This year’s annual supplement to the Foreign Trade Policy (FTP) 2009-14 came at a time when exports in 2012-13 fell for the first time since 2009-10. Despite fiscal constraints, commerce, industry & textiles minister Anand Sharma announced a slew of measures, mainly benefiting labour and capital intensive sectors such as engineering and textiles. He said the strategy is to improve market diversification, promote technological upgradation of exports, encourage domestic manufacturing for inputs to export industry, as well as reducing transaction costs. Excerpts from an interaction:
On the need to boost exports: Though there were fiscal constraints, the government has decided to incentivise exports as we need to bring down the trade deficit and current account deficit. We will review the performance of the exports in October and take additional measures to boost exports. We are also actively considering the demand for a Market/Export Development Fund (of R10,000-R15,000 crore).
On the export target for 2013-14 and the revenue outgo due to the FTP measures: It is very tough to give a projection of exports due to the difficult circumstances globally. It will depend on the recovery of key markets, such as the US and Europe. We wish a robust recovery of the euro zone market, because if there is no demand from these major markets, our exporters will struggle to get orders. At a time when several countries registered a drastic fall in exports, we succeeded in containing the fall to less than 2%. Though the trade deficit for 2012-13 was $191 billion, we feared that it would be more. The government is trying its best to increase exports, especially those of the value-added items, and reduce trade deficit. We do not want to speculate on revenue losses as it will depend on how much exports are taking place due to the benefits given in the FTP.
On not withdrawing minimum alternate tax on SEZ: MAT on SEZs was a serious concern expressed by SEZ developers and this was duly communicated by the commerce ministry to the finance ministry. However, due to fiscal constraints, the finance minister was not inclined to review MAT on SEZs. In any case, there will be not be any profit-linked incentives when the Direct Taxes Code kicks in. However, we have taken a conscious effort to help SEZs to do better and have given many incentives. Those who do not want to continue in SEZs can avail the benefit of the newly announced exit policy.
On FDI reforms: The relaxation of sectoral FDI ceilings is an ongoing process and we take decisions on it every year. Last year, we opened up multi-brand retail, civil aviation and broadcasting. We aim to give a thrust to advanced manufacturing and, therefore, we favour increase in FDI limits in defence to increase defence-related manufacturing in India. But it is a sensitive sector and, therefore, the decision requires inter-ministerial consultations. The government is in favour of increasing FDI in insurance and opening up pension sector. However, I have no comments on increasing FDI in the telecom sector.