Tuesday, March 3, 2009

New Foreign Trade Policy (2009-10)






The Union Commerce Minister Kamal Nath has unveiled some export-friendly measures in the Foreign Trade Policy for 2009-10. The policy states that India has scaled down its export target to around $170-175 billion for the current fiscal in the wake of current economic crisis. The policy is confident of achieving the target of $200 billion in exports during 2009-10.
As per the new policy, India will suffer less and recover fast from the global crisis. This year, i.e., during 2008-09, India did achieve an export growth of 30.9 per cent till September 2008, but there has been a set back recently due to the global recession. The increased economic activity has resulted in generation of around 140 lakh new jobs in the export sector.
The country’s economy is an open economy and not only its exports are rising but its imports have also risen. The average annual growth rate of imports has been 34.1 per cent and the total value of imports in 2007-08 was $251.56 billion.
Short-Term Supplement
The review of Foreign Trade Policy is in the nature a short-term supplement to the five-year framework (2004-09) that ran concurrently with the tenure of the United Progressive Alliance government. During most of the first four years, Indian exports fared remarkably well benefiting from the global trade boom.
The share of exports in the Gross Product Product (GDP) increased to 15 per cent, which — though not comparable to those of China and many other East and South East Asian countries — seemed set to grow further.
However, the picture changed drastically with the sharp downturn in the global economy. The World Trade Organisation (WTO) and other international institutions have lowered the global trade targets for 2009. Indian merchandise exporters are under extraordinary pressure as global demand is set to slump alarmingly.
India’s export growth has been negative in recent months and the Government has scaled down the export target for the current year to $175 billion from $200 billion. For 2009-10, the target has been set at $200 billion.
A Welcome Step
Welcoming the new polcy, Federation of Indian Export Organisations (FIEO) President A Sakthivel said these measures would help exporters in reducing transaction costs. He also welcomed the extension of export obligation period from 24 months to 36 months for advance authorisation and carrying forward of export obligation of 2008-2009 to 2010 under EPCG scheme.
While the PHD Chamber welcomed the procedural simplifications announced by way of trade facilitation measures, it has been a further disappointment for exporters who were looking forward to a stimulus package to help them meet the current global crisis.
President of the FICCI Harsh Pati Singhania said, “facilitation measures are indeed necessary for simplifying procedures and reducing transaction costs. They will be critical in giving the exporting community some comforts in the backdrop of current slowdown in global demand.”
ASSOCHAM President Sajjan Jindal welcomed customs duty reduction in EPCG Scheme. “Extension of DEPB for exporters is also a welcome measure that exporters will cherish,” he said, adding that the special package of Rs 325 crore for leather and textiles was far below the expectations of India Inc.
Way for Fiscal Concessions
Like the previous annual supplements to the Foreign Trade, the latest one paves the way for fiscal concessions and simplified trade procedures. For instance, income tax exemption for 100 per cent Export-Oriented Units (EOUs) has been extended for another 12 months.
There have been attempts at merging some export promotion schemes and speeding up approvals under the various entitlement schemes. Two towns, Surat and Bhilwara, have been recognised as centres of export excellence in diamond and textiles respectively. Some of the other major concerns of exporters are beyond the scope of Trade Policy. Development of world class infrastructure and global hubs for specialised manufactures — such as jewellery and handicrafts — requires the active support of other branches of the Centre as well as the State Governments.
The Highlights of the Foreign Trade Policy
* Customs duty under export promotion capital goods scheme cut to three per cent from five per cent
* Benefits under Duty Entitlement Pass Book (DEPB) scheme to be extended without waiting for realisation of exports proceeds
* Special incentive of Rs 325 crore for various sectors like handmade carpets, leather and technical textiles from April 1,2009.
* Threshold limit for recognition as premier trading house reduced to Rs 7,500 crore
* Benefit of five per cent under "focus product, focus market" scheme for export of handmade carpets
* Authorised persons of gems and jewellery units can personally carry imported gold of up to 10 kg
* Obligation under export promotion capital goods scheme extended till 2009-10 for sops availed during 2008-09
* The procedural formalities for claiming duty drawback refund and for getting refund of terminal excise duty for deemed exports is further simplified
* Opening of an independent office of DGFT at Srinagar
* Re-imbursement of additional duty of excise levied on fuel would also be admissible for EoUs.