Fair trade winds

When the new foreign trade policy was first announced in 2004, there were many who felt that the policy?s target was perhaps too ambitious.

When the new foreign trade policy was first announced in 2004, there were many who felt that the policy’s target of more than doubling India’s share of world exports from 0.8 per cent to over 2 per cent in five years was perhaps too ambitious. But the performance over the past two years appears to indicate that the targets were, if anything, on the conservative side. In the first two years that the new policy has been in operation, exports have grown by 24 per cent and 25 per cent respectively and have crossed the $ 100 billion mark. In the annual supplement to the policy released last week, Union Commerce Minister Kamal Nath has targeted a 20 per cent export growth for the coming fiscal year.

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If the economy continues to maintain its current rate of growth, that target appears eminently achievable. In fact, the real success of the new policy has been the clear policy roadmap laid out for exporters. This has enabled players to plan ahead and take full advantage of all-round economic growth. In that sense, India’s export performance is reflective of a maturing economy, which is increasingly able to compete in the global marketplace, without depending heavily on policy props or tax sops. This, however, does not mean that they are not needed. Mr Nath’s dilemma is that there is not much that he can do about this on his own. The export sector continues to labour under severe infrastructure restrictions, restrictive labour laws and a complicated tax structure. On the international front, incentives and tax breaks have to eventually comply with WTO norms. As India’s lead negotiator at the WTO talks, the commerce minister is well aware of what can, and what cannot, be done. With that in mind, the two major initiatives in the supplement, the ‘Focus Product Scheme’ and the ‘Focus Market Scheme’ have been made ‘WTO-compatible’.