Tuesday, November 12, 2013

Government likely to double export target to $1 trillion

NEW DELHI: The government is expected to double the export target to $1 trillion in the next five-year foreign trade policy even though the current policy that runs until March 2014 is all set to miss the $500-billion target set for exports.

A senior commerce department official told that the government has begun work on the foreign trade policy for 2014-2019, which will aim at doubling India's share in global trade from the current 3%. The policy is, however, expected to be announced only after the new government assumes office after the general elections next year.

"After the very successful 2009-14 foreign trade policy, we have started working towards the policy for the next five years," the commerce department official said. "Consultation process has started for that. We want to focus on the high-value exports and import substitution, such as engineering, aeronautics, cars, where value addition is the highest."

The proposed 2014-19 policy would include measures to make the country's outbound shipments more competitive by boosting productivity and generating exportable surplus.

"It will require support from the government to provide support for marketing, export infrastructure including improved logistics, keeping in mind the current situation of CAD (current account deficit)," said an inter-ministerial note moved for consultation on the new policy.

People aware of the consultations said the government is likely to set the export target for the new policy at around $1,000 billion.

The inter-ministerial note also explains the proposed policy would include a long term and a medium-term strategy to enhance trade competitiveness and overall growth of India's foreign trade.

Since 2009, India's exports have nearly doubled from $178 billion in 2009-10 to about $325 billion. The foreign trade policy for 2009-14 provided fiscal incentives to traditional sectors in the form of interest subvention and other duty neutralisation schemes to provide refund of indirect taxes and levies.

It focused on export promotion of capital goods and market diversification and product diversification. Incentives were provided under focus product and focus market schemes to encourage exporters to explore markets like Latin America and Africa.

The share of exports to Latin America has gone up from 2.9% in 2008-09 to 4.5% in 2012-13. India's rising current account deficit has prompted the government to promote import substitution through the new policy. India's CAD widened to a record high of 4.8% of the GDP in 2012-13 and 4.9% of the GDP in the first quarter of the fiscal.

After remaining muted for a year, India's exports grew in double-digits in the three months starting July, expanding by 11.2% in September.

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