Unwanted delay in FTP changes

The policy hesitation of the commerce ministry seems set to continue till the beginning of next year. There is no indication of when a new Foreign Trade Policy (FTP) will be announced. However, the dilemma of whether to prepare a new FTP very different from the earlier one or to go ahead with the already prepared and improved version of the present FTP or simply keep quiet and let the present FTP continue till the next financial year seems to have been resolved. As each day passes, the last one appears to gain favour, as only four months are left in the current financial year.

Last week, Commerce Secretary Rajeev Kher said the ensuing FTP would address the concerns of exporters on the slowing in several key markets, such as the European Union and Japan, even as a lot of policy developments and diversification measures are being worked out on the challenges in merchandise export. He was silent on when a new FTP would see the light of day.

It has been about six months since a Union ministry under the leadership of Narendra Modi took over. A short time to show tangible results but not that short for taking visible action. In 1991, P Chidambaram unveiled major trade reforms within a week of taking over as commerce minister. He went on amending policy through the year, responding to various developments before coming out with a new Foreign Trade (Development & Regulation) Act and the first five-year Export-Import Policy in 1992. Kamal Nath in 2004 and Anand Sharma in 2009 presented new FTPs within weeks of presentation of the Budget. They could act swiftly because they were clear about what to do and had enough of the confidence of finance ministers and prime ministers of the time. That does not seem the case now.

Nirmala Sitharaman, the minister in charge of commerce, had said bilateral trade treaties were being examined to see how far these had benefited Indian manufacturers. There is no indication on the direction in regard to existing treaties or those under negotiation. She had talked of a comprehensive review of the Special Economic Zones scheme. No changes have been announced. The second task force on reducing of transaction costs in exports gave its recommendations in July. The high-powered inter-ministerial committee on boosting of exports from the medium, small and micro enterprises sector gave a report last year. The task group for the diamond sector, aimed to make India an international trading hub for rough diamonds, also gave its report last year. All these reports/reviews give enough material to make meaningful changes in the FTP. However, the urge to present a very different FTP seems to have taken precedence.

The Director General of Foreign Trade (DGFT) can advise the minister in formulating an FTP but the power to notify one is with the latter. In a situation where the minister wants a very different FTP but the DGFT feels the existing one deserves to continue with appropriate fine-tuning, delay is bound to occur. The surprise is that vague directions from the top have come so late, making the needed changes in the FTP wait till next year.

email : tncrajagopalan@gmail.com