Home
» Foreign Trade Policy 2005-06 » Speech
Speech
Commerce & Industry Minister Shri Kamal Nath's speech on the
occasion of announcement of Foreign Trade Policy on Friday, April 08,
2005
On August 31 last year the Government spelt out a bold vision to double
India's share in world trade within five years, and to focus on the
generation of additional employment in the process. The current trade
figures indicate that India is not only on the right path but
approaching the goal at an accelerated pace.
Against a target of 74 billion dollars worth of exports and an
envisaged growth rate of 16%, quick initial estimates show that the
actual growth of merchandise trade in the very first year of the Policy
period has been of the order of almost 80 billion dollars, corresponding
to a growth rate of nearly 24% over last year's exports. This growth is
unprecedented in India's economic history! If we can maintain the
momentum, I am confident that India will cross the 150 billion dollars
milestone substantially earlier than the end date of the Policy period.
You may recall that in a departure from earlier practice when export
targets were announced almost mid-way during the year, I had specified
our targets for the next four years as far back as in December last
year. This was done, so that we could plan systematically and
strategically, sector-wise. In this scheme of things, I had indicated an
export target of 88 billion dollars for 2005-06, on the expectation that
we would touch 75 billion dollars last year. But in view of our
unprecedented achievement, I have no option but to revise this year's
target upwards to 92 billion dollars. It will be a challenge, but I am
confident that we will meet it.
Since trade is not just about exports, but also about imports, I am
sure that you are eager to know the value of our imports last year. It
was 105 billion dollars, representing a growth of 34% over last year. It
is significant that oil imports accounted for 29 billion dollars,
whereas the negative balance of trade is 25 billion dollars, indicating
that if oil imports were not to be counted, then our exports exceeded
our imports by almost 4 billion dollars. Though we have a trade deficit
in terms of merchandise goods, this is more than made up for by our
services exports, which are estimated at about 30 billion dollars. The
second objective of the FTP was providing a thrust to employment
generation, particularly in semi-urban and rural areas. The FTP
announced special focus initiatives in the employment intensive sectors.
The employment generation has been encouraging not only in these
sectors, but in other sectors across the board.
A study commissioned by the Ministry (and done by Research &
Information Systems for Developing Countries, i.e. RIS) reveals that
exports generated an incremental direct employment of 10 lakh jobs in
the year 2004-05, over the previous year. The total employment generated
during the year corresponding to export activity valued at 75 billion
dollars was 1 crore jobs - 86 lakhs of direct employment, and 14 lakhs
of indirect employment in the logistics, transport and related sectors.
Since our exports were actually 80 billion dollars, these figures would
improve proportionately. The study further reveals that if we achieve
our target of 150 billion dollars over the next four years, we shall be
adding an additional 1 crore jobs: 85% of it direct employment, and 15%
indirectly associated jobs.
The dynamics of global trade and the opportunities provided by the
multilateral trading platform necessitate a continuous realignment of
our international trade strategies and priorities. While India's
international trade will continue to function under the overall
framework of the Foreign Trade Policy announced last August (and which
has proved so hugely successful), some fine-tuning needed to be done to
take into account the changing international trade dynamics. In fact, as
periodic reviews are done, even in the future, some strategic
realignment and reassessment would always be necessitated. This is the
genesis of the Annual Supplement. It is not a 'new policy' that I am
announcing today, but just something to supplement the existing policy.
This Annual Supplement endeavors to incorporate additional policy
initiatives and simplify procedures, thereby facilitating and enhancing
India's international trade. Export Cess: I have been taking a
consistent stand from a policy perspective that taxes and duties should
not be exported. The various cesses levied under the different Commodity
Board Acts is a tax on exports, which is a handicap and a major irritant
to our exporters, since it erodes the competitiveness of our
agricultural exports. We therefore propose to abolish cess on export of
all agricultural and plantation commodities levied under these Acts. We
shall also engage in consultations with other Ministries which may,
under Acts administered by them, be levying cesses on exports, so as to
eliminate these. We cannot subsidise our exports, but let us at least
not tax them!
EPCG Package:
The Export Promotion Capital Goods Scheme is an important building
block for sustained export growth and so we have worked out several
elements in the form of an attractive 'EPCG package'.
(a) With a view to accelerating exports under the Scheme and to
incentivise fast track companies, firms fulfilling 75% or more of their
export obligation in half the original obligation period, shall be freed
from the balance export obligation.
(b) To create modern infrastructure in the retail sector, concessional
duty benefits under EPCG scheme shall be extended for import of capital
goods required by retailers, who shall be required to fulfill their
export obligation from payments received against 'counter sales' in
foreign exchange through banking channels.
(c) For providing a thrust to the agricultural sector as well as to
promote capacity expansion and quality upgradation in the SSI sector,
import of capital goods shall be allowed at concessional rates and there
shall be a reduced export obligation. We hope this will provide an
impetus for modernization of plant and machinery, which will enhance
overall competition in the medium term.
(d) In order to augment facilities available at secondary ports with
modern equipment and thereby reduce cargo handling turnaround time and
related transaction costs, Minor Ports, Integrated Container Depots and
Freight Stations would be allowed to count payment received in rupees
for port handling services against discharge of export obligation.
(e) The facility of clubbing of EPCG licences has been further
liberalized, and restrictive conditions relating to same licensing year
and same products and services have been deleted. Henceforth, all EPCG
licences issued under the same Customs Notification can be clubbed. This
will considerably reduce paperwork, both for the exporter and the
licensing authorities and lead to easier monitoring.
Package for Marine Sector:
Marine products constitute an important element in our export basket.
The tsunami tragedy has wrought havoc on our eastern coastline.
Fishermen and their families have suffered greatly, and the long term
benefits on coastal marine productivity are yet to be realised. We have
therefore prepared a special package for marine sector.
(a) It is proposed to allow import of mono-filament long line system
for tuna fishing at concessional duty.
(b) In order to enter new export markets and achieve a higher value
addition, certain special flavourings and ingredients for seafood
processing are required. These inputs will be allowed to be imported
free of duty to the extent of 1% of the FOB value of exports.
(c) The present system of allowing disposal of waste of perishable
commodities like seafood only after inspection by a customs official is
cumbersome and leads to unhygienic conditions. To overcome this, a self
removal procedure for clearance of waste shall be put in place.
Agri Exports
In order to give a boost to rural areas, benefits under the 'Vishesh
Krishi Upaj Yojana' shall be extended to exports of poultry and
dairy products in addition to export of flowers, fruits,
vegetables, minor forest produce and their value added products. To
promote export of 'Minor Forest Produce' products Shellac Export
Promotion Council has been designated as a nodal EPC for minor forest
produce.
Tea - In order to maintain quality and retain the brand equity
of Indian teas, all teas, whether imported or exported, would be
required to conform to specific quality norms. The new Order also
prescribes a minimum value addition norm of 50% on export of all
imported tea and stipulates a time period of 6 months from the date of
import for the export of imported tea.
Handlooms - Government has decided to develop a trademark for
Handloom on lines similar to 'Woolmark' and 'Silkmark'. This will enable
handloom products to develop a niche market with a distinct identity.
All Export Promotion Councils shall open a separate Cell to
involve and encourage youth and women entrepreneurs in
the export effort.
In fact, I would like to invite your suggestions on a proposal to
change the names of Export Promotion Councils to 'Trade' Promotion
Councils!
Service Exports:
(a) To enable Service providers to upgrade infrastructure in their
associate companies, goods imported under the 'Served from India' Scheme
shall be transferable within the Group companies.
(b) At present, Hotels & Restaurants are required to submit a
Chartered Accountant certificate that the entire duty benefits availed
under the 'Served from India' Scheme have been passed on to the
consumer. From now on, only a declaration will suffice.
Advance Licensing Scheme:
We have also brought in a number of rationalizations into the Advance
Licensing Scheme. Some of the important changes are:
(a) Different categories of Advance licences i.e. advance licence for
physical export, advance licence for intermediate supplies and advance
licence for deemed exports have been merged into a single category for
procedural facilitation and easier monitoring.
(b) The scope of Advance Licence for Annual Requirement has been
extended to all categories of exporters having past export performance.
Earlier, the option was limited to Status Holders only. Also, the
earlier limit has been enhanced from 200% of FOB value of exports to
300%.
(c) Clubbing of advance licences for export regularization purpose has
been allowed even for licences pertaining to 1992-97 period.
(d) Transfer of Duty Free material imported under Advance Licence from
one unit of a company to another unit is simplified.
Duty Free Replenishment Certificate:
The list of Sensitive Items restricted for import under the DFRC has
been pruned down to just nine items.
DEPB:
DEPB benefits shall be available for supply of goods from DTA to SEZs
for the period 1.04.2003 to 11.05.2004.
Target Plus Scheme:
The Target Plus Scheme aimed at rewarding incremental exports would
continue in the year 2005-06 with such modifications as will be
notified, separately for preventing misuse, if any.
Export Oriented Units:
EOUs account for 10% of our exports. They provide the nation the same
service as do SEZ units, in spite of the fact that the environments in
which they function are not always conducive. It is our intention to
facilitate their functioning, and remove procedural irritants. The
supplement contains the details of such initiatives.
Procedural Simplification & Reduction of Transaction Costs:
Last year I had promised to initiate action to bring about procedural
simplification and reduction of transaction costs to exporters. With
this in mind, a broad-based Committee was set up under the Chairmanship
of the DGFT. The Committee has submitted its report and has made several
useful and relevant recommendations. I have accepted the
recommendations, and we shall be implementing them. Broad details are
given in the Supplement.
As a first step towards this exercise, the DGFT has devised a single
set of common forms called 'Aayaat Niryaat' Forms. This is a 50 page set
of forms, as against the 120 page set currently in use.
Trade Facilitation:
The DGFT shall strive to move towards an automated electronic
environment for filing, retrieval and authentication of documents.
To enable the users to make commercial decisions in a more professional
manner, trade data shall be made available with minimum time lag in a
query-based structured format.
All DGFT offices shall continue to provide facilitation to exporters in
regard to developments in international trade, for example, WTO
agreements, Rules of Origin, SPS requirements and Anti Dumping issues to
help exporters strategise their business decisions in an internationally
dynamic environment.
As I mentioned at the start of my speech, India's total trade
engagement (imports plus exports) with the world is 185 billion dollars
- up 30% from last year's total of 142 billion dollars. With this kind
of involvement, India is inching towards becoming a significant player
in international trade. This rapid growth signals a more pronounced
integration with the global economy. Our tariffs are coming down to
ASEAN levels, our FDI regime is increasingly liberal, our domestic laws
are TRIPS-compliant.
The paradox, however, is that while India is opening up more and more,
certain developed economies seem to be shutting up. This 'shutting up'
in obviously not in terms of tariffs and quotas; these are on their way
out. But the barriers now are more subtle - they are NTBs and SPS
regulations: the non-tariff barriers to trade, often in the guise of
health or environmental or social concerns. It is these new instruments
of discrimination which we have to fight against.
Inter State Trade Council:
In order to achieve our Foreign Trade Policy objective of becoming a
major player in world trade, coherence and consistency among trade and
other economic policies of both the Union and the State Governments is
vital. State Governments are increasingly required to partner with the
Union Government. Some States have formulated export policies. But a lot
needs to be done to coordinate these efforts.
It is therefore proposed to engage the State Governments in providing
an enabling environment for boosting international trade, by setting up
an Inter State Trade Council. It is hoped that the Council would provide
an appropriate institutionalized dialogue mechanism on the subject.
A policy of partnership:
The FTP provided a road map that could help Indian companies become
globally competitive and simultaneously aimed at giving Indian consumers
world class products and services. I believe that it is the new equation
of partnership and co-operation engendered by the FTP last year that has
paid the rich dividends we are now encountering. Business and industry
have responded remarkably.
Government is committed to resolving all outstanding problems and
disputes pertaining to the past policy periods through the Grievance
Redressal Committee set up last year, for condoning delays, regularizing
breaches by exporters in bonafide cases, resolving disputes over
entitlements, granting extensions for utilization of licences etc. The
atmosphere of partnership between Government and Business will be
enhanced and taken forward.
Thank you.
