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The National Democratic Alliance government has not introduced the Foreign Trade Policy (FTP) for 2014-2019 because of a stand-off between the ministries of finance and commerce over allocation of extra funds as incentives for exporters.
Ever since the Narendra Modi government came to power, there was speculation the FTP would be unveiled immediately after the Budget. The ministry of commerce and industry raised expectations of exporters that the new FTP, which runs for a period of five years with annual revisions, would have a bag full of incentives. Expectations were also heightened by the fact that Minister of State (Independent Charge) for Commerce and Industry Nirmala Sitharaman doubled up as minister of state of finance.
The commerce ministry has been working on the draft FTP since May in consultation with exporters, export promotion councils, industry chambers and other stakeholders. But with export growth rate touching double digits, the government decided to delay it.
In October, merchandise exports contracted by almost 5 per cent to $26.09 billion from $27.48 billion the same month a year ago. The delayed FTP was because the ministries of finance and commerce were once again at loggerhead over allocation of funds under the various export promotion schemes, commerce department officials told Business Standard.
"The finance ministry has to release the money, which is not happening," said a senior commerce department official.
The ministry of commerce and industry had plans to push exports of services substantially through the FTP. Besides, there were to be incentives for special economic zones (SEZ) and encouragement to exporters in the use of free trade agreements (FTA).
The new FTP is expected to push the 'Make in India' concept and incentives will be provided to exporters promoting manufacturing.
But nothing has materialised with the finance ministry struggling to meet the fiscal deficit target for 2014-15. It has asked the commerce department to make do with what is available and prioritise the incentive schemes.
"We are telling all ministries to work within a set fiscal space, and this year the space is very tight," said a senior official in the department of expenditure. "Ministries have to prioritise how much they spend on each policy measure or programme," he added.
The fiscal deficit, pegged at 4.1 per cent of the gross domestic product in 2014-15, has touched almost 90 per cent of the budget estimate in seven months.
Director-General of Foreign Trade Pravir Kumar said until the new policy came into effect, incentives of the old policy would continue.
Some of incentives of the FTP 2009-2014 are the advance authorisation scheme, focus products scheme and focus markets scheme. During 2013-2014, export promotion schemes resulted in Rs 45,786 crore revenue forgone against Rs 45,027 crore in 2012-2013.
Commerce Secretary Rajeev Kher recently said the new FTP would address the slowdown in demand in some of the significant markets like Japan and the EU and would promote exports in Africa, Southeast Asia and the CIS countries.
| LONG & SHORT OF FOREIGN TRADE POLICY |
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