In the past few months, India’s exports had been logging tepid growth compared to the previous year, not only because the global economic recovery is on a glacial pace but also because the absence of the FTP when it was due on April 1, 2014 or after the new government came into office put paid to the drive and dynamism of exporters who are invariably looking for continuity of subventions or stability in policy to determine market and product consolidation and diversifications. The self-inflicted one-year policy holiday on the foreign trade front is partly the reason what is done us into the piquant spot when exporters felt frustrated with the double whammy of the overseas markets lingering in a languid state.

Now that the spell of silence is broken and a visionary statement is laid out by the Minister of State for Commerce & Industry Mrs. Nirmala Sitaraman on Wednesday, it is pertinent to focus on the nitty-gritty. For once, the Ministry of Commerce has recognized the importance of services exports and for the first time it has treated both goods and services on an even keel, after pampering merchandise classes and molly-coddling them when services exports took on its own and conquered markets by dint of its excellence in execution and commitment to offer the best bouquet among the competitors.

FTP 2015-20 has put in place two consolidated schemes instead of the earlier piecemeal and patchwork ones with different conditions for eligibility and use. The Merchandise Exports from India Scheme (MEIS) for export of specified goods to specified markets and “Services Exports from India Scheme (SEIS) for enhancing exports of notified services are the two new schemes, designed to galvanize India’s merchandise and services exports in the years ahead.

A notable feature is that duty credit scrips issued under MEIS and SEIS would have no conditionality attached and these scrips are fully transferable, giving the exporters the elbow-room to make free use of the duty credit accrued to them through augmented performance. This is a departure from the past which would definitely go some way in spurring exporters as the risks are rightly recognized and rewarded. The focus would be on promoting exports of high-value products with a robust domestic manufacturing base including engineering goods, electronics, drugs and pharmaceuticals where the challenges abroad are formidable in terms of quality and price and delivery, areas where India’s high-cost economy is the party-pooper unless authorities address underlying causes and remedy them on fast-track.

Even as the FTP said other sectors require special attention in consonance with the country’s strengths and their contribution to employment generation such as leather, textiles, gems and jewellery and the sectors based on natural resources including agriculture, plantation crops, marine products and iron ore exports, no specific detail is revealed in the policy, other than staidly stating the well-worn homilies. For instance, it said “revitalizing plantations, enabling a less controlled regime for agriculture and aiming at greater value addition and processing would help to increase the value of exports from these sectors. Export strategies for processed agriculture products and organic product exports will be shortly ready while a number of steps to address the challenges faced by the plantations sector are on the anvil”. One gets exhausted by these lip-sympathies as hand-holding by the authorities with the stakeholders over the years had not wrought any perceptible positive thrust. A new FTP to use the trite phrase old wine in a new bottle repeats the same ritual.

Considering the admission by the Minister of Textiles Mr. Santosh Kumar Gangwar in the Lok Sabha in a written reply on March 19 that as per the WTO agreement, India is under obligation to gradually phase out export subsidies in textiles and apparel sector over eight years from 2010 by latest 2018, the FTP has nothing substantive or substantial for the labour-intensive textile and apparel sector of more than $40 billion export turnover per annum. It is also revealing that India’s import tariff for all goods has been coming down steeply to the chagrin of domestic producers. The simple average of most-favoured-nation (MFN) tariffs for all Indian goods is just 13.5 per cent while the final bound rate is 48.6 per cent.

While the agricultural goods final bound is fixed at 113.5, India’s average applied rate in 2013 was 33.5 and for non-agricultural goods (industrial) the final bound rate is 34.6 with the applied rate at 10.2 per cent. With import tariffs getting implacably impacted on the domestic production calculation in view of the relatively inexpensive entry of such goods in the face of the high-cost structure prevalent in the country, the FTP’s claim that “tariff policy will be optimized in order to take advantage of the manufacturing opportunities offered by regional and global value chains, while retaining the policy space to protect domestic industry” rings hollow.

It is difficult for an increasingly integrated India into global trading system to resort to tariff hike as a ploy any longer when retaliation by trade partners would be swift and suffocating. As the policy concedes pithily, the heavy reliance on imports of essential commodities including crude oil, gas, coal, pulses, edible oils, fertilizers and electronics to name only a few, has kept the country’s trade deficit at a high level.

While the import cost of these essential items do help the authorities in tweaking tariffs mostly when lowered to make the availability affordable for consumers albeit with tax revenue foregone, they have the unintended consequence of dissuading domestic production increase or make the consumers pay hefty price when global prices shoot up.

It is not by design or default that the mandarins who prepared the FTP let out the lamentation that the innate limitations of manufacturing in India, the lack of diversity and focused exports on services exports, the under achievement of the potential of SEZs, high transaction costs including trade finance and infrastructural bottlenecks remain the domestic challenges to be overcome. The FTP has rightly cautioned the exporting community championing subsidy-culture for survival, that the extant WTO rules as well as those under negotiation envisage “the eventual phasing out of export subsidies”.

This is “a pointer to the export promotion efforts will have to take in future” by moving towards “more fundamental systemic measures rather than incentives and subsidies alone”. Hence, the policy took a few baby steps in consolidating a plethora of schemes and incentives by merging them into two manageable ones for merchandise goods and services. In this regard, it is a welcome move signaling the stakeholders to shape up or ship out in the sweepstake of foreign trade.

The government can only foster enabling milieu for smooth functioning by focusing on addressing and redressing structural impediments that have rendered the domestic economy high-cost. This is an overdue exercise and the Modi Government has wisely linked up “Make in India”, “Digital India” and “Skills India” to foster an “Export Promotion Mission”. It is a moot issue how the exporters will lap it up when ground level glitches continue to itch and ditch them despite their high-pitch plea for a measure of improvement! (IPA Service)