The Hindu Business Line : Short on credibility

THE ANNUAL SUPPLEMENT 2005 to the Foreign Trade Policy (FTP) 2004-2009 released on Friday by the Commerce Minister, Mr Kamal Nath, boasts of a number of forward-looking measures intended to impart dynamism to India's growing export performance. Unfortunately, they fall short on the credibility yardstick, mainly because of the looming shadow of the Finance Ministry over the FTP. For instance, the Duty Entitlement Pass Book (DEPB) scheme has been agitating exporters for quite a few months now because the Finance Ministry wants to impose income-tax on the encashment of the benefits under the scheme. Export organisations have demanding that this benefit, like other sops, should remain outside the purview of the income-tax. Mr Kamal Nath had no immediate relief to offer and only promised that tax recovery would be on hold for a month till the Prime Minister's Economic Advisory Council comes out with a view on this issue. The implementation of policy announcements is another sore point with the exporting community. Most of the measures announced by the Minister were greeted with scepticism as many of the past pronouncements are yet to be implemented.

Having said that, it must be acknowledged that the Commerce Minister has spruced up the existing policy. The Export Promotion Capital Goods (EPCG) scheme has been made flexible; fast performing export companies have been promised 25 per cent off from their export obligation if they fulfil 75 per cent of their commitment in half the stipulated time and the Advanced Licence schemes have been clubbed into one. There are special packages for promotion of marine exports, a renewed focus on agri- and processed-food exports by including poultry and dairy products in the Videsh Krishi Upaj Yojana, and withdrawal of all types of cess on exports, no matter that these were only minor levies. Mr Kamal Nath's other proposals such as setting up an Inter-State Trade Council or special women and youth cells in export promotion councils are more of embellishments than real measures to boost exports.

The annual supplement to the FTP also lauds India's export performance which in 2004-05 overshot the target of $74 billion to touch $80 billion. How much of the incremental earnings have come through higher physical exports and how much of it can be attributed to the exchange rate changes — especially the depreciation of the dollar against the euro and other currencies — remains to be worked out. But with ever higher targets being set and with exporters demanding incentives in the form of tax breaks, it would be prudent for the Government to conduct some sort of a study on the "costing'' of exports. Besides, the critical issue of infrastructure inadequacy has to be addressed urgently because achieving an export volume of $150 billion substantially earlier than 2009, as the Minister announced, would require an upgradation of port handling facilities as also of other support infrastructure.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Short on credibility

Oil: Super spike or crying wolf?

A narrative on derivatives

Superfluity comes sooner with white hairs

Standard, dead and buried

Is FBT a fundamentally blemished tax?

Time to streamline regulatory law-making