Stable export policies ensure their success

As the first decade of the twenty first century comes to a close, the Commerce Ministry must be quite satisfied that its policies are working. From barely $36.8 billion in 1999-2000, the exports have shot up to almost $176.57 billion in 2009-10 despite a negative growth of 4.7 per cent in 2009-10 due to global economic slowdown. This year, in the first seven months, despite continued slowdown in the developed countries, exports have shown 26.8 per cent growth over the corresponding period last year.

Major worries about the impact of abolition of quantitative restrictions in the beginning of the decade have vanished thanks to rigid ‘national treatment’ at the borders for imported goods and liberal use of anti-dumping measures. Although imports have gone up, fears of adverse impact due to import of sensitive items have not materialised.

The most significant and long term policy initiative of the decade is the Special Economic Zone (SEZ) scheme. It has not worked out quite the way it was initially visualised. Instead of few world class facilities, hundreds of SEZ have come up lured by tax breaks that are not available for exporters or real estate developers in the Domestic Tariff Area. The Commerce Ministry sees the scheme as a success because out of 580 formal approvals granted for setting up of SEZ, 367 have been notified accounting for investment of over Rs 1.76 lakh crore, direct employment to 621,000 persons and exports of about Rs 1.40 lakh crores in the first half of this financial year — a gro-wth rate of about 55 per cent over the corresponding period last year.

The ‘look east’ for getting better integrated with the East Asian economies has resulted in Free Trade Agreements with the Asean countries, Singapore, Thailand and South Korea  but major impact of these agreements will be felt only in the coming decade. The trade with neighbouring countries is being opened up and duty free access has been extended for imports from least developed countries in Africa. Agreement with developing (Mercosur) economies in Latin America is already in place. More Free Trade Agreements are on the anvil.

These agreements are yet to make major impact but they signify assessments that the multilateral trade negotiations (Doha Development Round will not get to conclusion anytime soon.

In terms of export bene-fits, the status holders got a bonanza by way of duty credits of 10 per cent on increm-ental growth in 2003-04 and 10 per cent duty credits under the target plus scheme for two years thereafter. Since 2009, exporters in select sectors are eligible for duty credit to the extent of 1 per cent of FOB value of exports under the Status holder Incentive Scrips scheme.

The value based schemes like Duty Entitlement Pass-book (DEPB) and Duty Drawback (All Industry) now cover more items and made more hassle free. The new schemes like Focus Product Scheme, Focus Market Scheme etc. have continued with gre-ater coverage and increa-sed entitlements since their introduction. Services expor-ters now get 10 per cent duty credits on their foreign exchange earnings. The duty exemption scheme, export promotion capital goods (EPCG), export-oriented units scheme and deemed exports scheme have been quite stable except for some minor changes and unnecessary replacement of duty free replenishment (DFRC) scheme with the messy duty free import authorisation (DFIA) scheme.

Overall, the emphasis has been on stability of the Policy framework.

Email : tncr@sify.com