This year ends with disappointment at low economic growth and a mild hope of revival in the later part of the coming year.
Despite the government's brave statements of India being the fastest growing economy in the world, the 24 per cent fall in export in November, 12th month of a double-digit decline, tells its story. The commerce ministry, however, says it is due to low prices for petroleum products and gem and jewellery items, that export from other sectors has declined much less. For instance, pharmaceuticals, garments and automobiles have done well enough.
The ministry put in place a new Foreign Trade Policy 2015-20 (FTP) from April 1, mainly reforming the reward schemes for export of goods and services. The newly introduced Merchandise Exports from India Scheme (MEIS) went through two major amendments, vastly extending the coverage to more products and destinations. The Services Exports from India Scheme (SEIS) gave duty credits at reduced rates but much-needed flexibility by allowing transferability of the scrips and allowing import of more items under the scrips. However, the incentive was made available to only select modes of delivery of services. The FTP said payment in rupees for service charges earned on specified services shall be treated as receipts in deemed foreign exchange, as under Reserve Bank of India guidelines. The list of such services is yet to be notified.
After a lot of dithering, the government announced an interest equalisation scheme for exporters from selected sectors. It was put in place in December but the interest subsidy is available eith effect from April 1, 2015. The Customs exchange rate for imports went from Rs 63.85 a dollar at end-December 2014 to Rs 67.20 a dollar by end- December 2015. The trade deficit and current account deficit, however, remained within manageable limits, due to a fall in the import bill. The finance ministry announced a number of steps intended to make it easier to do business and made a lot of noise about it but the ground realities did not change that much. There is no dearth of frivolous action at the operating levels. The ministry also announced a slew of measures to cut unnecessary litigation. The effect of these overdue steps will be felt over the next few years.
At the World Trade Organization, India delayed its ratification of the trade facilitation agreement struck at the Bali ministerial conference till the four-year deadline to conclude certain issues on farm subsidies was done away with. The December meet of trade ministers at Nairobi produced no particular gain for us. The commerce ministry tried to make headway in concluding a Regional Comprehensive Economic Partnership with Asean countries plus six other major economies in Asia. Meanwhile, several countries in the Pacific Rim concluded a mega trade agreement called the Trans-Pacific Partnership.
The new year brings fresh hope. America seems poised to lead a global economic recovery. Government finances are strong enough to push critical infrastructure projects. Hopefully, the economy will see productivity gains that can improve the competitiveness of our exporters. On that note, I wish you all a happy and prosperous new year.
tncrajagopalan@gmail.com
