Speaking to The Financial Express, Planning Commission officials said that an export growth of about 14-15 per cent would be required for achieving 8 per cent GDP growth and the export policy target falls way short of that.
Officials said that sustained high rates of growth of exports was essential for keeping the current account deficit within manageable levels and also for accelerating production. “If exports fail to grow at about 15 per cent per annum, there wouldn’t be sufficient demand to sustain an 8 per cent gross domestic product growth.”
Moreover, since during the 10th Plan the emphasis would be on increasing the rate of domestic savings, the Commission did not have the option of trying to step up domestic consumption to compensate for inadequate export growth.
According to officials, a steady increase in the rate of domestic savings implied that the rate of domestic consumption growth would be less than the rate of growth of output.
Therefore, external markets will have to be sought for sustaining high levels of capacity utilisation.
While officials appreciated the commerce ministry’s efforts to enter into strategic free trade agreements with countries like South Africa, Brazil, Columbia and Egypt, some feel that India should also focus on improving trade with its immediate neighbours. “One should ask the commerce ministry why the bilateral trade agreement with Sri Lanka has fallen through.”
Making a case for introducing value added tax (VAT) regime in states, officials said that the need for WTO compatible tax rebate schemes as outlined in the export strategy was possible only through the imposition of VAT. “The World Trade Organisation wants prima-facie evidence between tax paid and tax reimbursed and it can be effectively achieved through a VAT regime,” officials said.