The latest supplement to the five-year Foreign Trade Policy (FTP) (2009-14) announced by the Commerce Minister on Tuesday certainly does not lack ambition. Exports which rose 21 per cent to cross $300 billion at the end of last year are budgeted to touch $500 billion by April 2014, admittedly an extremely tough task during a period of macroeconomic stress in India and abroad. The medium-term goal is for India's share in global exports to double by 2020. These two objectives are predicated on an export performance scaling new heights consistently and well into the medium term. Reiterating the objectives of the FTP, the supplement focusses on spurring investment and job creation and hastening diversification of markets as well as products. The government would appear to have made considerable progress in realising the last objective: amid persistent slowdown in India's principal export markets, Europe and the U.S., Indian exporters — with help from the government — managed to tap newer markets in Latin America, Africa and the CIS countries with a variety of conventional and non-conventional merchandise exports. Until recently, India's exports appeared to buck the trend of declining world trade in the aftermath of the global financial crisis. However, recent performance has been modest, inevitably reflecting the sharp economic slowdown in India. Manufacturing, which has strong connections to exports and job creation, actually contracted during the fourth quarter of last year, dragging GDP growth down to a 32 quarter low of 5.3 per cent.
Of the seven key measures announced, two stand-out. The extension of the duty-free export promotion capital goods (EPCG) scheme and the expanded interest subvention plan are noteworthy also because these two measures have large fiscal implications and have been included despite obvious budgetary constraints. The interest subvention had cost the exchequer Rs.996 crore in 2011-12. It is expected to go up by another Rs.200 crore, now that its coverage is being expanded. While generally welcoming the measures, exporters have pointed out that the FTP does not specifically address the high transaction costs and inadequate physical infrastructure that have been holding back India's international trade. Clearly, solutions to those require a coordinated approach by the government and the private sector and cannot be left to the Commerce Ministry alone. One point of justifiable criticism: the FTP supplement is overwhelmingly focussed on exports while remaining relatively silent on imports. With very few restrictions in place, a trend of declining non-oil imports, especially of capital goods and raw materials, is a sure sign of economic slowdown.
The editorial has been corrected for an incorrect expansion of the abbreviation EPCG
Keywords: Foreign Trade Policy, Indian economy, India's exports
Notwithstanding the huge efforts both by the Private and the Govt in identifying and spurring non-traditional items of Exports, as commented favourably by you, is a direction that urges urgent as also consistent push. As rightly identified by the Hindu, here the Private sector has a larger role to play, which must not only be aided but abetted by the Commerce Ministry by genuinely understaning the needs of the trade. Improvement of all-India infrastructure and enlarging its scope with a view to facilitating such efforts is warranted. Similarly, identifying such items of imports, which can safely be avoided also needs a special push.The much avowed 'quadrilateral road network' initiated by the former Govt.needs an un-inhibited fresh look with a view to making it possible throughout the country. Here private participation should be not merely welcome but positively encouraged.Trade Promotion organizations should be urged to initiate measures to boost the trditional items of exports.
The exports are expected to drop as majority of the world economies are struggling,
particularly in Europe. Even the US economy hasn't fully recovered although it seems to be
recovering. One of the problems in India is the huge bill for crude oil imports that is hitting
the bottomline. Indian government should encourage exploration on new blocks by
international oil companies. This can potentially unlock some new oil reserves that have
been left untapped till now. Another point that can improve agricultural exports is if the
monsoon this year is stronger than forecast. But forecasting monsoon is hard as
forecasting crude oil requirements in India.
I think this supplement is a welcome step by government. They have
decided to let their coffer go thin by extending EPCG & interest
subversion schemes. The rise in export will not be that significant
given the shaky economic scenario across the globe but once the things
improve India will be able to take maximum advantage of the betterment.
And another task that lies with the govt is, of course, to create
infrastructure and conducive trade environment. A clarity and stability
in taxation and trade laws are must.
We need to ensure foreign investors that we are not here to block their
earnings by resorting to retrospective amendments. This will boost the
investors' confidence in India & would fuel the flow of foreign
currency. Right now India direly needs two things
A. increased exports to boost production which will seize the
nosediving growth rate
B. foreign investment which would seize rupee's free fall.
Few steps taken, much needed!
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