Export model need to be changed: Commerce Secretary

Says from a purely incentive based export model we have to move out to a competitiveness based export model

The country’s merchandise exports have to be made more competitive even as the government resorts to gradual withdrawal of various incentives which are given in the form of subsidies to support the shipments.

“We have to move out of a purely incentive based export model to a competitiveness based export model … We will have to re-engineer (the schemes) in a manner that they conform to international laws to which we are parties," commerce secretary Rajeev Kher said here today while addressing the Confederation of Indian Industry (CII).

Kher said export subsidy is not a long-term solution. He said, at present, India’s outbound shipments enjoy several subsidies, which are otherwise prohibited under the Agreement on Subsidies and Countervailing Measures (ASCM) of the World Trade Organization (WTO). However, some countries are exempted from the prohibition under Annex VII of ASCM and India is one of those.

This exemption is available until GNP per capita of a country reaches $ 1,000 in constant 1990 dollars for three consecutive years.

"Surely we would have or very soon we will cross this bridge and then we will not have the protection of Annex VII countries which would mean that all export subsidies will be prohibited,” he added.

He also highlighted the case of textile exports, which is not eligible to get subsidies as it has achieved export competitiveness. A product is called competitive when its share reaches at least 3.25 per cent in world trade for two consecutive calendar years.

On the other hand, Kher today also urged industry to utilize the free trade agreement and other such bilateral trading arrangements for its own benefit.

"A picture has been painted as if FTAs are nothing but evil. But we have to recognise that this is not the fact. The important thing is that we have to see how we are utilizing these FTAs. Go deeper and see how these FTAs can be considered as institutional opportunities,” Kher added.

Kher asked the industry to look at the advantages of these pacts which provide greater market access.

He said the Commerce Ministry has engaged with all the stakeholders in conveying the "advantages" of these agreement and also "the possible pitfalls.”