The message that emerges loud and clear from yesterday’s annual review of the Foreign Trade Policy is that the government continues to be justifiably wary of the country’s performance on the exports front. That perhaps explains why the amendments to the five-year policy have extended export promotion measures and concessions, such as the duty entitlement pass book (DEPB) scheme and exports promotion capital goods (EPCG) scheme — so that industry can continue to import goods for exports production at zero duty for some more time. There are also several welcome procedural simplifications aimed at reducing the cost of transaction for exporters. For instance, the amended policy has introduced an annual EPCG authorisation scheme for exporters, who now will no longer need to obtain multiple clearances from the government. Similarly, the facility of interest subvention of 2 per cent — currently available for handicrafts, handlooms, carpets and small enterprises — has been extended to cover sectors such as leather, jute goods, engineering and textiles. In addition, the amended policy provides a bonus incentive to sectors whose exports are still not doing well. Labour-intensive industries such as handicrafts, handlooms, silk carpets, leather, leather goods, sports goods, toys and bicycle parts will greatly benefit from the handout that will cost the central exchequer an additional '1,000 crore in a full year. The amount is relatively small compared to an estimated '44,000 crore of revenues that the government already loses every year on account of various export promotion schemes. However, their continuation and extension to new areas are indicative of the government’s concern that the exports sector is still not out of the woods.
This may appear contrary to the stridently confident note that Commerce and Industries Minister Anand Sharma struck while announcing the annual supplement to the five-year policy that he launched in August 2009. India’s merchandise exports for the current financial year, the minister said, would meet the target of $200 billion, representing a growth rate of 12 per cent over the performance in 2009-10. This confidence may have arisen from the 30 per cent growth witnessed in exports in the first four months in the current financial year. However, the monthly growth rates have already begun to taper off from a high of 36 per cent in April to 35 per cent in May, 30 per cent in June and a modest 13.2 per cent in July. The deceleration in exports growth reflects the base effect of a gradual recovery in exports that began from the end of the first quarter of 2009-10. Even otherwise, India’s exports growth in the remaining eight months of the year is likely to remain moderate given the slow recovery in its key overseas markets. The exports growth target of $200 billion may still be met, but not without help from the extension of the EPCG scheme until March 2012 and the DEPB scheme until June 2011. To that extent, the amendments represent no major departures from the thrust of the existing five-year policy. While this may be a sign of stability in policy, which would surely help exporters face the challenges of global markets that are increasingly becoming protectionist, the minister’s silence on new initiatives to promote exports or on his strategy for reviving the stalled Doha round of trade talks under the World Trade Organisation is a disappointment.
