes adverse to exporters will be avoided. Exporters are fefunded all Iocal duties and taxes imposed on inputs and intermediates used in export production including electricity duty which amount to around 17% of the total production cost.

4.3 GEMS & JEWELLERY

(i) Diamonds In cut & polished diamond market India has 55% share by value, 80% by caratage and 90% in number of pieces polished. This itself indicates that our unit value realisations are lower. To move up in the export value chain, forward and backward integration is needed. So need for strategic alliances with the producers of roughs and retailers of jewellery which can lead to economies of scale and higher market share. Need for sustaining relationship with De Beers and also strategic alliance with diamond producers other than De Beers and Argyle. Efforts to be taken towards development of skills and infrastructure for India to become a grading/trading centre for processed diamonds. (ii) Gem stones Need for forward integration into gem stone jewellery. The industry to adopt modern technology in the cutting and polishing segments. The tools used in Jaipur have changed little over 200 years. Low entry barriers have resulted in Not so good players in the industry adversely affecting the image. So need for `certification in the industry. Need to encourage corporatisation in this sector as proprietary concerns/partnership firm model of governance limit the expansion in this field Need to expand the gem stone sector to other parts of the country where labour is cheaply and abundantly available along with creation of infrastructure. 58

 While Thailand is important in this sector, India can be a trading centre and for this a change in import policy related to coloured gem stones is needed. For instance, the foreign buyer should be allowed to carry gem stones, unrestricted, into the country, and deal with the processor/manufacturer on a one-to-one basis, carrying out cash at the end of the transaction (after paying the necessary taxes). There is also a need to develop strong buyer commodities chain in this segment. (iii) Jewellery This sector ignored till now. Need to move towards exports. Hall marking and certification of goods towards development of an Indian brand in the jewellery market. India needs to integrate throughout the jewellery supply chain from mining of raw material to the retailing of end product. Need for Joint Venture manufacturing with the leading suppliers of the world such as Italy. Develop market intelligence focussing on USA, Japan, France and NRIs.

4.4 CHEMICALS & ALLIED PRODUCTS INCLUDING CEMENT

(i) Chemicals Identification of area of support required by industry for adoption of latest technology, advisory services, marketing support. Setting up of Comprehensive Chemical Estates with the integrated end-product manufacturing facilities in different parts of the country. Developing India as the sourcing point and as a subcontracting base for chemicals by organizing events like INDIACHEM 2000 on a regular basis. Enhancing awareness of Indian herbal items by launching an appropriate web portal on India Ayurveda and adoption of standardised procedures and a rigid quality enforcement system for Herbal/Ayurvedic products. Efforts to win international tenders in medicine. Focus on branded generic pharmaceutical products out of patent regime in developed markets. Launching an advertisement campaign in electronic and print media in all the countries about the quality of Indian pharmaceutical products meeting International Standard so as to defeat the anti-India propaganda.

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Curbing the menace of spurious drugs. Encouraging investment in R&D in the pharmaceutical sector. Focussing on rubber manufactured products like moulded rubber goods,cycle tyres, rubber condoms, surgical gloves, v-belts,cycle tubes, examination gloves, rubber sheeting, conveyor belting, rubber gasket, transmission belting, hot water bottles and other hoses. Sponsoring rubber delegation, buyer-seller meet and participation in Rubber Expo. Focussing on exports of print and publishing products, particularly, e-publishing. (ii) Cement India is the 2nd largest cement producing country in the world. The present capacity of Indian cement industry is 140 million tonnes. Domestic demand during this year 2000-01 was 90.29 million tonnes and is likely to grow up to 96 million tonnes in 2001-02. The industry has capacity and capability to export 10 million tonnes or even more annually without affecting supplies to domestic market in view of large capacity. Export during the year 2000-01 was 5.15 million tonnes. India has immense potential to tap cement markets in the countries of Indian sub-continent, middle east and south east Asian countries in view of its strengths viz. locational advantage, large scale lime stone deposits, adequate cement capacity and world class cement production with latest technology. Export of cement is expected to touch a level of 6-7 million tonnes from the present level of 5.15 million tonnes annually if duty free import of coal is increased to 40% of cement export from the present level of 20% and custom duty on coal is reinstated @ 15% without any surcharge from the present level of 25% without surcharge. Further the industry can export as much as 8-10 million tonnes annually if custom duty on coal is reduced to 5% without any surcharge. This can be done by shifting to 8-digit code for customs duties as suggested in Box No.5.1.1. Presently the railway authorities are levying Rs.17/- PMT from the cement exporters towards custom examination charges.This additional burden affects cement/clinker export to Bangladesh. Thus, to increase cement export, there is a need to examine the withdrawal of this levy by railways from the cement exporters. The issue of preferential custom duty by SAARC countries. Sri Lankan Government which has allowed preferential custom duty on Indian cement at 9.5% has extended the facility to other countries also by reducing the duty from 25% to 10% from October 2001 thus neutralising the preferential treatment India enjoyed under Indo-Lanka FTA. There is a need to convince Sri Lanka to levy 0-5% tariffs so that India can continue to get preferential treatment. At the same time Bangladesh has not extended this benefit to us. Bangladesh should be urged to give preferential rate of custom duty on imports from India for cement and clinker on the same lines as that of Sri Lankan government. 60

 Need to rebate for exports the costly State levies like royalties on coal, limestone and gypsum; tax on power tariff and sales tax on consumables and spares used in cement production which aggregate to around Rs.139 per tonne and form around 20% of the cost of cement. The break-up of these costs show that royalties form around 14% of total costs, sales tax on stores and spares form 3% of the costs and tax on power tariff form another 3% of the costs. Rebating these costs can make Indias exports competitive. The freight rates by railways on cement exported to Bangladesh is Rs.753 PMT compared to Rs.442 PMT for foodgrains. Thus freight for cement is higher by around 70%. Lower freight rates can make cement exports to Bangladesh competitive. If FTA facility is extended to countries in Africa, Mauritius, etc., cement/clinker exports from India could get a further boost.

4.5 AGRICULTURE & ALLIED, MARINE, PLANTATIONS, ETC.

4.5.1 Agriculture & Allied Products To established agri export zones in consonance with guidelines laid down in the exim policy. Appropriate pre and post-harvest management, standardised storage technology and setting up an institutional mechanism to ensure continuous interaction between the ICAR institutions, APEDA, Department of Food Processing Industry and the concerned State Agriculture Department to achieve effective research and extension interface. Developing appropriate infrastructure for cold chain linkage from firm to the market level and providing them collectively for a region with potential strengths of producing agro products for most of the year. Designating agencies responsible for laying down quality standards and human safety standards who would also establish and publicise transparent procedures for their accreditation of the Government and private bodies. To establish a Supply Chain management in the case of Basmati rice to ensure that the product would be traced back to farm level. An export certification programme for Basmati rice to be formulated so that importing countries are fully confident about the quality.

Review of the policies of fixation of higher minimum support price for Non Basmati rice, levy, restrictions in inter state movement of food grains etc. Setting a nodal SPS point in Department of Commerce.

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 Review of Tariff Rate Quotas (TRQs) maintained by other countries. Export subsidy issues. Using unused subsidy of one year in another year to be opposed. A common stand by developing nations on harmonisation of standards and SPS measures. In the case of floriculture, maintaining the cold chain throughout the entire process of production, transportation till it reaches the consumer. Certain innovative packaging like aqua pack, procona packaging, use of 350GSM virgin craft paper, etc. are needed. Developing markets closer to India in places like Middle-East & South East Asian countries by setting up flower auction centres at Bangalore, Chennai, Mumbai & Delhi and need for focussing on flower auctions over internet. In the case of mangoes, the concept of packhouses/value added centres where number of post-harvest activities are carried out, has to be developed among the growers/exporters. To build a quality image for Indian mangoes and also to ensure that the mangoes from certain regions and certain farms develop a niche market, a concept premium in terms of recognition is to be given to those that are exported through packhouses. 4.5.2 Plantations and Related Items 4.5.2.1 Tea Given the prospect of downward pressure in prices, need to concentrate on exploration of market oriented approach. The industry has to establish itself as an efficient processor and marketer of broad spectrum beverage. A close interaction between marketing, research and scientific industrial research is essential for the industry. Shift the focus from bulk tea exports to value-added packaged tea in external market. Focus on orthodox and Darjeeling tea, green tea in places like Morocco, organic tea, etc. New brand building approaches to be evolved and launched on a consortium basis by major players. Need to take advantage of health consciousness for promotion of tea Need to rationalise tax structure for tea. Focussing on each market based on their needs.

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4.5.2.2 Rubber A detailed global market study to be carried out for promotion of natural rubber exports, Efforts to be made for improving quality of processed rubbers through group processing centres. Focus has to be on exporting more value added forms of natural rubber. The thrust products of rubber wood identified for exports are four sides planed (S4S) sections, mouldings, finger jointed laminated codes, furniture components, kitchen cabinets and accessories etc. Main focus area include providing on line information, arranging buyer seller meets etc. 4.5.2.3 Coffee By 2004-05 world demand for coffee would be 6.74 million tonnes, while world production would be 7.31 million tonnes. Consumption would continue to be concentrated in developed countries. Judicious mix of strategy relating to export of Arabica coffee vis-a-vis robusta depending on market preference. Potential growth markets identified for Indian coffee are Japan, West Asia, France, Poland, Spain, Belgium & Netherlands. Need to increase Indias exports by 15% over the next five year in Japan and USA. A steady growth rate of 10% to be achieved from the present level to markets like Belgium, France, Germany, Italy, Netherlands and Spain. 4.5.2.4 Tobacco & Tobacco Products India is currently the worlds 2nd largest producer of tobacco next to China. Indian tobacco is exported to more than 80 countries spread over all the continents. The tobacco industry provides employment to 25 million people. Of the total exports of tobacco items from the country, unmanufactured tobacco accounts for 80% to 85% and manufactured tobacco products account for 20% to 25%. Of the unmanufactured tobacco exports Flue Cured Virginia tobacco is the single largest item accounting for 75% to 80% of the tobacco exports. The other varieties exported are Burley, HDBRG, Natu, DWFC, Top Leaf & Jutty-all are cigarette tobaccos. Non-cigarette tobaccos exported are Lalchopadia, Judi, Rustica for chewing purposes and Bidi tobacco in small quantities. The export of non cigarette tobaccos are at levels of 8-10%.Contrary to international trend, Indias tobacco production is dominated by non-cigarette tobaccos.

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 Indian tobacco exports have not registered a steady growth. Our flue cured tobacco exports, the major exportable variety have also declined significantly while the competitors could excel. Currently the situation in the global tobacco market is transforming into a favourable market environment for tobacco exports due to several reasons. Brazilian export prices have almost levelled the most expensive American tobacco prices. Zimbabwean farm prices have also seen higher than Brazilian prices. Increasing cost of production and the significant amount of export cesses imposed on tobacco exports by the governments of Zimbabwe and Malawi recently made their tobaccos further expensive. The newly opened East European and CIS markets are not in a position either to absorb high cost tobaccos or cigarettes made with high conversion cost. Phasing out of farm subsidies by European Union will further enhance price competitiveness of Indian Tobacco. Under these circumstances, India can become a major player in the Indian tobacco market if it can harness the emerging opportunities and enhance its exports to the major import markets. The advantages for Indian tobacco are low unit production cost; average export prices of Indian FCV tobacco are more competitive than that of Brazil, USA, Zimbabwe; low conversion costs of tobacco into cigarettes of 0.80 US$/1000 pieces in 1999 in India compared to 3.50 in UK and 4.0 in USA; low to medium nicotines to suit the current requirement of world markets; anticipated decline in production in China, USA, Zimbabwe, EU in the next five years due to declining consumption in USA & EU, government controls to restrict production in China, phasing out of Agri subsidies by EU and Land invasions & Land acquisition in zimbabwe i.e, change of tobacco farms from White farmers to Native farmers; and phasing out of Agricultural subsidies in European Union and Argentina; etc. There is a need to examine the adoption of the following strategies: i) Production Front Expanding production of quality tobacco(semi flavourful/ flavourful tobaccos) of FCV and Burley types in the soil regions of AP and Karnataka. Identifying high productivity areas in the central and northern block cotton soil region and sustaining cultivation to meet the demand from the price sensitive/price responsive importers from CIS countries. Release of new varieties with higher yield potential and with low to medium necotine levels to suit the changing demand pattern in the International markets. Allowing FDI through joint ventures with multinational leaf tobacco merchants/cigarette manufactures to go for contract farming in new areas to generate additional exports.

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 To undertake special projects of financing the cost of digging /building small water ponds in the Southern light soil region of AP (where per hectare yields are very poor) with a view to give life saving irrigation with the stored water to enhance productivity and quality of the leaf, schemes for supplying inputs like fertilizer, coal briquettes at subsidized cost to the tobacco farmers, schemes to bring down curing cost and transportation, development programs in the production of light soil Burley/oriental/Dark western Fire cured tobacco, schemes to help in the use of Malathion for control of mosquitoes in the light soil burley areas to avoid DDT residue problems, initiating efforts for semi mechanization of tobacco cultivation in AP& Karnataka through introduction of leaf stitching machines, tobacco planters, etc. ii) Production presented in the Auction Floors To introduce standardized packing material for wrapping tobacco in bales as in Zimbabwe. Offering well-graded product on the floors to ensure speedy sales, reduce post auction expenses & handling losses and reduce shipping delays through enforcing compulsory grading of tobacco by farmers in the licensed commercial/ community grading centers. iii) Export Front Tobacco trade delegations and publicizing Indian tobacco and tobacco products through International tobacco exhibition. Allowing FDI in 100% EOUs or special economic zones for export of cigarettes. Pursuing with the Government of USA at highest level for allocation of separate quota for India under its Tariff Rate Quota(TRQ) regime. Negotiations at the highest political level with Japanese counterparts for the re-entry of Japanese tobacco companies into Indian tobacco market Negotiating with China for importing Indian tobacco regularly. Permitting exporters to pay admissible commissions (at least upto 5%) for their rupee exports to Russia in hard currency. Entering into long term contract with Russia for import of 45,000 tons to 50,000 tons of tobacco every year for next 5 years under Debt Repayment Route. Undertaking propaganda for Indian tobacco and obtaining market situation report of Russian market and financial status of each cigarette factory by entering into a cooperation agreement with TABKPROM, Moscow, an association of Russian cigarette Factories. In Exim Bank credit line, inclusion of tobacco also as an item for export to countries like Egypt, Iraq, and Algeria.

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 Encouraging Indian cigarette manufactures to set up joint ventures in overseas markets viz., East Europe, CIS countries, Myanmar, Vietnam, for manufacture of cigarettes which would result in increased tobacco export to these countries. Pursuing with the Governments of Tunisia and Morocco to enhance their tobacco imports from India highlighting their huge trade balances in their favour. Pursuing with the Governments of Romania, Bulgaria to extend further tariff concession under Globalised System of Trade Preferences(GSTP) for Indian Tobacco. Tying up tobacco exports to Egypt with imports of crude Fertilizers, cotton etc. Helping cigarette exporters to undertake brand promotion by extending financial assistance. 4.5.2.5 Cashew Introducing new schemes for construction of drying yard at major growing/collecting centres and warehouses at major marketing centres. Implementing replanting scheme in the existing cashew cultivation area with high yielding varieties. Promoting extensive use of lower grade/broken cashews in confectionery, bakery and sweet manufacture. Promoting value added cashew kernels in consumer packs to Middle East countries. Need to issue phyto-sanitary certificates. Participation in specialised international food fairs/exhibitions. 4.5.2.6 Spices Increase production of value added products like pepper in brine, dehydrated pepper, freeze dried pepper. Enhance production of value added ginger in brine, ginger paste, coriander powder, etc. Popularising haldi (turmeric) as natural colourant and medicinal products. Establishing better cleaning/processing facilities in major growing centres. Launching campaigns for Indian curry at retail/consumer points and tie ups with chain stores in developed countries.

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 Shifting market focus from ethnic to local population in importing countries. . Increasing production and productivity of important exportable varieties of spices of desired quality. Introducing better post harvest practices for major spices including pests and diseases management/and application of pesticides/fungicides Promoting organic spices. Introduction of new technologies for further value addition. Encouraging non-traditional spices like paprika, vanilla,culinary herbs. Establishing Agri Export Zones. Controlling Pesticide Residues, Mycotoxin and Microbial Contamination. Harmonizing the Domestic, Export and Import Standards. Determining the Minimum Residue Level (MRL) for pesticide residues through supervisory trials and monitoring field data in major spices. Establishing co-relation of testing methods between Board Laboratory and Laboratories in importing countries. Implementation of Brand Buy Out Schemes whereby internationally reputed brands of spices are proposed to be purchased by the Indian exporters from the international markets and will be packed in India for selling it outside the country. Instant and prepared curry /spice mixes are getting popular in Europe and USA. This may be tapped through contract processing. Marketing strategy including : Promotion of Indian food/Indian cuisine. Popularisation of consumer packed spices particularly through established brands abroad. Promotion of ISO/HACCP certified units with better incentives. Participation in leading international food fairs. Exchange of trade delegation with importing countries including non-traditional countries. Interaction with international associations like ASTA/ESA regularly.

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4.5.3 Marine Products About 44% of Indias export earnings in value terms comes from Japan by exporting only 19.5% of total export by volume. However, by exporting 43.1% of total exports to S.E. Asian countries, India gets only 17.9% of its total export earnings from marine products. India exported 10.7% of the total products to USA and got 15.2% of total earnings therefrom. Therefore, Japan and also USA appear to be the two comparatively more profitable destinations for Indias marine product exports. In the case of capture fisheries, there is need for utilisation of under exploited commercially important resources such as tuna and particularly sashimi grade tuna by converting the existing deep sea fishing trawlers for long line fishing. The above will also pave the way for increasing the number of Indian deep sea fishing vessels coming forward to concentrate on tuna resources and this will reduce the pressure on shrimp resources. This will also reduce poaching by foreign vessels in Indian EEZ. Need for better handling techniques and procedures on fishing vessels by installing fish finds, Global Positioning System (GPS) and Radio Telephone(RT), which has produced good results during the last two years, and need for conservation of over exploited resources including protection of endangered species by conserving the fast dwindling stock of lobsters and endangered species of sea turtles, overcoming the Technical Barriers for Trade (TBT) created by USA, etc., scheme for providing TED free of cost to mechanized boats involved in shrimp fishing, eco-labelling, etc. In the case of culture fisheries, enhancing capabilities for acquaculture by diversification of acquaculture, modernisation of processing units by implementing food safety and quality control systems such as HACCP, Codex regulations, EU regulations etc. in the processing/ exporting units, establishing new Central quality control laboratories besides strengthening the existing units, encouraging establishment of modern pre-processing centres to meet US and EU quality assurance system which necessitates hygienic handling at each stage, better extension service to reach all the processing workers by extensive use of visual aids and establishing facilities in Andaman & Nicobar Islands for production and supply of disease free nauplii stages to the hatcheries for further rearing, increasing production of scampi, which has a good demand abroad. To promote scampi culture in a big way, extension programme needs to be intensified in the coastal and interior areas. Promotion of culture of seabass and grouper, encouraging use of only quality feed and other inputs in aquaculture. Encouraging use of immuno-stimulants, soil, reformers, probiotics, disease resistant/ preventive items, etc. in aquaculture. Marketing strategy in logo schemes for improving Indian value added products, organizing sea food festivals in restaurants abroad and market research and market campaign in USA, Japan, EU, LAC, etc.

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4.6 LEATHER & LEATHER MANUFACTURES

Need to relook at our policy for tanning sector given the high demand for leather and our potentiality with high bovine population. In the case of leather footwear, need for focussing on ladies footwear and mens casuals and also depending on inputs available locally like buffalo leather. In footwear components, need for modernisation. For leather garments, areas to identify and support large and strong exporters and alliance with overseas exporters of Germany who mainly re-export. Similarly for leather goods. Need to give importance to non-leather footwear also. Policy of reservation of items in this sector for SSI needs to be reconsidered in the interest of modernising and augmenting productivity, quality, variety and in achieving economic cost of production. Bringing the leather complexes already promoted or under promotion within the scope of Special Economic Zones. Building raw material base is the key to the success in this sector as the total availability of leather in the country would just meet the raw material requirement for the present. Industry has to accept the emerging social conditionalities such as clean factories, minimum facilities to workers and acceptable occupation safety and health conditions for workers as a rule. Promoting the brands on a consortium basis. FDI could bring not only large inflow of funds but also superior technology. Thus the need to encourage FDI in key sub -sectors like footwear components, tanning and designing. Need to focus on new items like leather upholstery which is an emerging product and likely to offer good growth. Need for special project creating capacity for design development within the country at main centres of production.

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4.7 OTHER ITEMS

The other identified items are mainly sports, games, toys and festival and carnival items. and minerals and ores. These are simple items and not much sophistication is involved, but potential is high. (i) Toys The potential of toy exports are enormous and existing export schemes like duty drawback should be extended to these items. Setting toys cities and special focus in SEZs for toy items can help in promotion of its export. (ii) Sports goods Raising the technological level of the industry through tie-ups with well-established countries of the world. Bringing in fresh investments into the sector through new green field projects. Attention to manufacture the non-traditional sports goods like ice skates and roller skates,. articles and equipment for exercise, gymnastics and athletics, etc. which constitute a high share in the global market. (iii) Minerals & ores Need to focus on China. During the current fiscal year 2001-02, China is likely to import 90 million tonnes of iron ore. Keeping this in view, government has allowed MMTC to enter into Long Term Agreement with Chinese Steel Mills as is with Japan and South Korea (POSCO). With the result, MMTC has signed (LTA) with china from the current fiscal year and accordingly exports iron ore on LTA basis. Railway freight on iron ore for export has gone up more than 200% since 1991-92 and accounts for 50%-60% of the f.o.b. cost from various ports, thus reducing the margin on export to a very low level .Similarly, the port charges and vessels related charges for the major ports from where the iron ore is exported is also on the higher side. Though efforts are being made to overcome these difficulties, further measures are needed in this direction. The ceiling on export of Bellary Hospet sector high grade fines requires upward revision to enhance the additionality of exports. Efforts in this direction are underway. Focus needed in the case of Bihar/Orissa sector which also has immense potential for export of iron ore. Allowing export of calibrated lumpy ores (CLO) in addition to fines, as Steel Mills in Japan and South Korea have decided to take only CLO in place of lumps as this will bring in more value realisation.

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Need for increasing handling capacity and efficiency of different ports.

4.8 SUMMARY
For the identified potential sectors, indicative sector-wise strategies have been given based on the detailed strategy paper prepared by the Export Promotion Councils/Commodity Boards and other industry associations. Besides, detailed discussions were held with exporters as well. The main sectors covered are the following : Engineering (including instruments and items of repairs), Textiles, Gems & Jewellery, Chemicals & Allied, Agriculture, and Allied (including Plantations and Marine), Leather & Footwear items and other items.These strategies need to be operationalised by Government for achieving the maximum results.Some of the major strategies suggested for the different sectors are as follows: Engineering/Electronic/Electrical and allied The strategies for this sector include support for SMEs to modernise, accreditation of testing laboratories in India by overseas agencies, R&D, other measures to effectively counter NTBs in the form of TBT conditions, furthering joint ventures, brand promotion, support to industry to fight anti-dumping cases, providing warehousing facilities in overseas markets, exploring possibilities of promoting exports of Indian made economy vehicles in developing countries and middle and low income groups in developed countries, promoting export of automobiles with the help of FDI, MRAs with respect to recognition of testing agencies and infrastructural and logistic support for automobiles exports, a three pronged export marketing strategy for automobile component exports (i) export through Original Equipment Manufacturers(OEMs) for their global sourcing requirements, (ii) export to tier 1 manufacturers as a part of their international supply chain and (iii) direct export to after-market, focussing on auto sector in some SEZs and automobile component centres, setting up construction equipment banks and adoption of consortium approach by Indian construction companies to increase project exports ,the 3 key mantras to promote electronics hardware, namely (i) hardware-software combination, (ii) integrating local and export production and (iii) massive investments, development of India as an off-shore production centre for electronic components/equipment required for MNCs through clusterisation, low-duties and SEZ model for IT hardware, promoting exports of instruments and repaired products through SEZs and combined policy for services exports, etc. Textiles sector The main strategies for this sector include increased investment in key areas, infrastructure development, by setting up Apparel Parks and Textiles Centres Infrastructure Development Schemes, restructuring EPCs, Brand Promotion and market assistance schemes, restructuring labour laws and smoothening existing schemes. Gems & jewellery The main strategies for this sector include forging strategic alliances with producers of roughs and retailers of jewellery and efforts to make India a grading/trading centre for processed diamonds, forward integration into gem stone jewellery, moving towards exports of jewellery, etc. 71

Chemicals and allied sector The main strategies for this sector include setting up Comprehensive Chemicals Estates(CCEs) enhancing awareness of Indian herbal items, focussing on branded generic pharmaceutical products out of patent regime, promoting exports of cement by lowering input costs like import duties, customs examination charges by railways, State levies, freight rates by railways etc. Agriculture & allied sector The main strategies for this sector include establishing Agri.Export Zones, establishing a supply chain management and export certification programme for basmati rice, setting up a nodal SPS point in the Department of Commerce, cold chain system and innovative packaging for floriculture exports, packhouses/value added centres for mangoes, market oriented approach for tea and shift in focus from bulk tea exports to value-added packaged tea exports, focus on export of value added forms of natural rubber and export of rubber wood, judicious mix of strategy relating to export of Arabica coffee vis--vis Robusta depending on market preference, promoting tobacco exports by production of quality tobacco of FCV and Burley types and allowing FDI in 100% EOUs or SEZs, pursing with USA for higher Tariff Rate Quota (TRQ) allocations and promoting exports to Japan, China, Russia, Tunisia, Morocco, etc. through bilateral negotiations, construction of drying yards and promoting exports of value added kernels in consumer packs, promoting exports of value added and organic spices and determining minimum residue level for pesticide residues in the case of spices, promoting use of better handling techniques on fishing vessels and adoption of food safety and quality systems in the case of marine exports, utilisation of under-exploited commercially important varieties in the case of capture shrimps and logo schemes for marketing marine products. Leather and leather manufactures The strategy for this sector include relook at our policy for tanning sector, supporting large and strong exporters and encouraging alliances with overseas exporters in the case of leather garments, bringing the leather complexes under SEZs scheme, encouraging FDI in key sectors like footwear components, tanning and designing, focussing on items in high demand in the case of leather footwear and new items like leather upholstery, modernisation in footwear components, etc. Other items The main strategies for these items include setting up toy cities and special focus in SEZs for toys, fresh investments in sports goods through green field projects and manufacture of non-traditional sports goods, focus on China for iron ore exports, lowering railway freight costs and port charges for exports of minerals and ores, etc. The adoption of the different sector-wise policies outlined in this Chapter along with the macro strategies suggested in next chapter can help in concretising the productmarket strategies outlined in the earlier Chapter and help in doubling Indias exports in the medium term.

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