Policymaking space has been curtailed

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: The Union ministry of commerce & industry ritually announces an annual supplement to the foreign trade policy in April every year, wherein changes are necessarily made within the broad framework of the goals set out in the government’s five-year trade policy document. These changes in policy necessarily address the challenges emerging from changes in global trade and the problems faced by the country’s trade sector in such changing situations. Such an annual supplement is also expected to review whether policies have achieved the medium-term targets. As a result, in all such instances, international traders’ expectations run high.

Like in earlier years, the government announced its annual trade policy recently. It was expected to bring in changes that address the current concerns of India’s export and import trade. Such trade policy statements—whether short- or medium-term—and their effectiveness have to be gauged against current trade concerns, and the space available for policymaking in general. With regard to the latter, with extensive liberalisation of the trade sector in terms of qualitative restriction removal and tariff reduction, the space available for policymaking has been curtailed.

To me, trade policymaking in India now remains restricted to trade facilitation measures through procedural simplification and addressing challenges arising out of the globalisation process, in particular WTO-related issues. Trade policymaking in India, thus, has a rather limited scope in general and such annual supplements to foreign trade policy have further limited scope. Before getting into the question of what this policy document delivered, it is prudent to observe the concerns of the trade sector.

Even though India’s exports and imports have grown robustly in the last five years, export growth performance has not been particularly encouraging during the past one year. The evidence of a slowdown in export growth, even though widespread, is particularly alarming in case of labour-intensive manufactures, including textiles & garments, gems & jewellery, and leather & manufactures. Much of this slowdown is on account of a 12% appreciation of the rupee against the dollar during this period. Even though the exchange rate has stabilised at around Rs 39.50 a dollar, year-on-year appreciation of the currency continues unabated and is likely to remain in place for some time.