Voters have reaffirmed faith in the leadership of Narendra Modi. His Bharatiya Janata Party (BJP) won an absolute majority on its own in the Lok Sabha. So, a stable regime will govern the country through the next few years.
The main task before the next government must be to revive the economy. Modi campaigned on the issue of national security, which cannot be ensured without a strong economy. It is now evident that domestic consumption is slowing and farm distress is real. The manufacturing sector is not growing rapidly and export growth has been tepid for five years. Private sector investment, especially in new manufacturing projects, has been uninspiring. Corporate earnings have been rather weak, although the stock markets are booming. The flow of foreign money into equity markets has strengthened the rupee. The global trading environment is not too encouraging.
For reviving of export growth, given the context and challenges, the new government must first restore the commerce ministry’s primacy in making the new Foreign Trade Policy (FTP). In the run-up to introduction of the Goods and Services Tax (GST) and during its implementation, this ministry was completely ignored. The finance ministry focused mainly on securing consensus in the GST Council and then on re-working of the laws to address the problems thrown up during implementation. The representations of exporters were initially dismissed summarily and later heard partially. Untold misery was inflicted on a large number of exporters by the finance ministry. An ineffective and voiceless commerce ministry was a spectator.
Now, the latter should not hesitate to take responsibility for export promotion. It should look at the opportunities the US-China trade war throws up and strive to make peace with the United States on trade issues. It should take up with the Reserve Bank of India the overall cost to the economy of monitoring realisation of payment against each and every export transaction; also, raise the issue of timely and adequate flow of credit to exporters and transmission of benefit under its interest subvention scheme.
It should also review all export promotion schemes in consultation with the finance ministry and treat deemed export at par with physical export. It should ask if it is necessary to subsidise export of services and examine whether it is necessary to deliver export promotion schemes through the regional offices of the Directorate General of Foreign Trade. A study on whether our free and preferential trading agreements are working to our benefit should be commissioned. And, the role of various export promotion councils should be re-assessed.
Nor need the commerce ministry wait till next year to announce a new FTP. In 2004 and 2009, the new Policy was announced within a few weeks of presenting the Union Budget. It was in 2014 that the new Policy was deferred till next April, for no good reason. Now, the finance ministry cannot decide anything on GST without approval of the GST Council. The Budget is unlikely to deal with GST rates and might barely tinker with Customs duties. So, the commerce ministry can go ahead and notify the new FTP, letting the finance ministry give effect to it through fresh notifications.