Progress and Prospects of Indian Engineering Goods Exports (1956-2005)

The importance of exports to economic development has been well documented in empirical as well as theoretical literature. For instance, as a number of studies prove, exports may lead to greater capacity utilization, economies of scale, incentive for technological improvement and efficient management due to competitive pressure abroad, etc. The present study analyzes exports performance of Indian engineering goods industry during 1956–2005. The study found that Indian engineering exports have shown phenomenal growth over many years and are making distinctive contribution to the overall export effort. Not only the engineering exports have grown by leaps and bounds from a mere Rs 5.16 crore in 1956-57 to an all-time high of Rs 73,800.9 crore in 2004-05 but also its share in total all-India exports increased from 0.5 per cent in 1956-57 to a commendable 20.4 per cent in 2004-05. It reflects the increased acceptability of Indian engineering products in international market, aggressive marketing strategy, entry into new market, promotional role of Engineering Export Promotional Council and more liberal policies of the Government especially after 1991, etc. Moreover, it is observed that engineering exports have registered a much higher annual average growth rate than total all-India exports in almost all decades. It is also noticed that there has been a marked shift and significant changes in the composition of engineering exports in the last four decades. The importance of capital goods and management and consultancy services has gone up while those of non-ferrous metals and consumer durables have declined. Further, a close look at destination of Indian engineering exports shows that there has been substantial diversification over the years. While the share of Asia and Africa which accounted for almost 97 per cent of Indian engineering exports in 1956-57 has declined to 34.2 per cent in 2004-05, the share of Europe and America with negligible share in 1956-57 now accounts for 39 per cent of Indian engineering exports. This is a pointer to the diversification of market as well as growing acceptability of our engineering products in developed world. The major problems of engineering exports are: stiff world. The major problems of engineering exports are: stiff competition, technological problems, high cost of industrial inputs, high transaction cost, trade barriers, infrastructural bottlenecks and so forth. Setting up of engineering export processing zones, focused approach in terms of identified thrust products and thrust markets, upgradation of technology, sales promotion effort, prompt delivery and after sales services, support to small-scale units, more involvement of large-scale units, setting up of joint ventures, attraction of foreign direct investment, establishment of free trade area or preferential trade agreements, etc. are a few suggestions emanating from the study.