Indias new government Tuesday set out a detailed trade promotion strategy aimed at doubling the countrys share of global trade by the end of its five-year term, reports The Financial Times.
Kamal Nath, Indias minister for trade, said New Delhi would simplify procedures and reduce transactions costs for exporters and take a more liberal approach to the import of capital goods.
Most of the new incentives were aimed at boosting exports from rural and small-town India, where job creation has languished. The bulk of Indias almost 75 billion US dollar worth of exports last year came from manufacturing hubs in urban India and services exports from the countrys software centers.
Nath announced a list of incentives to boost small-scale industry exports, such as waiving duty on the import of capital goods for agricultural producers. However, Tuesdays package did little to reduce the role of government in the lives of Indian business, even though the incentives were broadly welcomed by industry leaders, writes the daily.
The Times of India further notes the trade policy rewards Indias growing army of service professionals, not just in IT, but also in engineering, consultancy, architecture, medicare and a host of other fields. They can import gear worth 10 percent of what they export without having to pay duties.
The only way to avoid paying the new 10,2 percent service tax is to become an exporter: the policy exempts all exports of goods and services from the tax.
Among other things, Naths policy also tries to reach out to aam admi, the common man. It attempts to boost incomes of tribes by pushing exports of forest products from the ministers constituency Chhindwara and elsewhere; vegetable and fruit growers in Maharashtra, Andhra Pradesh, Himachal Pradesh and so on, and floriculturists from near Bangalore.
The Asian Wall Street Journal further adds that the government will seek “to double its percentage share of global merchandise trade within the next five years and act as an effective instrument of economic growth by giving a thrust to employment generation.”
To achieve this, Nath said India will strive for export growth of 20-21 percent every year during the next five years, up from its 16 percent growth target for the current fiscal year ending in March.
Although India, with a population of more than one billion, is one of the worlds fastest-growing economies, its share of world trade has hovered near 0,8 percent for several years, due at least in part to complicated bureaucratic procedures and infrastructure bottlenecks.
Nath said the governments trade policy is aimed at “unshackling controls…simplifying procedures and bringing down transaction costs.” However, he added that weak infrastructure, high oil prices and a strong rupee will pose challenges to export growth over the near term.
The government would allow duty-free import of capital goods for agriculture exporters and would permit 100 percent foreign direct investment for free trade zones.
The government also allowed 100 percent foreign investment for developing and setting up infrastructure for these free trade zones. Analysts welcomed the governments plans to push for such zones saying it would transform Indias trade sector and create jobs.
The Economic Times (India) meanwhile comments that the 1,5 percent share of global exports – targeted by Naths foreign trade policy – means that Indian exporters have to bring home 175 billion US dollar by 2005. Considering that the exports during 2003-04 stood at 60 billion dollar, the new targets mean additional exports to nearly 115 billion dollar in five years.
If this is not mind boggling, please note that the services sectors score does not figure at all in this uphill task, the Indian daily comments. The target is just for merchandise exports and the compounded growth that is needed is around 21 percent per annum from now to 2009.
What makes the target virtually impossible is history. On several occasions in the past, the government had set targets for capturing one percent of the global exports. Until today, India is lagging far behind at 0,8 percent, while Asian giant China has surged ahead. Targets for 75 billion and 100 billion US dollar also remain on paper.
Therefore, it will be major challenge for the government to maintain 21 percent growth year after year till 2009. For achieving such growth, infrastructure has to be beefed up on a war footing and efforts should be made to cut delays in inland transportation.
Kilde: www.worldbank.org
