India's Foreign Trade Policy

The five-year foreign trade policy that was announced by the Commerce Ministry on 27 August to better India's present shameful share of 1.5 percent in total global trade has several limitations. In fact, it is a hesitant step, as the document dishes out the roadmap for just two years instead of five, citing recession.

Situation of Global Economy
The export target declared in it is also not ambitious because the mention of $200 billion export a year was also made in the policy presented five years ago. But these limitations cannot be ignored in view of the unusual situations of global economy.

The present situation demands such practicality. But more commendable thing in it is that there is a glimpse of concrete effort to free the export sector after a long time from the shadow of the United States and Europe.

Export Growth
India's 70 percent export gone to just three destinations-the United States, Europe, and Japan. Since these three places have emerged later as centers of global recession, it was quite natural that, with their falling demand, India's export sector also had to go down.

Learning a lesson from the export registering a drop of 30 percent in the past 10 months, the Commerce Ministry has now declared export targets for Latin America and several African countries. Similarly, the decision to continue tax exemption and different concessions for exporters is also in the right direction, because exporters suffering from a strong Rupee and cold demand from developed countries badly needed some relief.

Weakness in Export Market
However, the biggest weakness of the Indian export market is that it is compelled to sell goods at 20 percent higher prices than main rival countries such as China, Bangladesh, Vietnam, and Cambodia, etc. The high interest rates of export and extremely high transaction costs are the main reasons for it, which have not received adequate attention in the new foreign trade policy.

There has been some effort in this direction through abolishing the fees for applying for different incentive schemes and increasing the facility of electronic transaction, but overall, there does not appear to be any major improvement through such petty steps. It is not without reason that most export organizations are not very enthusiastic about this policy. More dialogue with exporters-importers could perhaps have been the foundation of a better foreign trade policy.