The Telegraph
Monday , June 16 , 2014
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Export leap linked to governance

New Delhi, June 15: The new foreign trade policy (2014-19), to be announced after the budget, is expected to emphasise governance issues in the form of a co-ordinated strategy among different central government departments as well as states.

Within this overarching structure, the policy will focus on incentives to boost services export and value-added products, besides making inroads into newer markets.

A senior commerce ministry official said the foreign trade policy (FTP) would emphasise the manufacturing of value-added diversified products and exploring newer markets such as the Commonwealth of Independent States, east and West Asia and Latin America.

“Manufacturing at high levels of value and raising the scale of operations will be vital if the gains from mass production and riding on to the global and regional value chains have to be realised,” the official said.

The current regime considers exports a necessary ingredient of economic policy and that the export strategy will have to be embedded in the governance structures.

Officials said most of the ministries and government departments needed to be made aware of the fact that production was important not only for the domestic market but also for exports.

The officials also emphasised the need to involve states in meeting the objectives of the foreign trade policy, particularly in the elimination of transaction costs. The goal of the policy should be to “mainstream” the states. If necessary, they needed to be incentivised on the basis of their contribution to exports.

The FTP proposals are being firmed up by the commerce ministry in consultation with the exporters and will be discussed with the finance ministry soon.

All export and import-related activities are governed by the policy. It mainly aims at enhancing the country’s exports and use trade expansion as an effective instrument of economic growth and employment generation. The earlier policy ended on March 31.

To ensure that all service exporters benefit from the “served from India scheme”, the commerce ministry is looking at allowing import duty exemption scrips (given as incentive under the scheme) to be sold in the market or used to pay service tax, the officials said. This will benefit service exporters who do not import any inputs that prevent them from using the scrips.

Under the “served from India scheme”, exporters are entitled to import duty exemption scrips worth 10 per cent of the exported value. Only exporters with a minimum foreign exchange earning of Rs 10 lakh can avail themselves of the facility.

According to Ajay Sahai, director-general of the Federation of Indian Export Organisations, the scheme will be more effective if the scrips can be used to pay service tax or can be traded.

“At present, only the hotel industry is using the scrips as it imports liquor and vehicles. For most others, the scheme is not of much use,” Sahai said.

The commerce ministry also wants the existing focus product scheme — which gives sops to specific labour-intensive products — to cover fewer items, while increasing the amount.

Global trade is expected to increase 4.7 per cent this year against a 2.1 per cent growth in 2013 and an average 2.2 per cent in the past two years, according to an estimate released by the World Trade Organization.

Though the projected growth is still below the 20-year average growth rate of 5.3 per cent, it does indicate near-term development in global demand, which is crucial to exports. India missed its goods export target of $325 billion for 2013-14, with shipments during the year rising nearly 4 per cent to $312 billion.