New Foreign Trade Policy may miss the deadline
Even as the country is grappling with a huge current account deficit (CAD), which touched a record high of 6.7 per cent of the Gross Domestic Product (GDP) in the October-December quarter, simmering differences between the Finance and Commerce Ministries over the “package of incentives” to various sectors to boost exports is likely to delay the announcement of the new Foreign Trade Policy (FTP).
In his budget speech, Finance Minister P. Chidambaram had stated: “I look forward to the changes that will be made to the FTP next month and I assure my support to measures that will be taken to boost exports of goods and services.’’ Following this, Commerce and Industry Minister Anand Sharma started consultations on the new FTP and promised that it would be released by the first week of April.
After the CAD touched 6.7% of the GDP, the Finance Ministry stated that both the RBI and the government would continue to monitor the CAD and would take additional steps whenever warranted. Highly placed sources in the Commerce and Industry Ministry said that despite assurances to take effective steps by way of various sops, including financial incentives, to the labour-intensive exports sectors, the Finance Ministry is yet to take up “serious discussions” on the exact shape the package of sops will take.
“We have been holding discussions with the Finance Ministry for the past few days. This, after a feedback from the business chambers and corporate houses over what effective steps were needed to not only tackle the growing CAD but also to give a major boost to exports. Our pleas for a fiscal package have fallen on deaf ears and as there is no consensus on the sops for the various sectors, it will not be possible to release the policy as promised in the first week of April,” a senior official told The Hindu.
Interestingly, both Mr. Chidambaram and Mr. Sharma are yet to even hold preliminary consultations on the new FTP and till they meet and sort out the various differences, it will not be clear when the FTP will be out.
“In dire straits”
The Commerce Ministry is insisting on fiscal incentives, especially for the labour-intensive sectors, and an interest subvention scheme for an extended period. It also wants fiscal sops for exporters to venture into new markets and areas. “The export scenario is very bad as we will not be able to even touch last year’s export figures what to talk of this year’s $360 billion target. We are in dire straits and these special times need special focus and direction,” the official added.