Five years back, the Niryat Bandhu Scheme was introduced by the Centre with an aim to mentor potential exporters in India. Going by what has been achieved on ground, seems, India’s policymakers haven’t still understood the difference between foreign exchange and ‘precious’ foreign exchange. And till that happens, a scheme like this will be considered mere lip-service paid to the nation.
Manisha Choudhari | March 2016 Issue | The Dollar Business
Started with an objective to educate and mentor entrepreneurs, new exporters and those from small and medium enterprises (SMEs) “on the intricacies of foreign trade through counselling, training and outreach programmes”, the then UPA government launched the Niryat Bandhu Scheme in October 2011. The sole purpose of the scheme was/is to boost exports by helping new and potential exporters to start a new international business.
The scheme takes into consideration the significance of micro, small and medium scale enterprises (MSMEs) in manufacturing and employment generation, and thus, MSME clusters have been identified, based on the export potential of the products. Interestingly, signing up for the 20 sessions-programme, held five days a week, costs Rs.25,000 of which only Rs.15,000 have to be paid by the attendee and the balance is borne by the Directorate General of Foreign Trade (DGFT). No doubt, there is a need for such programmes to help newcomers foray into the field of international trade, but then has the scheme really been successful in facilitating entry of new entrepreneurs and in turn making a positive impact on India’s export earnings?
Although the scheme was launched in 2011, it only came into limelight after the Modi government came into power. There is no denying that the scheme is being executed for the benefit of potential exporters. However, more needs to be done in order to provide impetus to foreign trade. When the Modi-led NDA government unveiled the new Foreign Trade Policy in April 2015, it announced that the aim was to increase India’s share in world exports to 3.5% by 2020 from the current 2%, by reaching $900-billion mark in exports. Additionally, it also mentioned that the Niryat Bandhu Scheme would be revamped in order to achieve these goals. Months have passed, but nothing much seems to have changed except a tweak or two. Apart from the launch of Niryat Bandhu@Your Desktop – an online certificate programme in exports-imports business, in collaboration with Indian Institute of Foreign Trade (IIFT) there’s nothing more to write about in the name of change.
Of course, the most visible aspect of the scheme has been the many-a-seminar that is organised by EPCs around the country (172 in FY2015 – 57 at MSME clusters and Towns of Excellence and 115 at universities and b-schools). According to Dr. Kavita Gupta, former Additional DGFT (Mumbai) and the current Textile Commissioner at the Ministry of Textile (GoI), the scheme has been successful, given that each seminar has been typically attended by over 500 people. “We also held seminars at colleges so that the students (young entrepreneurs) can learn about international trade and make a foray into exports business,” she says while adding that “these young people have the potential and talent to become the nucleus of this industry. This was the whole intent of the scheme, and the scheme saw a huge success”.
Interestingly, about 18,300 new and potential exporters including students of management schools, etc., were given orientation on various aspects of international trade under the programme in FY2015. But then, if seminars and workshops are set to be the main bit of the scheme, perhaps there is a need to make sure that exporters learn “everything” they need to. We mean “everything”.
Just to do a reality check on the effectiveness of such seminars, The Dollar Business attended a seminar in late January this year, held by the DGFT in collaboration with a leading export promotion council (EPC). The conference hall witnessed the attendance of new exporters in majority. However, the first half of the two-hour seminar was “all about that particular EPC” and its role in helping exporters. Subsequently, a senior DGFT official walked in to give a brief on the new Foreign Trade Policy and matters related to foreign trade that exporters need to be aware of. Surprisingly, potential opportunities were merely glanced over, and other ideas and start-ups in foreign trade were not even discussed. If that’s how these seminars are conducted, footfalls is a wrong representation of the effectiveness of this scheme.
The Dollar Business also met a number of exporters at the event. While there were many who praised DGFT and the EPC for the initiative and found the seminar to be fairly helpful, there were a few who found it to be nothing more than a formality on the government’s and organisers’ part. For instance, while an aspiring exporter Naveen Syed said that the workshop gave him a basic idea of the current foreign trade scenario and made him think about venturing into consulting services, a few like Vijay Bhaskar of JFK Global felt that the session was not very effective. “Everything went over my head. I couldn’t understand much, as they changed slides so quickly. No booklet was given either to refer to,” he rued.
Though Malathi of Gowra Aerospace Technologies found the workshop helpful as “some things were better explained”, she was of the opinion that “these workshops always bring about more questions than answers.” When asked if there was anything missing in the seminar that she would have liked to see, she replied that a question and answer session at the end of the workshop would have really helped. Venkat Boppana from the Marketing & Operations team at SEPRA Exim too felt that the after-event networking session could have been longer and better organised.
No doubt, exports isn’t easy, and every exporter needs proper education and training. While these seminars are held time and again, it is important to ensure they are glaringly clear to attendees. There is no point in seminars that do not address exporters’ queries and lack reference material to refer to post event. Does it not reflect the sheer formality on the part of concerned departments in the name of executing the Niryat Bandhu Scheme and provide a record of funds allocated by the Centre for it in their respective cost sheets?
As per DGFT’s Niryat Bandhu Scheme Handbook (Implementation of Programmes in 2014-15: A Glance), an overall allocation of Rs.23.23 crore was made for the five-year plan period (2012-2017) initially. However, an additional amount of Rs.2 crore was allocated for FY2015. But, is the yearly amount of Rs.5.05 crore (Rs.25.23 crore for a five-year period) really enough to train thousands of young minds who want to foray into exports-imports business?
Let’s look at it this way – the cost of setting up an IIT (Indian Institute of Technology) is around Rs.1,750 crore, and setting up an IIM (Indian Institute of Management) can go up to a good Rs.1,000 crore. Now, for an exporter, who needs some technical and some management training, is a Rs.5.05 crore investment really adequate? A typical IIT and IIM in combination spend about Rs.8-9 lakh per student per year. Assuming that most of the 60,000 Importer-Exporter Code (IECs) issued every year (as mentioned in Niryat Bandhu Scheme Handbook 2014-15) are a result of word spread through the scheme, the Rs.5.05 crore investment signifies that merely Rs.842 is spent on every exporter. The difference between Rs.8-9 lakh (that should be spent) and Rs.800-900 (that is being invested) is what the ‘real’ difference is between what should be and what is.
As per Forbes’ list of Most Valuable Brands in 2015, Apple – the no.1 brand in the world – spends $1.2 billion (over Rs.8,000 crores) on advertising each year. If one brand can invest that amount of money hoping that there will be returns, why is it that the Indian government doesn’t have faith on its exporters?
Assuming that there is a direct correlation between the number of exporters under the Niryat Bandhu Scheme and the turnover they get, a higher investment in the scheme can increase the revenue from exports in the country.
Let us begin with the ‘Pessimistic Scenario’, (see charts) and assume that out of the 60,000 IECs issued every year, all have come from Niryat Bandhu. Even if 40% of these are active, with an assumed annual turnover of Rs.50 lakh, it means exports revenue of Rs.12,000 crore. Given that every year, there is an investment close to Rs.5 crore, revenue of Rs.12,000 crore would mean a 2,400x return. Thus, if an investment of Rs.100 crore is made for FY2016-17, then using the multiplier, we can expect exports worth Rs.2,40,000 crore. Moving on to the ‘Optimistic Scenario’, let’s assume 80% of the IECs issued are active, with a turnover of Rs.1 crore, then the revenue generated is worth Rs.48,000 crore. This means that in a very optimistic scenario, an investment of Rs.100 crore can bring about Rs.9,600,000 crore worth of foreign currency into the country!
Apart from training, some sort of risk coverage can be provided to aspiring exporters. It can prove effective in boosting exports. Measures such as providing credit facilities and lower interest rates to exporters under the Niryat Bandhu Scheme can also be thought about. Moreover, with low rates of Duty Drawback being a source of discomfort for exporters, an additional extra percent or two of drawback can be given for the products they export. These suggestions pertain to a limited time, of course, perhaps lasting for say 2-3 years after an exporter finishes the programme and starts exporting, similar to the way the government is following in ‘Startup India’ programme. These measures could augur well and help start-ups in foreign trade.
Other countries too have schemes similar to Niryat Bandhu to help aspiring or current exporters. For instance, UK has a Passport to Export Service – an export assessment and support programme for small and medium-sized enterprises (SME). Under this scheme, UK Trade & Investment (UKTI) provides new or inexperienced exporters with training, planning and support to grow their business overseas. In fact, the service is highly personalised, and clients are supported with a variety of tools over the course of a year. These include guidance from international trade advisers, a detailed assessment of the exporter’s readiness to export, an action plan for exporter’s export activity, workshops, market research with visits to target markets, and of course, opportunities to network at events and tradeshows. While guidance from trade advisers is free of cost, exporters may have to pitch in for the rest of the activities. Then there is an online learning tool for exporters, called ExportSavvy, the registration on which is free. The tool is designed to guide exporters through what they need to consider when planning, executing and evaluating export activity.
Similarly, Australia has a scheme – Export Market Development Grants (EMDG) – wherein SMEs are encouraged to develop export markets. Under the scheme, eight grants are given to each eligible applicant, and a reimbursement up to half of the eligible export promotion expenses above AUD 5,000 is allowed, provided that the total expenses are at least AUD 15,000.
Taking cues from these schemes, India’s government should aim to personalise the Niryat Bandhu scheme. Entrepreneurs aspiring to take a plunge into exports business should be given personal attention and shown the right path for their businesses to prosper. While the idea behind the scheme is commendable, it is up to the government to ensure that it doesn’t end up being an on-paper scheme – one made to lecture exporters and students for a couple of hours.
Let’s consider the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) – a highly successful scheme that has actually achieved its goal. NREGA was allotted a whopping Rs.34,000 crore in FY2015 itself, and its success is a testament to the fact that big investment equals heavy yields. So, all that’s needed is for the government to keep the faith in our exporters. It is admirable that the scheme – which aims to train 1,000 IEC holders annually – saw 4,650 IEC holders go through sensitisation programmes in FY2015.
Money makes money – the policymkers know that. With greater investments and a more personalised approach, aspiring exporters can become real exporters and make the country shine brighter on the high seas.
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