The Hindu Business Line : FTP: Long-term strategy missing

The Foreign Trade Policy (FTP) for the next five years announced on Thursday by the Commerce Minister, Mr Anand Sharma, is the second major policy initiative of the UPA Government, after the Budget. The FTP announcement comes in the backdrop of a consistent decline in exports over the last 10 months. What makes the FTP even more significant is its timing, just before the crucial WTO-G20 ministerial meeting on the stalled Doha Round negotiations and after a string of bilate ral agreements with new and prominent markets such as the Asean and Korea. Against such a backdrop, the FTP could have been a strategic vision for a global India in a newly emerging economic order. Unfortunately, the FTP is long on short-term expedients and short on long-term strategic vision.

The Commerce Minister makes it clear that the ‘immediate objective’ is to reverse the decline in exports and provide succour to exporters. Fiscal concessions such as the income-tax benefits for both IT and export-oriented units are to be extended for an additional year, to 2011; export credit guarantee schemes providing insurance cover will continue till March 2010. The FTP lays equal stress on exporters doing their bit; it stipulates a minimum value addition of 15 per cent on imports. Exporters also need new markets with the advanced economies in the doldrums. The FTP identifies 26 new markets in Latin America and Asia-Oceania and promises additional resources for both the Market Development Assistance Scheme and Market Access Initiative Scheme. With an eye to a future pick-up in world trade, most incentive schemes are to be rationalised to identify products that could catalyse the next growth.

The FTP urges technology upgrades and promises duty-free imports of capital goods through ‘Duty Credit Scrips’. The idea is to reduce costs, though how this is to be done in traditional exports without impacting employment — a major focus in the policy — is open to question. Transaction costs, the traditional bugbear of exporters, also receive treatment; some fees and Customs verification processes have been abolished. But the FTP has few ideas on how India’s share of world trade by 2020 can double, given the competition that is gearing up for the next round of growth. Simply mentioning an Inter-Ministerial Committee to examine ‘trade grievances’ is not enough; that goal requires an inter-Ministry consensus on removing age-old hurdles, such as shoddy roads, poor power, poorer governance and hidden transaction costs. That sense of united purpose is missing.

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