Govt unveils Foreign Trade Policy for 2009-14

Commerce and Industry Minister Anand Sharma and Minister of State for Commerce and Industry Jyotiraditya Scindia at a press conference to announce the Foreign Trade Policy.
Commerce and Industry Minister Anand Sharma and Minister of State for Commerce and Industry Jyotiraditya Scindia at a press conference to announce the Foreign Trade Policy.
Union Commerce and Industry Minister Anand Sharma today unveiled the Foreign Trade Policy for 2009-14 that is designed, in the immediate term, to arrest and reverse the declining trend of exports and to provide additional support, especially to those sectors which have been hit badly by recession in the developed world.

However, given the current economic climate, the policy measures outlined today are only for a two-year period, after which the government will take stock of the situation and make mid-course corrections.

The Government is hoping to achieve an annual export growth of 15 per cent over 2010-11 with an annual export target of $ 200 billion by March 2011.

"In the remaining three years of this Foreign Trade Policy, the country should be able to come back on the high export growth path of around 25 per cent per annum," Mr Sharma said.

He said the Government expected to double India's exports of goods and services by 2014. "The long-term policy objective for the Government is to double India's share in global trade by 2020."

The minister said that, in order to meet these objectives, the Government would provide a policy environment through a mix of measures, including fiscal incentives, institutional changes, procedural rationalisation, and efforts for enhanced market access across the world and diversification of export markets.

"The three pillars which would support us to achieve the targets are improvement in export-related infrastructure, lowering of transaction costs and providing full refund of all indirect taxes and levies," he said.

"We would reassure our exporters and provide them adequate confidence to maintain their market presence even in a period of stress. In this policy, we have given a special thrust to the employment-oriented sectors which have witnessed job losses in the wake of recession, especially in the field of textiles, leather, handicrafts, etc.," he said.

Mr Sharma said the Government would ensure that dollar credit needs of exporters were met in a timely manner, and a committee had been constituted with Finance Secretary, Commerce Secretary and the Chairman of the Indian Banks Association (IBA), which would meet periodically for this purpose.

He said the Government had taken a conscious decision to continue with the Duty Entitlement Passbook (DEPB) scheme upto December 2010. Also, the income tax benefits under Section 10 (A) for the Information Technology (IT) industry and under section 10 (B) for 100 % export-oriented units would continue for one additional year till March 31, 2011, he said.

The enhanced insurance coverage and exposure for exports through Export Credit Guarantee Corporation (ECGC) schemes has been ensured till March 31, 2010. The Government has also decided to continue with the interest subvention scheme for this purpose.

The minister said that, through the new policy, the Government would encourage value-addition in manufactured exports and, towards this end, it has stipulated a minimum 15 % value addition norm on imported inputs for the advance authorisation scheme.

In view of the fact that the developed countries have shown a negative growth trend in the present economic climate, the Government has taken a conscious decision to expand and diversify the country's export markets, especially in the emerging markets of Africa, Latin America, Oceania and the CIS countries.

"Therefore, we would like to offset the inherent disadvantages which our exporters face in these markets, such as credit risks and higher trade costs, through appropriate policy instruments," he said.

He said the Government had rationalised the incentive schemes, including the enhancement of incentive rates, which are based on perceived long-term competitive advantage of specified Indian products and markets. He said new emerging markets had been given a special thrust to allow competitve exports.

Mr Sharma said the Government would like to encourage production and export of "green products" through measures such as phased manufacturing programme for green vehicles, zero duty Export Promotion Capital Goods (EPCG) scheme and incentives for exports.

Similarly, exports from the North-East region will also be promoted, he said.

The Government has earmarked additional resources under the Market Development Assistance Scheme and Market Access Initiative Schemes, and leading products have been identified which would catalyse the next phase of export growth.

The minister said the Comprehensive Economic Partnership Agreement (CEPA) signed with South Korea earlier this month would enable Indian products to secure enhanced market access to the growing Korean market.

The Trade in Goods Agreement with ASEAN, which will come into force from January 1, 2010, will give enhanced market access to several items of Indian exports in this vibrant economic grouping, he said.

These agreements are also in line with India's "Look East" Policy, he pointed out.

He said the Mercosur Preferential Trade Agreement had been concluded and it would be the Government's endeavour to deepen its trade engagement with other major economic groupings in the world.

Mr Sharma said India remained committed to the successful conclusion of the Doha Development Round. "We are in favour of establishing a rule-based, fair and equitable global multilateral trading regime which has development as its core objective. However, it must respond to the aspirations of millions of people of the developing world," he said.

He said the Government would promote Brand India through at least six "Made in India" shows to be organized across the world every year.

The minister said that, in the era of global competitiveness, there was an imperative need for Indian exporters to upgrade their technology and reduce their costs, which the policy seeks to achieve.

Technological upgradation of exports is sought to be achieved by promoting imports of capital goods for certain sectors under EPCG at zero per cent duty.

Under the present Foreign Trade Policy, the Government recognizes exporters based on their export performance and they are called "status holders". For technological upgradation of the export sector, these status holders will be permitted to import capital goods duty free (through additional Duty Credit Scrips equivalent to 1% of their FOB value of export in the previous year, of specified product groups).

This will help them to upgrade their technology and reduce cost of production. These two schemes would be valid upto March 31, 2011.

For upgradation of export sector infrastructure, "Towns of Export Excellence" and units located therein would be granted additional focused support and incentives.

To enable support to Indian industry and exporters, especially the Micro, Small and Medium Enterprises (MSMEs), in availing their rights through trade remedy instruments under the WTO framework, the Government is planning to set up a Directorate of Trade Remedy Measures.

Mr Sharma said the Government would endeavour to make India an international diamond trading hub, and plans to establish more diamond bourses in the coming years.

In order to reduce the transaction cost and institutional bottlenecks, the e-trade project would be implemented in a time bound manner to bring all stake holders on a common platform. Additional ports/locations would be enabled on the Electronic Data Interchange (EDI) over the next few years.

An Inter-Ministerial Committee has been established to serve as a single window mechanism for resolution of trade-related grievances.

An updated compilation of standard input and output norms and ITC (HS) classification of export and import was also released today after five years. It is expected to bring greater transparency and facilitate easy transactions by exporters and importers.

"These are difficult times and we have set an ambitious goal for ourselves. I am sure that the industry and Government, working in tandem will be able to ensure that the Indian exports become globally competitive and that we are able to achieve the target which we have set for ourselves," the minister said.

At the outset, Mr Sharma pointed out that the new Foreign Trade Policy was being unveiled at a challenging time when the entire world was facing an unprecedented economic slowdown.

"This year we are witnessing one of the most severe global recessions in the post-war period and countries across the world have been affected in varying degrees. Major economic indicators of industrial production, trade capital flows, unemployment, per capita investment and consumption have taken a hit," he said.

He said the World Trade Organisation (WTO) estimates projected a grim forecast that the global trade this year was likely to decline by 9% in volume terms while the International Monetary Fund (IMF) had projected a decline of over 11%.

"This recessionary trend has huge social implications. A World Bank estimate suggests that 53 million more people would fall into the poverty net this year and over a billion people would go chronically hungry. Fortunately India has not been affected to the same extent as other economies of the world, but our exports have suffered a decline in the last 10 months due to contraction in demand in the traditional export markets. In this economic climate, some countries have resorted to protectionist measures posing barrier to free trade, which has aggravated the problem. Even though economists are talking of emergence of ‘green shoots’, I remain hesitant to hazard a guess on the nature and extent of this recovery and whether it is a V shape recovery or a U shape recovery," he said.

Mr Sharma said the Foreign Trade Policy at this juncture would need to take cognizance of the declining demand in the developed world.

He recalled the series of measures announced by the Finance Minister which had resulted in some signs of recovery. He cited the Index of Industrial Production for the month of July and the figures for the core sectors in this regard.

The minister said the Government had in 2004 set two objectives--to double India's percentage share of global merchandise trade within five years and use trade expansion as an effective instrument of economic growth and employment generation.

He said that in the last five years exports had witnessed a robust growth to reach a level of $ 168 billion in 2008-09 from $ 63 billion in 2003-04.

India's share of global merchandise trade was 0.83% in the year 2003 which rose to 1.45% in the year 2008 as per WTO estimates. Its share of global commercial services export was 1.4% in 2003 which rose to 2.8% in 2008. India’s total share in goods and services was 0.92% in 2003; it increased to 1.64% in 2008.

Mr Sharma said studies had suggested that nearly 14 million jobs were created directly or indirectly as a result of augmented exports in the last five years.

He said the policy of Special Economic Zones (SEZ) , which was launched in 2005, had given encouraging results. He said the Government had granted approval for setting up 577 SEZs, of which 325 had been notified. After the enactment of the SEZ Act, nearly three lakh people have gained employment in the SEZs, he said.

Of the 98 Special Economic Zones which have started operations, physical exports have increased from a level of nearly Rs. 66,000 crores in 2007-08 to Rs. 99,689 crores in 2008-09, registering a growth of 50% in a year, he said.

In the last 5 years, exports from SEZs have grown by 620%, and have attracted foreign direct investment of US$ 2.43 billion, he added.

Factbox: Highlights of Foreign Trade Policy 2009-14


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