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

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