FTP: New but not novel

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Bikky Khosla | 24 Apr, 2013
"I look forward to the changes that will be made to the Foreign Trade Policy next month and I assure my support to measures that will be taken to boost exports of goods and services" . . . Finance Minister P Chidambaram said in February while announcing the national budget, which noticeably lacked any strong measure to push exports from the Indian industry. Following this, it was widely expected that the Annual Supplement to the Foreign Trade Policy 2013-14 would address at least the key challenges faced by the export sector, considering the bleak demand outlook in international markets. But last week's FTP again put a dampener on our expectations.

If we look back at the demands raised by various industry bodies ahead of the FTP during their consultation with Commerce Minister Anand Sharma, it seems that expectation were far higher. Of course, the annual supplement comes with a $555 million stimulus and some welcome measures like extension of the interest subvention and relaxation in export obligation on domestic procurement of capital goods. There are some good news also for the Special Economic Zones and the textile sector, but I don't think they are enough. There are a bountiful of problems.

The time is demanding more. This cannot be more evident than the recently released export figures for the last fiscal showing 1.76 percent fall to $300.6 billion with trade deficit widening to $190.91 billion. The March export figures are a little positive, however, reflecting some recovery in the global markets, but still I'm finding it difficult to buy the idea that our exporters are suffering only due to international market conditions. They are suffering equally from some internal weaknesses, which demand no less attention from the government.

I think the first and foremost thing the government should concentrate on is to help the sector get rid of costly credit, undue tax burden, high transaction costs and delayed processing of loans and incentives, high input costs in a number of forms, and inadequate infrastructure. These are life-and-death issues, and committed and sensitive steps are needed in this direction. This could solve half the problems of exporters. We need a clear strategy, both in short and long terms, without which little could be expected to be achieved no matter what temporary or superficial steps are taken to boost exports.

Another thing what I find always missing in the Centre's strategy is an effort to create new exporters. Sops are important for the sector at time of crisis -- not an iota of doubt about this -- but at the same time it is equally important to encourage and help more and more businesses to venture into exports. India's export activities are concentrated to some select fields and regions, with many of them lagging far behind, some even lacking the least level of awareness and facilities. This has to be changed. We have to involve the rural India and impart and upgrade its export skills if we want to give a unique dimension to India's foreign trade in the coming years.

I invite your opinion on the new FTP -- how it will benefit and where it fails your expectation and why.