The government's new “incentive” package for exporters is meant to help some of them cope with the looming uncertainties in the global markets. It will cost the exchequer Rs.900 crore. Taken along with the interest subsidy of 2 per cent announced by the Reserve Bank of India a couple of days earlier for labour-intensive industries such as handicrafts, handlooms, and carpets and for small and medium exporters, the cost will add up to at least Rs.1,700 crore. Obviously, there would be questions as to whether the amount is really enough to restore the competitive edge and whether it is well targeted. It is said that the new measures are part of the Foreign Trade Policy (2009-14) and will be incorporated in its next annual supplement. That should elevate what may seem to be ad hoc measures to the status of policy, giving them a semblance of durability. The intention clearly is to dovetail the ingredients of this package with the broader thrust of the foreign trade policy, which seeks to reward exporters who move into newer markets in Latin America, Africa, and the Commonwealth of Independent States (CIS), with an additional one percentage point duty credit. Around 50 products in the engineering, pharmaceuticals, and chemicals sectors would get the special bonus, subject to certain conditions. For many years now, the government's trade policy has aggressively promoted the diversification of India's exports to non-traditional markets and products.
That strategy appears to have paid off, if recent export performance is anything to go by. Between April and August this year, exports grew by 54.2 per cent over the same period a year ago to touch $134.5 billion. Such a scorching pace will be hard to sustain, however. India's traditional export markets — the United States and Europe — which account for about 35 per cent of the total, are facing uncertain times and virtually flat economic growth. Since Indian exporters would be hard pressed to sustain their volumes in these markets, let alone increase them, their initiatives to get into the non-traditional markets make good sense. The export performance has been commendable also because it has come in the face of large uncertainties caused by the fluctuating rupee and rising interest rates. Obviously, India's trade figures are extremely relevant in the larger context of balance of payments. According to RBI data, merchandise trade deficit has gone up to $35.54 billion from $31.38 billion during the first quarter of this fiscal year. That is another reason why export promotion ought to remain a top priority.