India will tomorrow unveil its foreign trade policy that is expected to eliminate or refund taxes and offer cheaper bank credit to recession-battered exporters, besides encouraging them to look beyond the US and European markets.
The policy will outline the government's priorities over the next five years for resurrecting the sector that contracted by over 31 per cent in the April-June quarter.
Job-intensive segments such as textiles, handicrafts, leather and gems and jewellery will receive special attention by way of zero taxes or tax refunds and subsidised credit.
"Tomorrow's FTA may satisfy many... (but) may not satisfy everyone. It will be forward looking, taking on board the concerns of the industry, particularly the labour-intensive sectors. They will get special attention," Commerce and Industry Minister Anand Sharma said.
Exporting units employ 150 million people and their jobs were the first to be put to risk following the demand slump in traditional export markets such as the US and Europe.
Sharma, who would be presenting his first FTP, said that he would like exporters to diversify their portfolio beyond North America and western Europe. As much as 54-55 per cent of India's $168 billion exports land US and European ports.
Africa and Latin America remain the least priority for the exporters while full potential with south east Asian economies has not been realised. "I have directed my team to prepare a strategy paper for Africa and Latin America," Sharma said.
For, well-known economist and Director of think tank ICRIER, Rajiv Kumar, Indian exports suffer from a structural problem. Procedural complexities and high transaction costs are the key issues which the government must address, he said.
"As per our study of 400 exporters, 20 per cent said they don't make use of fiscal incentives,70 per cent said they have to incur additional cost to get hold of the schemes," he said.
There are already 26 schemes, which most of the exporters are not aware of.
The Federation of Indian Export Organisations (FIEO) has a wish list that includes continuation of the Duty Entitlement Pass Book (DEPB)-a popular tax refund scheme, sops for brand promotion, duty free import of fuel and export credit at 4.5 per cent below the prime lending rates.
"The policy should announce a new scheme to rebate state and local levies," FIEO President A Sakthivel said.
Thanks to over dependence of our exporters on the advanced economies, recovery signs in the developing countries are not enough to remove their worries.
"While developing economies have shown much recovery, advanced countries continue to be in red. This has serious consequences for our exports as well," Sakthivel said.
In the assessment of the Reserve Bank of India, the "slackening growth impulses in the world economy emerging from the global financial crisis continued to impinge on the world merchandise trade".
India's export basket comprises mainly the primary products, manufactured goods and the petroleum products.
The primary products include agriculture and allied products as also ores and minerals.
The chemicals, engineering goods, textile, gems and jewellery are the main items of manufactured exports.
Besides,exports the FTP would also streamline procedures for imports, which have also been declining due to economic slowdown.
In fact, imports declined at a faster rate of 36.5 per cent for the April-June period.
