A truly global trade outlook

Exporters in India could not have asked for a better foreign trade policy than the one presented by commerce minister Anand Sharma on Thursday. It may not have had dramatic announcements but it certainly went down to the smallest exporter and looked into his requirements. And if exporters still have grievances they can go to the centralised directorate of trade remedy measures. The policy announced in 2004 by the first UPA government delivered as promised. A lot of thought went into the architecture of the 2009 policy, and according to trade experts it has remedied many of the faultlines which had proved a stumbling block to the growth of trade in the last 10 to 15 years. What might help Mr Sharma to smoothly implement his new policy is his close rapport with finance minister Pranab Mukherjee, under whom he had worked as a junior minister in the foreign office in the last government. The success of any foreign trade policy depends to a large extent on timely and effective support action by the finance ministry, such as in prompt issuing of the relevant notifications so that exporters can get the envisaged benefits. This did not happen in some cases in the past due to friction between the commerce and finance ministries.
One of its most interesting aspects is a truly global outlook, which encourages exporters to diversifiy into 26 new markets countries under the Focus Market Scheme and 13 more under the Market-Linked Product Scheme. It provides incentives of nearly three per cent under these schemes, much needed in view of the financial troubles plaguing traditional markets such as the United States, Britain and the rest of the European Union. Exporters, it is hoped, will seek new opportunities in Latin America, Africa, Oceania and the CIS countries. Companies which had earlier ventured into these territories under the aegis of the Exim Bank can vouch for the opportunities there. This will help the pharma, textiles, synthetic rayons and a host of industries to diversify into new markets.
Traditional exports like leather, handicrafts, textiles, engineering, chemicals and basic chemicals will also get a fillip with the introduction of the grant of the “status holders” incentive scheme, which will enable them to import capital goods at zero duty. This will certainly help to modernise these sectors and make them more competitive.
While the new policy is expected to take the country’s exports to $200 billion by March 2011 and double that in the next three years, there is a dire need to improve all the infrastructure related to exports. This includes better road, rail and port connectivity, as well as timely implementation of the Delhi-Mumbai industrial corridor. Other highlights of the policy include extending the income-tax exemption deadline, which will help the gems and jewellery sector, and a reduction in the substantial fees exporters have to pay for licences: from Rs 1.5 lakh to Rs 1 lakh. And there’s always room to ask for more. One trade body is looking forward to the commerce minister implementing the e-trade project in a time-bound manner to bring about a substantial reduction in transaction costs, which now varies between five to eight per cent of FOB value.