Exports have played a pivotal role in the growth of the Indian economy. It contributes 16 per cent to GDP, therefore, it has become imperative that there should be a focus on not only increasing exports base but also improving their export competitiveness in the world market. A key factor hindering export competitiveness has been the high transaction cost involved in exports. Transaction cost related to trade involves a host of regulatory requirements, procedures and compliance measures; besides infrastructure-related cost- including transport cost to bring product to the border, time and money spent in ports on border procedures, international transportation costs and communication costs. Along with this, documentation has become an additional burden.


Reducing Transaction Cost: An initiative Trade facilitation is a key determinant of a country's competitiveness in the international market. Over the years, government of India has taken various initiatives to simplify and rationalize the procedural complexities in exports in order to put in place an efficient and effective trade facilitation mechanism and reduce the implicit transaction costs associated with the enforcement of legislation, regulation, and administration of trade policies involving several agencies such as customs, airport and port authorities, banks, trade ministry etc.


In order to overcome the recent global financial and economic crisis and help exporters become more competitive and have enhanced market access, the government apart from fiscal and monetary stimulus is also paying attention to other areas like procedural reforms, automation etc.

 

Keeping in mind the above issues, Department of Commerce had constituted a Task Force on Transaction Cost in October 2009 to assess the procedural bottlenecks affecting India's exports and imports.


The basic objective and scope of the work of the task force:


1) Reduce transaction cost for exports in terms of money and time spent, to improve ease of business competitiveness of the Indian exports.


At the global level, ease of doing business is one of the important parameters on which the status of trade facilitation in a country can be benchmarked. As per the business report of 2010 is concerned, India ranks 94 among the various nations, in terms of ease of trading across borders. It is noticed that India is far behind from comparable economies like China, Indonesia and Mexico in this regard. There are times and cost issues associated with the transport, documentation and clearances of export and import cargo. Clearly, such costs have adverse impact on competitiveness of exports.


As mentioned in the World Bank report the average cost of export in India is US$ 945 per container and it takes 17 days to export a container from India. This includes time and cost elements for documentation preparation, customs clearance, ports and terminal handling and inland transportation and handling. Comparing it with other economies, it costs US$ 450 and US$500 to export a container in Malaysia and China respectively. Denmark, Brazil, Mexico, China takes five days, 12 days, 14 days and 21 days respectively to export a container from their countries.