Trading places

Of all the sections of the Indian economy hit by the global downturn,export-oriented units have been hit hardest. And while a smaller proportion of Indian output is exported than by,say,China meaning the vulnerability of national income overall to crashing external demand is less here than elsewhere there is little doubt that this is,nevertheless,a large sector which employs many and generates dynamism and innovation,but which is going through a very bad time right now. Which is why the announcement of the governments trade policy for the coming five years would be even more closely scrutinised than normal.

The policys announcement,by Commerce Minister Anand Sharma,did not come as a disappointment. It would be difficult,given fiscal space,to expect too much in terms of direct transfers; and difficult too,in terms of reformist policy orientation,to defend too much sector-specific tinkering. But the trade policy as drafted,by focusing on extending current tax credit schemes and by loosening some regulations,exte-nding the number of focus markets that are subject to export incentives,and enhancing single-window certification as well as cutting transaction costs,could act as a decent stimulus package for the besieged sector.

The general orientation of the policy is to encourage the export sector to develop further resistance to localised or temporary downturns. The adding of 25 more focus markets,economies identified as places where Indian exports could conceivably grow manifold,is part of that. The commerce ministry has correctly surmised that the Indian product mix at Indian price points would do well in markets in Central Asia and Latin America. Trade with these areas hasnt grown fast enough,and needed a kick. More important,though,for those in immediate trouble: allowing units notified as being export-oriented to sell up to 90 per cent in the buoyant domestic market. Indias export sector has been too shaped by government policy and incentives; ideally,a reformist vision should see domestic producers able to quickly and dynamically shift between exporting and domestic markets and,actually,between various external markets,too. This might be a decent first step in that direction.