Hoping for a lift-off
Trade continues to be the worst-hit sector in India even as the rest of the economy is beginning to sporadically grow green shoots. Indian exports—that are declining since October 2008—cannot turn around without a revival in global demand. And revitalising global demand is beyond the control of exporters themselves or even policy makers.
Yet, a government must announce its annual trade policy every year on the designated day. Then, every fifth year, a longer-term five-year road map is also laid down. So it was this year, too. Union Commerce Minister Anand Sharma announced the foreign trade policy (FTP) for 2009-’14 on August 27.
This, however, is perhaps a wrong year for making such pronouncements. A policy must contain both assumptions and assertions. How does one make them in a year in which no amount of lowering costs or repackaging exports can spur revival?
Omitting to forecast the recovery in his maiden trade policy, Sharma set hugely ambitious short, medium and long-term goals of doubling India’s share (currently at 1.64 per cent) in world trade by 2020. Sharma has set a target of $200 billion by FY ’11 from $175 billion in FY ’09 or a 15 per cent growth over two years. In the medium term (FY ’12-’14), his policy has targeted a growth of 25 per cent.
His targets are based on the assumptions of improved supply of infrastructure, benefits from the introduction of GST and lower transaction costs. But these hardly constitute a ground-breaking policy push. So, while exports remain deep in the dungeons, Sharma’s optimism on future targets is unbridled. But then, there’s little else besides optimism he can offer in the current context.
Unusual as this year might be, in the past, too, trade policies have played only a marginal role in India’s export performance. True, India achieved the targets of the last policy (it doubled its share of global trade in five years. But that was a period during which the Indian economy succeeded in meeting almost every single goal. For four of those five years, the GDP growth remained above the 9 per cent mark. So, policy makers cannot claim much credit for the spectacular performance.
Traditionally, India’s FTPS have been low-key affairs that revolved around incentives, de-licensing and export targets, all of which lacked consistency and coherence. There are plenty of examples. In the 1990s, for instance, the United Front Government’s Commerce Minister P. Chidambaram had announced a 15-country, 15-commodity matrix. Today, even a decade later, there are no “champion commodities” that the Indian export sector can really boast of.
The idea was junked by Chidambaram’s successor Ramakrishna Hegde in the very next Exim Policy (1997-2002). It resurfaced subsequently in a new avatar— Expansion of Market-Linked Focus Products Scheme (MLFPS). UPA2’s FTP 2009-14 has revived this policy, extending it to 13 new markets and 1,700 products. It has also promised to raise Board of Trade— another old idea.
The lesson for exporters is clear: their destiny is in their hands, and not in that of the Commerce Minister.
