Important among the strategies spelt out to achieve these goals are unshackling of controls, simplifying procedures, bringing down the transaction costs, and facilitating development of India as a global hub for manufacturing, trading and services.

In a major move towards unshackling of controls, all goods and services exported, including those from Domestic Tariff Area (DTA), have been exempt from service tax and all exporters with minimum turnover of Rs 5 crore and good track record have been exempted from furnishing bank guarantees in any of the schemes so as to reduce their transaction costs and procedural delays.

The policy also aims at neutralising the incidence of all levies and duties on inputs used in export products, based on the fundamental principle that duties and levies should not be exported along with products and services.

Thrust areas

The chosen five thrust areas to promote employment-intensive exports are: Agriculture, gems and jewellery, leather and footwear, and handloom and handicrafts. A day after the announcement of the policy, the Commerce Minister indicated that the Government would also bring out special packages for textiles, tea and coffee to boost their exports. Further, more thrust areas could be identified in the coming days.

A welcome feature of the package for agriculture under the scheme called "Vishesh Krishi Upag Yojana" is the accent on flowers, fruits, vegetables, minor forest produce and their value-added products and not on foodgrains. Exports of these products would qualify for duty-free credit entitlement equal to five per cent of the FOB value of exports.

Moreover, capital goods imported under EPCG (Export Promotion Capital Goods) scheme for agriculture would not attract any duty.

There is now a growing realisation that agri export thrust will be meaningless unless the sector's productivity is not enhanced through increased investments in irrigation and R&D. Also, a number of studies have emphasised time and again the need to shift from foodgrains to other crops which are more labour-absorbing and which could yield higher incomes. These include vegetables, floriculture, horticulture, animal husbandry and fisheries. Similarly, more employment could be created in rural areas by encouraging post-harvest processing for exports.

The incentives offered to handloom and handicrafts, which are the predominant segments of India's cottage industry include duty-free import of trimmings and embellishments up to five per cent of FOB value of exports, which would also be exempt from countervailing duty (CVD); and authorisation to the Handicraft Export Promotion Council to import trimmings, embellishment samples for small manufacturers, who are unable to do this on their own.

It has also been decided to establish a new Special Economic Zone for handicrafts. Promotion of handloom and handicrafts should help generate more employment opportunities in semi-urban and rural areas.

Services exports

The trade policy has drawn up an ambitious scheme to provide a major thrust to services exports since they account for over 50 per cent of the country's GDP now.

For this purpose, it is proposed to create a `Served from India' brand, and set up an exclusive export promotion council for services sector along with schemes to assist and promote home-grown service providers.

The Council is expected to map opportunities for key services in key markets, and develop strategic market access programmes, including brand-building in co-ordination with sectoral players and recognised nodal bodies of the service industries.

Also, Common Facility Centres would be set up for use by home-based service providers, particularly in areas like engineering and architectural design, multi-media operations, software developers etc. to draw a vast multitude of home-based professionals into services export arena.

It is expected that the new policy will help broad-base services exports from the country, which are currently dominated by software exports. The expectation is that services exports will grow to $150 billion by 2009 in which software services will account for about $65 billion.

The other highlights of the policy include:

A "Target Plus" scheme to reward exporters achieving a quantum growth in exports;

A new scheme to establish Free Trade and Warehousing Zones (FTWZs) to create trade-related infrastructure and to make India a global trading hub;

A scheme to set up biotechnology parks enjoying all facilities available to 100 per cent Export Oriented Units (EOUs); and

Revamping the Board of Trade and assigning it a clear and dynamic role.

Tasks and challenges

At the outset, the task of doubling the value of merchandise exports by 2009 appears quite daunting. In 2003-04, India's merchandise exports were valued at $63.45 billion, accounting for 0.8 per cent of world exports. If this share were to double to around 1.5 per cent by 2009, the country's exports would have to rise to around $150 billion by then taking into account the expect growth rate in the world trade over the next five years.

To achieve such ambitious export target, there should be massive investments in infrastructure andfar-reaching changes must be effected in the domestic policies, including early deregulation of internal market. Some of the areas that will need early action include removal of SSI reservations in most products to allow for economies of scale, change in exit policy, and changes in labour laws.

There is a need to push ahead with the much-needed tax reforms to make Indian industry more competitive. These include implementation of a full-scale countrywide value-added tax (VAT) on all goods and services and scrapping of all other indirect tax levies by the Central and State Governments and moving towards a low single tariff rate on all imports instead of charging different rates for different products. This will do away with most procedural delays and help reduce the rampant corruption.

Also, the special packages, sectoral sops and the plethora of export promotion schemes, tax incentives, import entitlements and so on, which were designed in an era of stringent import controls and recurring foreign exchange shortages, have outlived their utility. Though many of these schemes were intended to be transitional, they are still continuing because of strong lobby pressures rather than their economic merit.

A case in point is the controversial duty entitlement passbook (DEPB) scheme, which is being widely misused. The various export incentives cost the Government about Rs 40,000 crore per year and the DEPB scheme alone accounts for about Rs 11,500 crore.

Clearly, the time has come for India to get away from the traditional concept of trade promotion through the plethora of sops and to focus on making the Indian industry globally competitive.

For this, the industry needs a level-playing field, freedom to decide on growth strategies, adequate infrastructural support in the form of modern highways, good roads, world-class ports and, above all, good quality power supply at reasonable rates.

Hopefully, the high-powered committee on infrastructure, set up by the Prime Minister, Dr Manmohan Singh recently, will take a fresh look at the gaps in infrastructure, including the power sector reforms.

Unfortunately, the country's Foreign Direct Investment (FDI) policy is mired in needless controversy because of the stand taken by the Left parties that are supporting the coalition Government from outside. Even after nearly a decade and a half of launching of the process of liberalisation and globalisation, India has not been able to attract FDI on any significant scale.

A more aggressive push to FDI is needed both for achieving a higher GDP growth and increasing exports of industrial and agro products. For FDI is important not only to increase the rate of investment in the economy but also for inducting new technologies and management practices, and scrapping obsolete and sub-critical capacities.

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