India’s future trade (policy) model should have the Commerce Department at the helm, supported by ministries including External Affairs and Finance, while a ‘transformed’ Directorate General of Foreign Trade (DGFT) should be the apex body for all trade promotion activities for the country, according to a government-commissioned report.
India’s foreign trade strategy and policy is currently being piloted predominantly by the Prime Minister’s Office and External Affairs Ministry.
Frost & Sullivan report
The report — prepared by the global consultancy firm Frost & Sullivan and submitted on December 23, 2016, to the commerce & industry ministry — also makes a strong case for a higher profile for the Indian Trade Service (ITS) in matters of trade policies & systems.
At present, the officials belonging to the Indian Administrative Service, Foreign Service and Revenue Service evidently have a relatively superior role over ITS cadre regarding decisions on crucial trade policy matters.
The report proposed that “… a dedicated ministerial arm under Department of Commerce will deal exclusively with trade-related policy inputs, their formulation and their rollout with the bulk of implementation work handled by a digital platform.”
The Frost & Sullivan report advocated that “the operational implementation of the Foreign Trade Policy (FTP) should reside with the department of commerce providing the trade community one single entity to deal with.”
The FTP should be considered a “dynamic document,” according to the report. It added that any change necessitated with respect to the ongoing requirements must be approved by the (commerce) departmental arm responsible for policymaking.
“Once approved by all ministerial stakeholders including the Department of Commerce, Department of Revenue and Ministry of External Affairs, a single communication should be issued by the departmental arm dedicated to FTP,” it stated.
Small, yet efficient
It observed: “The Prime Minister’s preferred model of a small and yet efficient government acting as a facilitator for businesses is most relevant and applicable to the DGFT. Furthermore, there is a critical need to transform the current DGFT by taking a holistic view of the existent trade environment in the country.”
The report mooted that a transformed DGFT should be made accountable for all trade promotion activities for India — providing services such as trade representation in foreign countries, research & development, market intelligence, business matchmaking services as well as public relations, advertising and marketing services.
The ‘DGFT 3.0’ — with DGFT pre- and post-liberalisation being the earlier two versions — should also provide (foreign trade) monitoring and training services, hold export promotion campaigns, industrial trade fairs and ensure greater focus on small and medium firms, the report suggested.
“The ITS is the only dedicated cadre within the Ministry of Commerce that has professionals with deep knowledge of trade policies and systems. Given their extensive involvement with DGFT and institutional memory, DGFT is best placed to continue with its role in providing policy inputs and aiding the policy formulation process,” the report recommended.
Noting that the DGFT needs to re-skill its resources to be successful, the report said: “Future recruitment should focus on professionals with experience and qualifications in trade and commerce from reputed institutions.”
The report comes at a time when India’s goods exports have not yet recovered fully from the impact of a prolonged contraction from December 2014 to May 2016, as well as the government’s demonetisation exercise early November.
“For an improvement in India’s performance on the ease of doing business – currently ranked 130 out of 190 countries and particularly on the parameter of ‘trading across borders’ (where India is) currently ranked at a dismal 143 – it is imperative to deploy digital technology to transform the experience of doing trade in the country,” according to the report.
It also comes in the backdrop of the World Trade Organisation (WTO) stating in December 2016 that “… the number of new trade-restrictive measures being introduced (by WTO Member countries) remains worryingly high given continuing global economic uncertainty and the WTO's downward revision of its trade forecasts.”