India's new five year Foreign Trade Policy

No big bang ideas to revive exports distinguish the new five-year foreign trade policy (FTP) unveiled by commerce and industry minister Anand Sharma on Thursday. Instead, the accent is on continuity and stability. The minister extended most fiscal incentives by a year, expanded the focused market and product schemes and gave a leg up to labour-intensive areas like textiles, leather, handicrafts, gems & jewellery, particularly diamonds. The measures are for two years, at the end of which the policy will be revisited.
The immediate objective, said the minister, was to arrest and reverse the declining exports and also provide greater support, especially to sectors hit badly by the recession in the developed world. The exporters and trade policy makers are apprehensive about growth in the near future.
A big help will be the extension of the duty entitlement passbook (DEPB) scheme that allows remission of all customs duties paid by exporters on imports that go into the manufacture of export products. The 2 per cent interest subvention on pre-shipment credit to seven sectors stays. Moreover, the policy allows duty-free import of capital goods under the export promotion capital goods (EPCG) scheme for technology upgrades. Duty-free imports equivalent to 1 per cent of exports by `status holders' have been allowed. This benefit is available in the form of duty credit scrips, which can be now traded.The arrangement will come to an end on March 31, 2011. By then, exports are expected to get back on the 25 per cent growth path. In the focused market and product schemes, more products and 26 new markets have been listed. Incentives for exports in the market part of the scheme have been raised from 2 per cent to 3 per cent, and those in the product part from 1.25 per cent to 2 per cent.
Sharma said because of the recession in the developed world, a conscious decision had been taken to expand and diversify India's export markets, "especially in the emerging markets of Africa, Latin America, Oceania and CIS countries".
The minister has set a modest merchandise export target of $200 billion by March 2011, and double that amount by 2014. The aim is also to double India's share in world trade in goods to about 3 per cent by 2020 from 1.45 per cent now. By then, export of services is also targeted to double from a reported level of 2.8 per cent of the global total in 2008.
Exporters have complained of difficulty in getting dollar credit at competitive rates. To look into this an inter-ministerial committee has been set up.
A centralised directorate of trade remedy measures will be set up to ensure that small exporters get their due. The directorate will also deal with dumping, anti-dumping and all trade related disputes. Existing bodies like the anti-dumping directorate may be subsumed into new body.
Among sectors, the diamond industry has received special attention.More diamond bourses like the ones operating in Surat and Mumbai will be set up in the hope of making India a hub of global trade much like Antwerp in Belgium. A flexibility in duty remission and fiscal incentives has been allowed in the marine, agriculture, leather, tea, pharmaceutical and handloom sectors to give a fillip to their exports and stem job losses that they have seen in the global downturn.
For example, leather units have been allowed to re-export unsold imported raw hides, skins, semi-finished leather on payment of half the duty. Value addition norms for tea exports have been halved to 50 per cent.
A similar flexibility has also been allowed in customs duty payments to help meet export obligations. The time limit for re-export of gems and jewellery will now be three months instead of two.
A wider linkage between the customs department and DGFT via electronic message exchange among 70 locations is expected to half the transaction costs incurred by exporters.