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Last Updated Sunday April 22 2018 12:17 PM IST

Heading towards stronger foreign exchange reserves

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Foreign exchange reserves (Representative image)

A strong foreign exchange reserve projects a a country's ability to compete both at the internal international markets effectively.

The latest information received on the international business front is a marginal improvement in our Foreign exchange reserves after several weeks of outflow. However despite this recent positive trend the question arises as to how this uneven balance of trade is occurring in our economic system at such regular intervals.

There are two probable reasons - overconfidence or diffidence.

Overconfident exporters have been accustomed to their ability to capture global markets that they have rely on their laurels do not take the current day international market scenario into account. They fail to realise that markets, today, are highly competitive and stress on both product quality and prices.

The brand image of a product by itself is no guarantee in its ability to capture global markets. Many entities have exited markets as they were unable to survive.

Unlike India, several smaller nations have begun to effectively compete in the overseas markets with superior product quality and low prices. Indian exporters have not taken full advantage of technological developments in a rapidly changing commercial environment. This has lowered the quality and has reduced the demand for Indian products in the international market. Conversely, there is a high cost of import. Such products are not being efficiently channelised for developmental purposes thus leading to unnecessary outflow of foreign exchange reserves.

The second aspect is the lack of confidence among exporters. As I have already mentioned earlier, international trade and commerce is highly competitive and exporters have to rise to the occasion to improve quality standards by efficient management of available economic resources.

The decline in market demand for Indian products cannot be wished away in the name of global economic crisis as in the past . Unfortunately, our exporters have not thought of a positive return on trade in the long run. Instead, they have focused their attention on the immediate present , closed down units and retrenched labour to save on costs. This negative mindset prevents them from taking advantage of technological improvements as in the earlier instance but this time due to inadequate will power to incur costs to compete in the market in the near future.

The situation does not demand closure but improved the quality of manpower, technology and products. There should be greater stress on output rather than the cost of production.

Further the margin of profit should also be minimised to ensure that the prices are globally competitive. The international trade treaties signed in the last few months also facilitate smooth commercial decision taking to ensure effective coordination between export and import trade.

Further, a computerised environment facilitates speedy entry into contracts. This ensures that the momentum of our international trade is maintained on an ongoing basis. Profit margins should be minimised to ensure our continuity in the market.

Finally, exporters should learn to be independent on both the production and market front. The shouldn't be dependent on the Government subsidy. This could help regain our image in global markets.

Disclaimer: The views expressed in My News are solely those of the author in his/her private capacity and do not in any way represent the views of Onmanorama, or any other entity of Malayala Manorama.

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