By K R Sudhaman
The Narendra Modi Government has come out with a new Foreign Trade Policy that aims to achieve $ two trillion exports by 2030 — that is $1 trillion of goods or merchandise exports and an additional $1 trillion services exports. It certainly looks a tall order going by the past records. Indian government led by UPA came out with a foreign trade policy in 2013 to achieve $500 billion goods exports in three years when annual merchandise exports was around $300 billion at that point of time. The government changed in 2014 and till now that $500 billion goods exports target has not been achieved.
Of course, there are some valid economic reasons like global economic downturn, Sino-US trade standoff and Covid 19 pandemic, which resulted in India’s merchandise exports stagnating at around $300 billion for number of years. Only last two or three years with the economy recovering after covid, exports have started moving up and both merchandise and services exports are doing reasonably well. But after achieving over 20 per cent exports growth in the previous year, good exports growth slipped in 2022-23 in view of global recessionary trends.
But overall exports (goods and services) of over USD 770 bn with a growth of about 14%, amidst global headwinds goes to show the resilience of the Indian exports sector in 2022-23, argues Dr A Sakthivel, President, FIEO.
Dr A Sakthivel says that milestone achievement of $ 447.47 billion in goods exports in 2022-23 has been mainly on account of phenomenal growth in exports of electronic goods, petroleum products coupled with growth in agro and processed food, marine products, leather goods, apparel, drugs & pharmaceuticals and organic & inorganic chemicals. Roughly 40% of the incremental GDP in 2022-23 was contributed by exports. As a result the FIEO Chief is confident of achieving the exports target of USD 2 trillion by 2030. Aggregate exports of $770 billion in 2022-23 from about $ 500 billion in 2020-21 with a CAGR of about 55 % is worth noting.
But the question is can we expect this rosy picture all through until 2030 to reach $2 trillion. There are some positive signs but future could be bumpy as past situations show how targets get derailed because of economic headwinds, both domestic and international. Also there are unpredictable developments as well like the Covid.
But international trade expert and a senior former economic adviser in finance and commerce ministries H A C Prasad is of the firm opinion that New FTP is a step in the right direction. The policy has many positives like the shift from incentives to tax remission which is also WTO compatible, focussing on emerging areas like E-Commerce, developing districts as export hubs.
Rationalising the threshold for recognition of exporters as status holders will enable more exporters to achieve higher status and reduce transaction cost for exporters. Merchandise trade reforms involving shipment of goods from one foreign country to another without touching Indian ports and involving an Indian intermediary could help in India’s third country exports. Accepting Rupee payments under FTP schemes could help in furthering rupee trade, though furthering rupee trade also depends on its greater acceptance by our trading partners. In India’s new FTAs and also the current ones under implementation, India should push for rupee trade to the extent possible, Prasad, who understands the technicalities of trade policy very well, point out.
On declaring setting up of four new towns of export excellence, he however felt there is a need to evaluate the performance of the 39 towns of export excellence already existing. Promoting districts as export hubs could help in decentralising export promotion. But this calls for greater effort and coordination between central and state governments and local bodies.
There are other positives as well like DGFT outreach programmes, measures to expand E-Commerce and one time amnesty scheme for default in export obligations and the plan to restructure Commerce Ministry. All these are welcome, but only time will tell how far these measures are effectively implemented considering the inertia in government.
While the Outreach programs by DGFT offices could help, greater participation by active chambers of commerce at district level is also needed. Estimating district-wise exports is also a challenging task, when a proper mechanism to estimate state-wise exports is yet to be put in place, he rues.
Prasad however feels some explanation is needed why FTP has not touched upon three areas. He wonders why have the FTP not included the recent progress being made by India in FTAs like the India-Australia Economic Cooperation and Trade Agreement, the India-UAE Comprehensive Economic Partnership Agreement and the other FTAs in the pipeline. This could have given a more holistic trade policy.
Secondly he says while clubbing Services exports with Merchandise exports gives a holistic picture of exports, the strategies and policies to enhance services exports are not exactly the same as those for merchandise exports.
Also, Prasad says the open-endedness of the FTP with no end date is something new. While it indicates the flexibility to make changes whenever needed, the advantages of automaticity of triggering any sun-set clauses associated with a fixed end date policy and a zero-budgeting approach may not be past records show, the targets set in foreign trade policies were never achieved. That only substantiates the point that the new FTP is certainly a welcome step but the targets do appear to be overambitious. (IPA Service)