Foreign Trade Policy: More than sops, promote exports as growth engine – The Financial Express

The recent mid-term review of foreign trade policy (FTP) promises to scale up exports, as the government believes exports are the engine of growth, and if the country wants to grow at 7% then exports need to provide that extra stimulus. The review, aimed at mid-course correction, focuses on policy measures to boost exports of goods and services and increase employment generation and value-addition in the country. A first look suggests the government is sensitive towards the fact that the manufacturing sector needs considerable encouragement to perform well and better integrate with the global economy. The ‘missing middle’ appears to have been thought about and good sense has prevailed, which is reflected in this review, where the government has offered incremental sops to exporters of traditional manufacturing such as leather, textiles, processed food and agricultural sector.

The government is taking steps towards ease of doing business and this would help India’s attempts towards trade facilitation, which is a major focus of developing and developed economies in WTO negotiations. In this review, a major course correction is an additional 2% incentive for labour-intensive sectors under the Merchandise Exports from India Scheme and Services Export from India Scheme, which is in the form of freely transferable duty scrips that can be used by exporters to pay custom duties. This provision has been extended to 24 months from the existing 18 months. Duty credit scrip is one of the most important export promotion incentives offered by the government to exporters. This additional emphasis on scrips will perk up exports by giving tax incentives to exporters. The scrips will also help promote exports of certain goods to specific markets. Self-certification scheme for duty-free imports is another important incentive.

A new trade data analytics division under DGFT is a welcome move that will analyse real-time data to help fine-tune policy. This approach would form a matrix of products/markets dynamics that would help to focus on products that have a strong global market. Exporters are sometimes devoid of working capital and therefore bank on credit, which is available to them at a high cost, which, in turn, decreases their global competitiveness. To safeguard exporters, the government will provide them with incentives to the tune of Rs 8,450 crore. It’s apparent that the government’s intent towards promotion of exports as a viable medium for registering high growth rate and as a medium of global integration is clear. Of these incentives, Rs 749 crore is for leather and footwear, Rs 1,354 crore for agriculture and related items, Rs 759 crore for marine exports, Rs 369 crore for telecom and electronic items, Rs 921 crore for handmade carpets, Rs 193 crore for medical and surgical equipments, and Rs 1,140 crore for textiles and ready-made garments. On the whole, incentives for goods exports stand at Rs 4,567 crore, and for services exports at Rs 1,140 crore.
More than sops, exports need focus on issues such as availing lower transaction costs, less red tape in clearances, robust infrastructural development having state-of-the-art port, airport and superhighway facilities to augment domestic and external trade. Rational labour laws and provision of cheaper electricity to exporters, especially MSME, are the need of the hour. Exports, for the first time in a year, fell in October, owing to delays in refunds that resulted in lack of working capital for exporters because of GST. Now, with improvisation on that front to an extent in terms of establishing better network, exporters will be able to get refunds possibly faster. Such dynamics should encourage exporters to pursue with their vendors to file GST return, to be able to claim their own refunds.

As the government’s focus at the five-year term of FTP (2015-20) was to reach $900 billion worth of exports by 2020, a lot depends on what kind of favourable and liberalised export policies the government designs to make MSME sector globally more competitive. This, in turn, would generate employment, which is the main agenda of the government. Sustained growth in exports also depends on the pace of global recovery, and signs of recovery seem to be visible in the US, the EU and Japan.

via Foreign Trade Policy: More than sops, promote exports as growth engine – The Financial Express

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