The Hindu Business Line : Will it keep its promise?

The Annual Supplement to the Foreign Trade Policy is an ambitious goal-setting exercise and infuses a sense of optimism among the stakeholders. But as far as employment generation is concerned, it does not really measure up.

All major trade policy measures normally have a populist stance. This year's Annual Supplement to the Foreign Trade Policy is no exception. Riding the crest of an export boom, the supplement emphasises accelerating India's exports, attracting huge amount of foreign direct investments and promises to create employment on a large scale.

By doing so, it has tried to appease the major stakeholders such as trade and industry, small and medium enterprises, policy analysts and the people of the country.

Ambitious goal

On the face of it, the supplement is an ambitious goal-setting exercise and infuses a sense of optimism among the stakeholders. Spurred by exports surpassing the magical figure of $100 billion, the country is gearing up to attain this year's target of $120 billion. This is in sync with the positive trend of the past two years with exports growing at 20 per cent annually. More heartening is the increase in the market share in developed countries such as 30 per cent to the UK, 54 per cent to Singapore, 44 per cent to South Africa and, more important, registering a 34 per cent growth in exports to China.

Under such favourable conditions, external trade is gaining critical importance in the design of the country's economy and, as a result, the policymakers are paying adequate attention to the value of external trade.

Exports not only add to the forex reserves but also increase employment at skilled levels. With this emphasis, it seems the FTP is on the right track.

Other important schemes of the FTP supplement are services for aviation, gems and jewellery, marine products and auto components.

On the gems and jewellery front, the objective of turning India, specifically Mumbai, into an international hub for value-added products, reflects the positive attitude and confidence to take on new centres such as Dubai and Tel Aviv.

The measures announced should push this backbone of India's exports to compete and tackle new challenges by upscaling its value-addition potential.

R&D Labs to gain

Another major boost would come from auto component manufactures. This industry has been allowed to import new vehicles for research and development purposes without the procedural hassles of getting them certified.

This seems to be an encouraging sign as it will provide research and development labs easier access to the latest technologies in the auto component industry.

In the aviation sector, the Supplement's provisions will bring the country the recognition it needs as a competitive centre of providing aviation facilities.

India will treat refuelling and supply of food and beverages for long-distance flights as exports, entitling them to share the benefits under this unique government export scheme.

This, of late, has emerged a big business opportunity and many airlines are resorting to this measure of replenishing fuel in Thailand, Malyasia or Singapore. This will hopefully enable India to offer competitive fuel prices and will attract mid-route stops of international flights.

On employment creation

On the business front, the FTP supplement seems fine. But as far as employment generation is concerned, where do we stand? The Policy has not addressed the issue in a manner that would generate real employment. It should have made some attempt towards suggesting ways of making labour laws more flexble.

The introduction of two new WTO compatible schemes — Focus Products Scheme and Focus Market Scheme — may look like innovative strategising to promote specific products and overseas markets, but the big idea behind this is to create mass employment in semi-urban and rural areas.

To make this happen, one needs to have the logistics and infrastructure in place, but there is no mention of that.

The FTP supplement does make some bold promises, but how far it will be successful, only time will tell.

(The author is with the Indian Institute of Foreign Trade, New Delhi.)

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