New Delhi: Aiming for an ambitious 28% jump in annual exports to $160 billion, the government offered incentives for hi-tech and agricultural products, cut transaction costs and added 16 more countries to the roster of those that get special benefits.
“Exports are no longer a means to generating foreign exchange. Now exports are drivers of (economic) growth and a source of employment,” said commerce minister Kamal Nath as he unveiled India’s annual trade policy.
Nath said that the government wanted to promote India as a manufacturing centre for high-value products, such as aircraft engines and not mass-produced goods, which is China’s strength.
Nath said the new target was based on the performance over the past three years, during which India’s exports nearly doubled to $125 billion. “In 2008-09, our exports will cross $200 billion,” Nath predicted.
The latest target has been fixed by assuming that the rupee would depreciate from its current level of 42.07 to the dollar.
An official at the Directorate General of Foreign Trade, the commerce ministry’s arm in charge of trade, said the ministry had assumed that the rupee would depreciate to Rs43 to the dollar. “If it’s wasn’t for the rupee, I would have set a higher target,” said Nath.
Trade groups, however, said it would be difficult to sustain the momentum if the Indian currency continues to strengthen, denting the competitiveness of Indian exports.
The rupee has appreciated nearly 10% against the US dollar over the past year and reached a nine-year high of Rs41.90 per dollar earlier this week.
“We would like to see the rupee depreciate to Rs43 per dollar and stay stable at that level,” said G.K. Gupta, president of the Federation of Indian Exporters Organization.
The minister added 16 countries, including 10 central Asian economies that were formerly with the Soviet Union, to what is called the “Focus Market” programme that now covers 57 countries. Under the programme, exporters can claim duty concessions totalling 2.5% of the value of exports to these countries.
Until the early 1990s, exports formed a very small share of national income and were seen mostly as a source of foreign exchange required to meet such imports that were necessary for industrialization at home. Over the past decade, however, exports have grown quickly as the country switched to a more open, market-oriented economy. A third of India’s gross domestic product now comes from exports.
Although exports did well, rising 25% last year, latest data showed imports grew faster, leaving the country with a wider trade deficit at about $57 billion. Imports in the fiscal ended March totalled $181.37 billion, against 124.63 billion in exports. The numbers do not include export and import of services such software and call centre operations.
Over the past few annual trade policies, India has worked to reduce transaction costs or the costs incurred by traders in exporting or importing goods and services. This year’s policy also tries to do this by streamlining procedures to reduce time and costs involved in exporting and importing, and by exempting exporters from service tax incurred.
Foreign trade officials, who did not wish to be identified, said the exemption would lead to a revenue loss of Rs500 crore a year, but officials at the revenue department of the finance ministry said they had not quantified the revenue loss.
The minister also chose the occasion to highlight the positive contribution made to the economy by special economic zones (SEZs). Nath said over 18,000 direct jobs have already been created by SEZs. He added that he expected an additional 15 lakh jobs to be created in the SEZs that had already been approved. Nath said that in 2007-08, SEZs will see investments of Rs40,000 crore and generate 10 lakh jobs.
Rajesh Mahapatra is from the Associated Press