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Hegde's export incentives will herald era of protection, warns economist

Export incentives announced by Union Commerce Minister Ramakrishna Hegde are short-sighted and would bring back the era of protection, noted economist and Karnataka State Planning Board Deputy Chairman D M Nanjundappa has said.

Talking to the media in Bangalore, he said in his anxiety to step up exports, Hegde had sacrificed the holistic approach needed in this direction.

Excessive dependence on the inflow of foreign capital and rise in exports would be dangerous, he said. Unless there were sustained exports arising from improvement in the competitive strength of Indian industry, the country's hope for a recovery would be will-o'-the-wisp.

He said Hegde might have been concerned with the widened trade deficit that has touched $ 2.8 billion while announcing the reduction in bank rate and other incentives. How long could the country's exports be propped up by high subsidies, he asked.

Referring to incentives provided for exports during 1995-96 by the then P V Narasimha Rao government, Nanjundappa said though the revenue loss varied between Rs 180 billion and Rs 230 billion, the exports rose only by Rs 100 billion.

He said the Indian industry had been heavily depending on government patronage for exports and at the same time not made any effort to reduce their cost of production or resort to any other means to increase competitiveness in the international arena.

"If a holistic view involving all the ministers concerned is not taken, it is feared that we will be back to 'square one' in the matter of exports and this would be dangerous for the country," he added.

He urged Hegde to come out with incentives for state governments to prop up agricultural exports whose potential had been estimated at about Rs 600 billion.

UNI