Just tinkering with trade

In hindsight, the Foreign Trade Policy FTP does not appear to be as wonderful as it is projected to be. Senior analysts see it only as a r...

In hindsight, the Foreign Trade Policy FTP does not appear to be as wonderful as it is projected to be. Senior analysts see it only as a rechristened exim policy. Its target is to double India8217;s share of world trade by 2009, which would imply a 1.5 per cent of world share and an absolute figure of 150 billion. India8217;s share in world exports is 0.8 per cent. For the first quarter of 8217;04-8217;05, dollar growth has been 25.6 per cent with rupee growth at 21.6 per cent.

Fortunately, slow global recovery has not stymied the growth of exports from India. The export growth was over 18 per cent against the target of 12 per cent. India8217;s export of merchandise goods touched the level of 52 billion and the surge is being maintained. Currently India exports about 10 per cent of its GDP. Of this, about 88 per cent consists of non-agricultural exports, whose share in GDP is more than 25 per cent.

The measures announced include a special focus initiative for agriculture, handloom and handicrafts. A new scheme called Vishesh Krishi Upaj Yojana has been introduced to boost exports of fruits, vegetables, flowers, minor forest produce and their value added products. But this in itself is inadequate. It has to come with other policies designed to give agri-exports that 8220;big push8221;. The factors constraining the farm product exports include both natural barriers 8212; like the falling acreage of arable land 8212; and manmade ones 8212; like inadequate port infrastructure. India does not have a functioning cold chain, for instance.

Similarly the promotion of agri-export zones is yet to deliver the intended benefits. It is not clear how growers 8212; mostly small ones who are now on the verge of starvation 8212; would gain from the export policy. Agriculture and allied product exports are stagnating at about 6 billion a year as per RBI figures. Tea and coffee exports are falling and marketing efforts are lacking. There are not be many takers for Indian wheat and farmers here have had to depend on smaller markets like Nepal, Afghanistan and Bangladesh.

Inflationary pressures may also affect the projected goal as input costs increase sharply. Besides this the international farm market is extremely competitive and is subject to wide fluctuations. Farm exports have been allowed duty free credit which is equivalent to 5 per cent of the value of exports. But it involves paper work and bureaucratic wrangles and somehow appears less beneficial for the farmer.

The new FTP has let the grey areas in trade remain. Minister of Trade Kamal Nath says that it is not a closed document and can be revisited. But such 8220;revisits8221; are not helpful. We need a cogent policy, not casual tinkering.

The writer is a former senior editor, Financial Express