New Delhi: The foreign trade policy focuses more on continuity than change as the commerce minister sets ambitious export targets and tries to diversify India’s export markets. But the policy holds back on material moves such as changing interest subvention (subsidy) rates or special schemes for labour-intensive industries. Commerce minister Anand Sharma spoke about the policy in an interview. Edited excerpts:
What was it that you had really set out for yourself in this policy given the current economic climate?
First to ensure a stable environment, continuity as far as industry and the exporters are concerned of government support, government incentives and policy initiatives, which will be conducive in boosting confidence and to make Indian exports globally competitive. Technology upgradation and cutting of the transaction cost were the other two factors influencing policy formulation and lastly, a focus on the labour-intensive sectors.
Engaging process: Commerce minister Anand Sharma announcing the foreign trade policy in New Delhi on Thursday. PTI
We had to bear in mind that major economies are in contraction—those have been the traditional destinations of Indian exports—in EU (European Union) countries, America, even countries like Japan, and it would take time, despite all this talk of green shoots, when these economies do a turnaround. Therefore, as a matter of strategy, to engage with the world, there are regions that are doing better even in this crisis situation. Emerging economies, many developing economies have done well... So we are trying to tap them, to connect to them. We have embarked on an ambitious initiative of market expansion and diversification. We have added 26 markets in Latin America, Oceania, and Caribbean under the Focus Market Scheme (FMS). We have added another 13 under the market-linked Focus Product Scheme.
Exports have been declining for 10 months. By when do you feel the decline can be arrested and a reversal can be achieved due to the measures that have been announced today?
I would hesitate to put a timeline, a date cap, because we do not know when the major economies rebound. That is where our exports have been hit. But the measures announced will motivate our industry and our exporters to go to other markets... I am sure that whatever shortfall we will have in the other regions will be, to a large extent, made up with this approach.
After two years, when we revisit (the policy), we will be able to reassess as to where the world economy is going, how global trade is shaping and how have we benefited from the policy initiatives, then there could be mid-course corrections. But it doesn’t mean that for two years we stay quiet. If there is a situation where need-based intervention is required, we have the will to do so, and we have the resources to do so.
How does this policy address the issue of non-tariff barriers?
For that we have, as a country, safeguard mechanisms. We have a directorate for anti-dumping, directorate for safeguard measures and even the WTO (World Trade Organization) provides for that, that a country can take action.
So you can levy anti-dumping duty and at the same time you can also levy, if the situation presents itself, special safeguard duties plus the few other quantitative restrictions.
A day back the safeguard board rejected the proposal for a 25% import duty on hot-rolled coils, as demanded by the domestic steel industry... Do you really think we are able to protect domestic industry?
When we say safeguards, it should be there in those situations where the domestic industry is adversely impacted by a surge which distorts prices or lowers the domestic price. But for normal trading there are traffic lines which is not duty free, traffic is there. If at any stage government feels that the industry will be hurt, then the traffic bar can be raised, but we cannot stop trading. That also has to be borne in mind because the tendency to put up protectionist barriers in difficult times can be harmful both ways. In my view, that approach, protectionist approach which many countries have, will deepen the recession and delay the recovery.