The Hindu Business Line : A big push to small exporters

THE MANMOHAN SINGH Government's five-year Foreign Trade Policy, unveiled by the Commerce Minister, Mr Kamal Nath, on Tuesday, has gone micro. For, beyond setting the impressive export target of $150 billion each for merchandise and services by the end of the decade, the policy aims to broadbase the export effort by co-opting small exporters. By this the Government has recognised that an export drive cannot be meaningful unless the policy reaches out to the smallest of business houses.

This approach of the first Foreign Trade Policy — hitherto it used to be the Export-Import Policy — is evident in its extension of duty-credit entitlement to individual service providers, including standalone restaurants, and the lowering of the export threshold to Rs 15 crore in three years as part of a re-categorisation of "star export houses". As Mr Kamal Nath correctly said, this will "bestow status on a large number of hitherto unrecognised small exporters". The lowered threshold for designated towns of export excellence, from Rs 1,000 crore to Rs 250 crore, is also of a piece with this thrust — to include more players in the export effort. The policy adopts the incentives approach as well, by a new Target Plus scheme, which would entitle an exporter to duty-free credit, based on incremental exports substantially higher than the general target. The move to exempt all exporters with a minimum turnover of Rs 5 crore from the bank guarantee requirement should also help the small entrepreneur.

Merely extending the trade policy benefits to small exporters cannot be effective unless accompanied by a simplification of procedures. Mr Kamal Nath has tried to address this with measures to prune procedural requirements and reduce transaction costs. Good examples include increasing the validity of all licences and entitlements issued under various heads to a uniform 24 months, and reducing the number of forms and returns to be filed by an exporter. The delegation of powers to zonal and regional offices of the Directorate-General of Foreign Trade to speed up electronic data interchange is also to be welcomed.

At the macro-level, the focus of the Policy is on agriculture and services sectors, besides the traditional areas of strength — handicrafts, gems and jewellery, and leather and footwear. In agriculture, the stated thrust is employment generation though it remains to be seen to what extent this target will be met by the Vishesh Krishi Upaj Yojana, which aims to boost exports of fruits, vegetables, flowers, forest produce and their value-added products. The services sector is to be aided by the Served From India Scheme, which is expected to treble exports by 2009. The policy, ambitiously, proposes setting up free-trade warehousing zones to facilitate the emergence of India as a global trading hub. Similarly, allowing 100 per cent foreign direct investment in free-trade zones looks an attractive idea, but its implementation will depend on various operational conditions, importantly labour relations. The Foreign Trade Policy has nothing much to say on this. But, then, even the draft Special Economic Zones Bill is silent on the labour reforms issue, indicating the reality of the UPA Government's dependence on the Left to remain in power.

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