India’s new Foreign Trade Policy (FTP) which released today has provided incentives to labour-intensive sectors such as textiles, handicrafts, leather and gems and jewellery. The policymakers had to shift their focus on these sectors particularly due to lower demand, the direct fallout of the global slowdown which in turn triggered huge job losses.
Last month, Anand Sharma, Union Minister of Commerce & Industry of India had said the slide in overseas sales had resulted in companies cutting 500,000 jobs in 10 industries. Since past four months, India’s exports are declining at an average of 30 percent.
The new policy has simplified exim documentation procedures to avoid red tape and attract new entrants. The affected industries are provided with tax cuts and lower interest rates. The government has decided to continue the DEPB scheme up to December 2010, and enhanced insurance coverage and exposure for exports through ECGC Schemes till 31st March 2010.
Sharma while presenting the FTP said “we would like to encourage production and export of ‘green products’ through measures such as phased manufacturing program for green vehicles, zero duty EPCG Scheme and incentives for exports”.
According to the Indian commerce ministry, the measures like tax exemption and cheaper credit rates to the needful industries are a stitch in time program but the larger plan would be to expand and diversify to new markets. The decline in demand for Indian merchandise from the North American and Western European markets that account for almost 50 percent of Indian exports has forced India to call for increasing presence in Latin America, Africa, Oceania and CIS countries.
India’s trade deficit was $10bn per month last year but past three months have seen that falling to half of last year’s average. India’s exports grew from about $64bn in 2004-05 to around $169bn last fiscal at an average growth rate of 25 percent, the third fastest after Russia and China during the same period.
The new FTP will serve as the trade roadmap for the next five years to the exim entities of India. The Ministerial Meeting of the WTO G-20 plus countries that will be held in India during the first week of next month will witness Indian negotiations centred on the new FTP. Sharma said that India was committed to conclude the Doha Round talks, however, indicated that India would remain conscious of the interests of the millions of country’s farmers and also that of country’s small and medium enterprises.
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