So, another foreign trade policy and, forgive us, another reason to yawn. The plain fact is that exports are determined by macro factors?domestic and global?and the commerce ministry?s painstaking finetuning doesn?t affect macro economies. Therefore, policies like the reduction in import duty under the EPCG scheme, tax refund on service exports, interest relief, etc, etc can do little to change trends. It is hard to imagine why more than 15 years after India opened up, there?s no official recognition that annual trade policies have only a superficial impact on trade prospects because export competitiveness is determined by factors like interest and exchange rates, raw material and utility prices, operation costs and logistic support systems. All of these affect the totality of domestic output as well. So, an export policy is actually indistinguishable from general macro policy and, therefore, the former should cease to exist. If the government won?t listen to us, it can listen to exporters. In the second joint survey by The Financial Express and the Federation of Indian Export Organisations?the results were reported on Friday?the top five concerns of exporters were appreciating rupee, container shortage, inflation, transaction cost and power shortages. Which of these can the foreign trade policy address? And given that, how does the commerce ministry explain its revision of the export target for this fiscal to $200 billion, up by almost a third from the current figures?
There?s another commerce ministry target?doubling of India?s share of world merchandise trade to 1.8% by 2009. The commerce ministry clock started ticking from 2004. By 2006, India?s share of global trade was up by 0.3 percentage points to hit 1.2%, one-third of the target set. There?s an interesting substory in this. Imports have been a greater driver of merchandise trade than exports. Between 2004 and 2006, India?s ranking among top exporting nations went up by only two rungs, to 28th position. Its rank among top importing nations went up in the same period by six places, to 17th position. Of course, no one is raising alarms about imports, a sign of industrial activity. Nor should one be an export fundamentalist and argue that everything must be subordinated to it, for example, by keeping the rupee low and complicating the fight against inflation.
