Kamal Nath unveils annual supplement to Foreign Trade Policy

NEW DELHI: 11 April; Union Commerce and Industry Minister Kamal Nath on Friday announced various measures to check spiralling inflation, extended sops to exporters to sustain growth in the export sector and gave relief to sectors hit by rupee appreciation vis-a-vis dollar in the current fiscal.

Releasing the annual supplement of the Foreign Trade Policy (FTP) here on Friday, Mr. Kamal Nath said: “To curb inflation on essential items, the Government has banned export of non-basmati rice, edible oils and pulses. Now we are banning export of cement too, while tax incentives and the promotional scheme on export of rice and primary steel items are being withdrawn.”

DEPB scheme

Lauding exporters for their resilience and hard work in sustaining the growth momentum, Mr. Kamal Nath announced a slew of ‘innovative steps’ that included extension of the ‘Duty Entitlement Passbook’ (DEPB) scheme till May 2009; extension of the interest subvention scheme where exporters are given bank credit at a reduced rate of 6 per cent; reduction of customs duty payable under the ‘Export Promotion Capital Goods’ (EPCG) scheme from 5 per cent to 3 per cent; and lowering of average export obligation under the EPCG scheme. “The Interest subvention scheme would mean an outgo of Rs. 1,050 crore from the Central Exchequer in the current year,” he added.

IT exemption for EOUs

The Minister also extended income-tax exemption to 100 per cent export oriented units (EOUs) beyond 2009, announced additional duty-free credit of 2.5 per cent under the ‘Vishesh Krishi Gram Upaaj Yojana (VKGUY) to boost exports of fruits, vegetables and flowers besides giving 6 per cent interest annually to exporters if refunds are not made within one month of the due date. However, the Software Technology Parks of India (STPI) scheme, which also faces uncertainty over continuation of the tax benefits, will not get advantages of EOUs.

Similarly, Mr. Kamal Nath announced additional credit of 5 per cent for sports and goods industries under the ‘focus product scheme’; special focus initiative for the information technology (IT) sector; inclusion of IT and IT-enabled services and research and design in natural sciences under the ‘industrial park scheme’; and establishment of ‘Export Promotion Council’ (EPC) for telecom; and extension of re-import of branded jewellery to one year.

Stating that the Indian telecom sector has seen a dramatic growth, Mr. Kamal Nath said the telecom EPC would be set up in partnership with the private sector to boost exports. Exports from the telecom sector were likely to more than double to Rs. 4,000 crore this year from Rs. 1,800 crore in 2007-08, he added.

Under the focus market and product schemes, Mr. Kamal Nath said the coverage had been increased and ten more countries — Mongolia, Bosnia-Herzegovina, Albania, Macedonia, Croatia, Honduras, Djibouti, Sudan, Ghana and Colombia — were being included.

Mr. Kamal Nath said the FTP initiatives in the last four years had resulted in increased trade activity and had generated additional employment of 136 lakh. “Exports are not just about earning foreign exchange, but about boosting the manufacturing sector, creating large-scale economic activities and generating employment opportunities. India’s total merchandise trade (both exports and imports) will be $400 billion during 2007-08, accounting for nearly 1.5 per cent of world trade. If trade in services is added, our commercial engagement with the world would be to the tune of $525 billion,” he added.

The Minister pointed out that the new FTP (2004-09) had more than doubled India’s exports in the last four years. The country’s exports in 2007-08 had exceeded $155 billion from $63 billion in 2004, registering a cumulative annual growth rate (CAGR) of 23 per cent, year-on-year, and way ahead of the average growth rate of international trade.

“And this we have achieved despite appreciation of the rupee, high interest rates, spiralling oil prices, slowdown in major trade markets, and withdrawal of some GSP (generalised system of preferences) benefits to India by other countries,” he said, adding that “India should achieve 5 per cent share of world trade by 2020. As a means to achieve this, an export target of $200 billion has been set for 2008-09.” Noting that there are still many structural problems to be addressed, Mr. Kamal Nath announced setting up of a ‘joint task force’ (JTF) to plan an integrated strategy to tackle these issues. The task force would look at development of world-class infrastructure to facilitate trade, involving an investment of over $800 billion; find measures to ensure trade facilitation; look into development of global manufacturing hubs in selected sectors including auto-components, gems and jewellery, textiles and petro-products.

Talking about ‘special economic zones’ (SEZs), Mr. Kamal Nath said: “the Government views it as vehicles of industrialisation and employment generation. SEZs currently provide employment to more than 2.8 lakh people and the projected exports from SEZs would reach Rs.1.25-lakh crore by this year.”