The Hindu Business Line : Awaiting foreign trade prescriptions

The delayed annual supplement to the Foreign Trade Policy 2004-09 should be out in two days and exporters will look keenly at the fine print for changes that will stand them in good stead in what is clearly an increasingly competitive market. Nations that would have not come up to scratch a few years ago are grabbing developed market attention and this is just the beginning. Bangladesh, for instance, is emerging a noticeable exporter of garments and could provide challenge to traditional apparel exporters such as India and China. Now more than ever, a review of the Foreign Trade Policy, announced by the Commerce Minister, Mr Kamal Nath, in August 2004, should cast some light on the achievements and offer new prescriptions to expand the volume of exports.

The annual supplement is all the more important because exports in 2005 rose 27 per cent in dollar terms over the previous year and the record should be turned into a trend. Surprisingly, traditional items such as iron ore, petroleum products, marine products, gems and jewellery, engineering goods, basic chemicals and readymade garments took exports to $28.1 billion, 21.4 per cent higher than in 2004. With 2005 posting external trade worth $128 billion, the Commerce Ministry is confident of reaching its target of $500 billion in export and imports by 2009. The policymakers will have to pay careful attention to the road map laid by the 2004 Foreign Trade Policy. Among other things, the strategy for boosting exports spelt out then mentioned upgrading infrastructure, neutralising the incidence of all levies and duties on inputs used in exports and unshackling controls. The strategy is laudable ;in the apparel export industry it has brought transactions costs down from 15 per cent of the export revenue in 1998 to under 10 per cent five years later. But much more needs to be done to reduce the transaction cost across industries and reconsider the incentives that have been revoked.

The issue of tax incentives has become especially pertinent with the Special Economic Zone Act that confers sweeping privileges on SEZs even as some tax-breaks for traditional exporters, such as those under Section 80 HHC have been abolished. The Commerce Ministry might look with approval at the widespread interest shown in the SEZs but will have to consider the fact that in its earlier avatar the SEZ has not been an success story. Unwittingly, the policymaker has stacked the odds against the winners and this bears a relook. For its part the Finance Ministry will not be amused at the revenue loss from the tax-breaks accorded to the SEZs. Hopefully, the Commerce Ministry will address these issues on April 7 while reiterating its confidence in India's rising export potential.

More Stories on : Editorial | Foreign Trade

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

Stories in this Section
Awaiting foreign trade prescriptions

Compounding troubles for farmers

Are long working hours endangering flight safety?

RBI's balance-sheet: Mirroring global change

`Globalisation is a source of productivity miracle'

Love you, US!

Of IIM fees and salary offers

SBI strike

Security for working women