Exim policy gives a push to services

A share in the pie of business arising out of reconstruction of post-war Iraq couldn’t have been far from Jaitley’s mind given Indian construction companies success after the Gulf War in 1991.

Keeping an eye on the forthcoming elections, Jaitley has also envisaged a special package for promoting agri exports through the Agro Export Processing Zones (AEZs) and involving corporates in promoting agri exports.

But the single-most important policy decision which could affect the common man is the fact that oil marketing companies have been allowed to go in for direct imports of petrol and diesel.

In addition to the existing four national oil marketing companies — Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL) and IBP Ltd, the government has given marketing licenses to four other companies including Oil and Natural Gas Corporation (ONGC), Reliance Industries (RIL), Essar Oil (EOL) and Numaligarh Refinery Limited (NRL).

Besides a special focus on potential high-growth sectors like drugs and pharmaceuticals and electronics hardware, Jaitley announced development of ten new export clusters other than the existing Tirupur known for fabrics for garment exports, Panipat for furnishings and Ludhiana for knitwear and sports goods, as new Towns of Export Excellence. Special attention would be paid to physical infrastructure upgradation and technology and skill-upgradation in these areas.

Apart from removing quantitative restrictions (QRs) on the export of five items including paddy (except basmati), cotton linters, rare earths and slik cocoons, the policy has also removed QRs on import of 69 items covering animal products, vegetables and spices, antibiotics and films.

Another striking aspect of this Exim Policy is that Jaitley has managed to involve the Finance Ministry in the exercise to facilitate simultaneous notifications of announcements by Directorate-General of Foreign Trade (DGFT) and Central Bureau of Excise and Customs (CBEC) to minimise procedural harassment to exporters.

After achieving a 16.76 per cent growth in exports during the first 11 months of 2002-03, Jaitley has aimed the annual export target at $80 billion by 2007 from the present level of $50 billion. It is to achieve this goal that the policy seeks to reduce transaction costs and diversify export markets by focussing on CIS countries and enlarging the growing African market by covering 24 countries.

He said exports of Asia’s third-largest economy needed to grow by 12 per cent a year for the next five years to raise its share of global trade to one per cent from just 0.67 per cent now.

To boost exports of services other than software, duty-free import of consumables, office and professional equipment, spares and furnitures up to 10 per cent of the average foreign exchange export earning in the previous three years has been allowed for firms earning minimum foreign exchange of Rs 10 lakh. The EPCG facility has also been extended to newcomers against bank guarantee to the extent of the revenue sacrificed which was likely to benefit the health sector and make the country a major destination for health services.

Within the sevrices sector Jaitley emphasised the role of the entertainment industry which was ‘‘singularly handicapped’’ by lack of investment, would now be promoted by encouraging venture capital funds into the sector. Suitable tax incentives would be given to the venture capitalists, in consultation with the Finance Ministry.

Responding specifically to the accusation that the government had failed to restrict flooding of Chinese products in the Indian market, Jaitley tried to dispel the myth saying that India’s exports to China had grown by a whopping 86 per cent to over $1.25 billion over the last year while imports from China grew by a mere 38.89 per cent during April-December 2002-03. Contrary to perceptions, he said Indian exports to China formed 3.3 per cent of the country’s total exports.

As far as the direct impact of the war in Iraq is concerned, Jaitley said that almost Rs 1,000 crore worth of exports were affected — Rs 600 worth of exports which are in transit and Rs 400 crore worth of orders which are ready and awaiting shipment. Jaitley said that options to ship them to alternate ports at Syria or Jordan were being explored. He said that the impact of war on India’s exports would depend on how long this war lasted as 11 per cent of India’s exports were to the Middle East.