Trade snippets & The Foreign Trade Policy

The Government announced a Rs.3,000 crore package to boost exports even as shipments rose for the third-month running in March, helping cut the worrying trade deficit last month to a nine-month low.
The commerce and industry minister Anand Sharma also announced some changes in the rules to make special economic zones (SEZs) more attractive for investors. Exports rose 7% in March to $30.84 billion while imports contracted by 2.87% to $ 41.1 billion, helping trim the deficit to $10 billion.
For the full year, exports were marginally lower than last year at $ 300.6 billion, while imports were up 0.44% to $ 491 billion, yielding a trade gap of $191 billion, marginally higher than $183 billion last year. Benchmark stock indices rose 1.7% after the trade data and rupee strengthened, as the data suggested the current account deficit had begun to moderate from record high 6.7% of GDP in the October-December quarter.

The Government extended the zero duty capital goods imports scheme to all sectors, more countries were added to the incremental export incentive scheme and it was extended to full year and 2% interest subsidy on exports has been made available to more sectors in engineering and textiles. Focus market and focus product scheme will now cover more countries and large number of products. The extension of existing schemes would cost about Rs.2,000 crore while the new sops are worth Rs.1,000 crore, but the package failed to excite the industry that wanted more to compete in the stagnant European and slowly growing US markets.
"It was a routine policy. It has no bold or big-ticket announcements," said R Ahmed, President of the Federation of Indian Export organisations, which wanted a $ 2 billion Export Development Fund. However, Sharma said the export development fund is under consideration by the ministry. Sharma said he would review the exports performance in October to see if more intervention was needed, but did not give an exports target because of the difficult situation.


The government also eased land acquisition and usage norms to breathe life into the moribund special economic zones (SEZs). The land requirement for SEZs has been halved and an exit policy announced. The government said this would revive investment in SEZs that it claimed contributed to 2,000 per cent growth in exports to Rs 4,76,000 crore in seven years.
“We have decided to reduce the minimum land area requirement by half for different categories of SEZs,“ commerce minister Anand Sharma, said, announcing changes in the foreign trade policy.
There will be no minimum land requirement for setting up for IT and IT-enabled services SEZs. The minimum built-up area cri terion has also been eased.
The land requirement for multi-product SEZs now stands at 500 hectares and that for single-product SEZs at 50 acres. Analysts said this policy would leave huge scope for developers to manipulate land usage for already acquired land. Commerce ministry officials are silent on what will happen to land acquired by developers beyond 500 hectares for multi-product SEZs and beyond 50 hectares for single-product SEZs. Sharma justified the lower land acquisition limit and easier usage saying that this was necessary “to overcome the acute difficulty in getting large tracts of uncultivable land that is vacant and contiguous.” The director-general of foreign trade, Anup Pujari, said misuse of the provision was “possible but not probable” as no industrialist after acquiring a large piece of land at a huge cost would keep it idle.
Sharma announced an exit policy for SEZs, saying, “We have now decided to allow transfer of ownership of SEZ units including sale.” Of 389 SEZs cleared and notified, only 170 are operational.
In the case of IT SEZs, the requirement of 100,000 sq metre built-up space will be applicable in only seven major cities — Mumbai, Delhi (NCR), Chennai, Hyderabad,Bangalore, Pune and Kolkata. For class B cities, the minimum built-up area will be 50,000 sq metres and in other cities 25,000 sq metres.
Other than the SEZs’ land acquisition and usage norms, there were no big policy changes. Exporters’ demand for withdrawal of the proposal under the direct tax code to impose MAT and DDT has not been accepted, apparently a result of a tussle between the finance and commerce ministries.