Foreign Trade Policy Targets
Higher Share in Global exports

India Redoubling Efforts to
Boost Exports to Africa
By Dev Varam

Identifying Africa as the new focus market in view of its huge potential, India is intensifying its efforts to further boost exports to that vibrant continent. The Indian Government is planning to pump Rs 600 crore ( $133 million) to push up exports to Africa. The two crucial economic ministries - Commerce and Industry and Finance - had worked out the special package for Africa, which was announced on April 7, 2006 as part of India's Foreign Trade Policy for the financial year 2006-07 (April-March). Under the concessions made exports to Africa will get a special import entitlement of 2.5 percent. A similar benefit is also being extended to certain key products such as handlooms, processed food, handicrafts and stationery.
A new window would be opened for promoting exports to Africa. The notional revenue to be spent on these incentives has been worked out to be about Rs 600 crore.
The plan for greater trade with Africa falls with the larger plan of Prime Minister Manmohan Singh to allow African countries greater access to the Indian market. Import duty preferences would be made available to African countries to boost trade with India. The focus on emerging markets would be a big boost to those focusing on non-traditional markets. The strategy would help in reaping long-term benefits.
Additional incentives to exporters who focus on emerging markets like Africa, CIS nations and Latin America is aimed at broad-basing the country's export focus and ensure faster growth.

Services Sector
For the urban youth - skilled or semi-skilled - the government is targeting new employment opportunities in the services sector.
Service sector companies will be allowed to transfer accumulated import entitlement under the 'Served from India' scheme and rupee payments by foreign tourists will be taken into account for calculating foreign exchange earnings of hotels and tour operators.

Auto Components To promote India as an auto component hub, the government will allow import of cars for R&D purposes without going through expensive homologation. This will enable import of new model cars for testing components.

Handicrafts & Handlooms Exports to Create Rural Jobs

Apart from the focus on emerging markets such as Africa, additional incentives will be available to export of fish, marine products, leather, leather products, processed food, handicrafts, handlooms, sports goods, fireworks and stationery.
The Exim Policy, announced by Commerce and Industry Minister Kamal Nath laid emphasis on the exports of items such as handicrafts and handlooms in view of their potential to provide jobs in villages and rural areas.
How the common man must benefit from trade was the underlying theme of the Exim Policy with leather, fish, gems and jewellery, khadi items, fireworks and stationery chosen for special incentives.
The common thread linking sops to these products is their employment-generation potential, with Kamal Nath emphasizing that two million new jobs will be created in 2006-07 through 20 percent growth in exports. The rural thrust is expected to cost Rs 2,500 crore in terms of revenue foregone.
With merchandise exports touching $101 billion in 2005-06, the government is bullish on improving India's share in global exports to 1.5 percent. With trade in services estimated at around $100 billion and merchandise import of $140 billion, India's foreign trade is now around $340 billion. The government wants to use this $340-billion trade muscle to create more jobs.
A recent study has shown that exports supported nearly nine million jobs in 2004-05. In addition, nearly seven million jobs were supported indirectly as exports during the year touched $80 billion..
While the focus on handicrafts and handlooms is expected to boost rural jobs, the government is banking on services and gems & jewellery for the urban and semi-urban centres.
Exporters have also been promised exemption from service tax and fringe benefit tax. While the export-oriented unit (EOU) scheme has been made more flexible to benefit agri-export zones, the popular duty entitlement promotion scheme (DEPB) has been retained in its existing form.
The export promotion capital goods (EPCG) scheme has also been made more flexible with additional time for fulfilling export obligation. To reduce transaction costs, Kamal Nath has promised to shift all licensing work of the Directorate General of Foreign Trade (DGFT) to the online mode.
Exporters will be in a position to get their clearances through the electronic data interchange (EDI) system. The government has also promised interest payment on delayed refunds.
GM Crop Imports
The government would lay down clear guidelines on imports of genetically modified (GM) crop varieties, Kamal Nath said.

Easy imports of precious metals & stones to boost jewellery exports

India will make imports of precious metals and stones easier in order to promote gems and jewellery exports, Kamal Nath said, adding Mumbai has to match Dubai and Tel Aviv in gems and jewellery trade.
There are a number of unutilised gems and jewellery manufacturing units, which need to be revived, he said, Tax benefits would be extended only to inputs and not for finished jewellery products.
Persisting with its efforts to promote India as a gems and jewellery hub, the government has reduced the value-addition criteria for exporters from this sector to 4.0 percent as compared to earlier level of 7.5 percent.
Import of used jewellery and scrap of precious metals has been allowed, and exporters can bring back export jewellery and ship their exports on consignment basis.
The idea behind these steps is to prevent India's gems & jewellery business from shifting to Dubai. Boosting the gems & jewellery sector would create more jobs in smaller centres like Surat.

Exports boom to create 20 million jobs

India's booming exports will not just earn valuable foreign exchange , but could also generate more than 20 million jobs by 2009-10 across the country.
According to a study by Research & Information System for Developing Countries, released by Commerce Minister Kamal Nath, if India achieves $150 billion exports target by 2009-10, total additional jobs created would be 13.6 million..
Of this, 8.1.5 million jobs would be direct incremental employment , while 5.4.6 million jobs would be in indirect jobs created through backward linkages and in logistics.
However, if exports cross $165 billion by 2009-10, 20.1 million incremental jobs could be created. This would include 12.4 million direct jobs and 8.63 million indirect jobs in export-related sectors, the RIS study projected.
The total employment in export sectors by 2009-10 would jump to 29.5 million or 36.9 million depending upon whether exports touch 150 billion dollar or $165 billion.
"It is only with a multi-pronged, multi-dimensional efforts that we can address the massive challenge of finding jobs for millions of our unemployed youth. Export-oriented production has a huge potential for generating jobs," Kamal Nath, who released the report while announcing the Foreign Trade Policy said.
India's exports have already crossed 100 billion dollars in 2005-06 and the government has set a target of 120 billion dollars in 2006-07. With an annual growth rate of about 25 per cent, the country's exports may well cross this target.

Aviation fuel supplies to be treated as exports

India moving towards FTA with ASEAN

Roadblocks in the way of ASEAN-India Free Trade Agreement appear to have been removed following Prime Minister Manmohan Singh's intervention on the crucial issue of sensitive farm products like pepper, rubber, palm oil, coffee and tea.
A meeting, convened for this purpose in New Delhi recently by Singh was attended by Kamal Nath and Agriculture Minister Sharad Pawar. Both the Ministries have been asked to hold consultations on Tariff Rate Quota (TRQ) approach for these products in the FTA ahead of the Trade Negotiating Committee of ASEAN-India FTA meeting beginning April 24.
Commerce ministry has mooted TRQs under the FTA to the ASEAN member countries, which export these products in the wake of Agriculture Ministry's strong objection to their inclusion in the trade liberalisation programme. TRQ is a specific quota offered to a country for exports at a fixed duty, which is lower than the importing country's normal duty.
As per agriculture ministry, these commodities form a part of its list of Special Products in the World Trade Organization and have sensitivities involved, so under any FTA it cannot agree to have zero tariff on them. In some of the commodities like pepper and palm oil, their rising imports from Sri Lanka under the Indo-Sri Lanka FTA has impacted this sector which mainly consists of small growers and manufacturers.
But if these products are not included in the FTA, then objective of such an agreement would be lost which worked on principle of all trade meaning at least 80 per cent of trade.

Quicker Customs Clearance Assured

Union finance minister P Chidambaram expressed confidence that the process of customs clearance, often considered to be laboriously slow in India would improve and that clearances would be just a matter of hours, as is the case in many advanced nations.
Speaking at the inauguration of the World Customs Organization WCO's ICT conference in Bangalore recently, Chidambaram said that the Indian Customs department had, during the last 10 years, invested in an extensive automation programme that made it possible for trade to conduct a big part of its business with customs, either from their homes or offices.
"Customs is an essential instrument for the effective management of an economy. It has to ensure that international trade is not hampered by concerns of time or transaction costs and where customs can deliver services with minimal adverse impact on trade activities," he said.
P Chidambaram also noted that India was one of the oldest members of the WCO and said that the country had provided inputs in areas like standardization and harmonization of data requirements, which in turn helped in the development of the WCO customs data model.
Azim Premji, Chairman of Wipro who was present at the inauguration recounting his company's experience with the Customs department, said that India's growth over the next few years would make the task of retaining and improving the levels of service imperative.
Later, at a media interaction, Chidambaram said that in many countries the contribution of customs to government revenues was not substantial.
In the Indian context it is pegged at about 20 percent, with peak customs duty having fallen from a high of 100 percent to the current level of 12.5 percent.