While announcing the foreign trade policy (FTP) on Thursday,the commerce ministry did not set a target for exports in the current financial year. The indication is clear. It is wary,aware of the difficult times ahead for exporters and the economy as whole given the challenges elsewhere in the world.
WTO figures show growth of world trade is just 2 per cent in 2012,from 5.2 per cent in 2011,and is expected to remain sluggish in 2013 at around 3.3 per cent as Europe battles a slowdown. This is well below the pre-2008 trend of 6 per cent.
The EU and the US are major traditional markets for India and a slowdown in these economies does not augur well for India. In 2012-13,while growth in exports contracted 1.76 per cent,imports grew by 0.44 per cent,resulting in a highly unsustainable current account deficit,which widened to 6.7 per cent of the GDP in the December quarter.
A bit of a balance does come from the incipient signs of recovery in the USA,(it recorded a robust rise in manufacturing while unemployment fell to its lowest level at 7.6 per cent,since the economic crisis) but the FTP,one suspects,was written before this positive emerged.
Yet,having identified the challenges,the FTP offers little as support to bolster exports. The government is of course walking a tight rope on the fiscal front and the measures announced mirror the constraints. Halving the area requirement for SEZ developers will help to make quite a few more viable but it is difficult to figure out why a task force is needed to figure out the costs of transaction. There have been several committees on this score and all they require is implementation. Lowering these costs act as a subvention measure,by themselves.
Shruti is a senior correspondent based in New Delhi