The annual foreign trade policy review seems to have lost its sheen. Hitherto, it was billed as the third biggest economic event in a financial year after the Union budget and railways budget. Suresh Prabhu was instrumental in scrapping a separate railways budget beginning last financial year. It got subsumed into the federal budget presented by finance minister Arun Jaitley.
Likewise, we must put an end to the concept of a separate foreign trade policy review. All trade and investment related policy decisions should be part of the federal budget presented on February 1. Alternatively, it should become yet another press release from the government put up on the official website.
Like Union Cabinet periodically considers the policy on foreign and domestic investments, why can’t changes in trade policy be announced in post-cabinet media briefings? In any case, there’s very little that happens in the annual free trade policy reviews. There’s hardly any out of the box thinking to push up both merchandise and services trade by Indian companies and exporters. During the UPA-II regime, there were at least two consecutive years when a foreign trade review never took place. Why should the foreign trade policy review become an event to catch the eyeballs and little else?
Pro-active intervention in the export and import regime as response to global developments must happen as part of government’s conduct of its business. Like the changes in FDI are announced through notifications, why can’t changes in scrip rates, incentives or procedural changes be notifications too?
Annual reviews notwithstanding, India is nowhere near achieving its stated objective of cornering 5 per cent global exports share. Anand Sharma as commerce minister had set this lofty target during UPA-II. But little seems to have moved forward in this regard. Even today, India’s share of global exports languishes at a measly 1.65 per cent as per data compiled for 2016 by the World Trade Organization (WTO).
A lot has been reported on Rs 8,450 crore worth incentives doled out by the government for employment intensive, low value exports like leather, agriculture, carpets, marine products and handicrafts. This was done through 2 per cent tinkering applicable to merchandise exports from India scheme (MEIS).
Constant review, course correction and change in strategies to enhance trade in services and merchandise export should be the hallmark in a dynamic dispensation like the one we have now.
Moot question, however, is: where are the big ideas to change India’s trade and investments profile globally? Unlike the ‘make in India’ scheme to push up domestic and foreign investments, there’s hardly a thrust to move up the exports value chain. When the five-year trade policy was put together in 2015, the objective was to move up the exports contribution to $900 billion. India is nowhere near this stated target.
And even worse, India could not take advantage of benign global trade and investment environment over last eight months. India’s exports during first six months of 2017 grew at 9.5 per cent while it could have done much better. India’s exports growth looks very modest not à-vis its Asian peers. For instance, Vietnam posted exports growth of a whopping 23.8 per cent, South Korea reporting 18.3 per cent robust performance while even Indonesia was able to do better at 17.8 per cent growth.
India’s weak performance cannot also be attributed to volatility in its currency, rupee. Out of 36 global currencies, Indian rupee was reportedly very stable giving no room for excuses to justify below par performance. Domestic under-performance, structural changes like GST roll out and demonetisation could be partly responsible for subdued exports performance. But, without the vision and application, there’s no way India can put up a crackling show.