Tejinder Khanna: States should be made stakeholders in trade

Policy will make both exports and imports grow faster than the GDP

The Foreign Trade Policy 2004-2009 announced by the Union Minister for Commerce & Industry has several commendable features.

Firstly, the objective of doubling India's percentage share of global merchandise trade by 2009 means that both our exports and imports will grow faster than the GDP; thus our Economy's openness to the rest of the world will increase significantly. This is a laudable objective because in an era of increasing global exchange in goods and services, a country with India's productive resource endowments of men and materials should be able to progressively garner an increasing share of global transactions.

The second notable aspect of the new Policy is the intention to focus on certain productive sectors in rural and semi-urban areas which have the potential of increasing export-related employment in a big way.

The selection of five "Special Focus" sectors, viz., Agriculture, Handicrafts, Handlooms, Gems & Jewellery and Leather & Footwear sectors is undoubtedly germane to the country's existing and future export potential.

The Policy has correctly recognised the importance of "Services" for earning valuable foreign exchange by making individual service providers who earn foreign exchange of at least Rs.5 lakhs, and other service providers who earn foreign exchange of at least Rs.10 lakhs, eligible for a duty credit entitlement of 10% of the total foreign exchange earned by them.

Global services exports account for over one-fifth of world's exports and have reached the level of nearly US$ 2 Trillion. With India's vast base of professional manpower and huge potential of generating earnings from tourism, knowledge-based services, health and educational services, etc. we have a long way to travel to realise adequate gains from these sectors. Tourism being one of the most employment-intensive service industries, needs to be given all encouragement. The proposal to set up a Services Export Promotion Council marks a welcome initiative.

I now turn to some prima-facie gaps in the Policy announcements. My experience as commerce secretary had shown that state governments did not accord adequate priority to the national export effort because they felt that they had nothing to gain from promoting exports from their territories. States should be given a positive stake in promoting exports of goods and services through incremental Central Plan assistance for improved export performance.

There is no reference to making labour laws more flexible to cope with seasonality in export demand, enabling hiring of additional workers for a few months to cope with the rush of export orders and then laying them off until the next busy season for export production.

(While the policy of reserving certain items for promotion for the SSI sector has served a useful purpose in developing that sector and generating valuable jobs, SSI units have suffered from limitation in their production capacities and have been unable to cater to large export orders. The SSI reservation policy will need to be revisited from time-to-time and items which have a major export potential should be excluded from the scope of the reservation policy).

Since SSI manufacturers- exporters account for 40% of the country's exports, special efforts should be mounted to address their difficulties and encourage them in further improving their contribution to the national export effort.

Export of our farm produce has suffered from lack of quality consciousness among producers as well as Indian exporters. Absence of varietal-differentiation and proper grading and packaging have led to difficulties in the past such as the rejection of certain shipments of Indian wheat and rice by Iraq, Philippines, etc.

For enabling export of perishables, augmentation of cold-chain transportation linkages and cold storage facilities up to the point of shipment, will have to be facilitated through supportive fiscal incentives. Certain items of farm-produce have not been allowed to be imported in some important markets due to special phyto-sanitary restrictions. Focussed efforts will be required to overcome these restrictions if such items are to be successfully exported hereinafter.

Finally, I would like to refer to the intention of creating an efficient "Expoters' Grievances Redressal" machinery. The Union Commerce Ministry/DGFT should have a special electronic site for receiving grievances of exporters and should provide a single-window service to exporters of both goods and services to get their grievances redressed.

A representative group of the concerned ministries and departments should be established to attend to such grievances in a meaningful and time-bound manner so that genuine exporters quickly get the relief due to them.

On the pattern of the Staff Satisfaction Surveys carried out through independent consultants in leading companies, Exporters' Satisfaction Surveys for various sectors should be got conducted by the Union Commerce Ministry to get independent feedback about the state of affairs and, thereafter, take appropriate timely remedial action.

(The author is former commerce secretary)