A seminar on critical analysis of the Foreign Trade Policy 2009-2014 of the Government of India was held on 10 October 2009 at the Gulmohar Hall at the India Habitat Centre, under the aegis of EMPI Business School.

The speakers included Mr. G.P. Upadhyay, I.A.S., Secretary General of Federation of Indian Export Organizations (FIEO), Dr. Vijaya Katti, Chairperson (Research), IIFT, Prof. V. Ramachandriah, Ex-Dean, IIFT, Dr. UK Neogi, Director, EMPI and Prof. C.M. Sastry, G.M. (Retd.), MMTC Ltd.

The opening address was delivered by Mr. Gurnam Saran, Chairman, EMPI Group. Welcoming Mr. Upadhyay to the seminar, he addressed the gathering about the importance of the Foreign Trade Policy 2009-2014 in the light of the current economic scenario and of his experience of having seen India evolve from a country in the ‘License Raj’ to one opening its economy to align itself with the world and gain a competitive edge. It was a paradigm shift from the times when there was not much discussion of ‘trade’, to the present, when Indian companies are reaching out to spread their business across the globe, Mr. Saran stated.

In retrospect, India’s last Foreign Trade Policy 2004-2009 had the primary objective of doubling India’s share of global merchandise trade within the policy period of 5 years, an objective which the country had very commendably achieved. In the last five years our exports witnessed robust growth to reach a level of US$168 billion in 2008-09 from US$63 billion in 2003-04. Our share of global merchandise trade was 0.83 percent in 2003; it rose to 1.45 percent in 2008 as per WTO estimates. Our share of global commercial services export was 1.4 percent in 2003; it rose to 2.8 percent in 2008. India’s total share in goods and services trade was 0.92 percent in 2003; it increased to 1.64 percent in 2008. On the employment front, studies have suggested that nearly 14 million jobs were created directly or indirectly as a result of augmented exports in the last five years. But the current Policy of 2009-2014, comes in turbulent times when the world is facing its worst economic recession in history. The WTO estimates project a grim forecast that global trade is likely to decline by 9 percent in volume terms and the IMF estimates project a decline of over 11 percent.

“Recession is actually a drastic reduction in demand, the world over, especially in the major consumer countries of the world, viz. the US and the European nations” said Mr. G.P. Upadhyay, Secretary General, FIEO, in his address analyzing the Foreign Trade Policy 2009-2014, in light of the economic slowdown. Taking the audience back to the 1980’s, Mr. Upadhyay said that exports as a percentile of India’s GDP stood at around 5 percent then. Today, although it has grown to 15-16 percent of GDP, we still have a long way to go, and a great potential for its increase. Taking the example of China, Mr. Upadhyay said that it had started initiatives in increasing trade and aligning its economy with the world more than a decade before India had, and is today reaping the benefits, having become the ‘Factory of the world’ with exports touching around 60 percent of the country’s GDP.

Three pillars of the Foreign Trade Policy 2009-2014 are:

• Improvement in infrastructure related to exports

• Bringing down transaction costs

• Providing full refund of all indirect taxes and levies

The three pillars would pave the path for India to reach its goal in the current Foreign Trade Policy 2009-2014. Infrastructure, in the form of roads, port handling capacities, etc. need a drastic overhaul and improvement if we are to become globally competitive. Also, bringing down transaction costs in the form of the red-tape, paperwork and formalities needed to be completed by exporters have to be reduced if our products have to remain globally price competitive. Providing full refund of all indirect taxes and levies would help exporters remain globally competitive and act as an incentive for exports.

Stressing FIEO’s initiatives for trade promotion, Mr. Upadhyay underlined the setting up of 26 Export Promotion Councils for niche areas like Pharmaceuticals, Silk, etc. and 8 Commodity Boards for Tea, Coffee, Coir, etc. FIEO has ten offices in India and one each in Sharjah in the UAE and in Bucharest in Romania. They are also considering China and West European countries as possible office venues. Also, of the six ‘Made in India’ shows proposed in the Policy, FIEO would be hosting a minimum one of show. In his experience in dealing with foreign delegates, Mr. Upadhyay said that India is looked upon as a potential manufacturing base by many countries of Western Europe - “We have to take advantage of it and make sure we ramp up our standards so we can be viewed as an equally competitive economy as China as far as manufacturing is concerned”.

“Any country which wants a global presence has to do so by dint of its exports. For this, the government has to keep in context the global business dynamics and the global demand, which defines the factors for supply”, stated Dr. Vijaya Katti, Chairperson (Research), IIFT, in her presentation of the Foreign Trade Policy of India, 2009-2014. “The consumer wants the best of products within his purchasing power. At the same time, a producer knows where the profit is, and will go that-ways. Academic institutions facilitate these actors by directing where they should go to garner more profits. That’s where the Foreign Trade Policy focuses, on new target markets for trade.” What was a yearly EXIM Policy earlier is now the Foreign Trade Policy of India with a five year term, she added. The five-year policy was started with amendments. The amendments were incorporated keeping in view the global dynamics and the supply side issues that need to be periodically addressed, in keeping with the matrix of demand vs. the supply scenario.

Dr. Katti also expressed her concern over the miniscule expenditure of India on Research & Development. She opined that this was a disturbing fact since a country has to invest substantially in R&D if it wants to grow and have a competitive edge in the global trade scenario. She expressed satisfaction at the proposed setting up of the Directorate of Trade Remedy Measures to enable support to Indian industry and exporters, especially the MSMEs, in availing their rights through trade remedy instruments under the WTO framework. MSME’s, she agreed, do not have any safeguards for issues like dumping of goods, and the Directorate will be a help for them.

Strategy for achieving the objectives:

• Unshackling controls

• Creating a feeling of trust and transparency

• Simplifying procedures and transaction costs

• Duties and levies should not be exported

• Facilitate development of India as a global hub for manufacturing, trading and services

The current Foreign Trade Policy framework concentrates mainly for the next two years, keeping in mind the global economic slowdown, and measures to be taken accordingly. Post recession, augmenting further growth and measures for improvement of trade will be the focus of the Policy, Dr. Katti added. Speaking about the focus on alternate markets of Africa and Latin America, as proposed in the current Policy, Dr. Katti presented facts and figures that pointed to the fact that India has immense potential for trade growth in these countries, since, for example, India’s share of export to the Latin American countries aggregates to about 0.5 percent of total export. Hence the expansion impetus to these markets as propoed in the Foreign Trade Policy 2009-2014 is the correct path to take.

Continuing the discussion, Prof. V. Ramachandriah, Ex-Dean, IIFT threw light on the critical aspect of the Foreign Trade Policy with respect to the WTO. Prof Ramachandriah expressed satisfaction by India’s ‘Look East’ policy in the current Foreign Trade Policy and stressed on the importance of improving infrastructure essential for trade, viz. roads, ports and handling facilities; reduction in transactional costs in order to make India more globally competitive. In addition, he dealt on the absolute necessity of implementing Electronic Data Interchange (EDI) to reduce paperwork and make operations seamless and easy for the exporter.

Dr. U.K. Neogi, Director, EMPI, in his speech, stressed on time management. He said that be it in the start of the current Foreign Policy which saw a delay of around six months, or be it delay in delivery timelines of a shipment, both are unacceptable in global standards and time management has to be of prime importance. In his critical examination of the Policy, he brought out some very pertinent issues that are plaguing the trade sector in India. Foreign Trade Policy should talk of infrastructure improvements more than incentives, he opined, as should changes in policies midway be stopped, which often happens due to change in political will. Barriers for fast movement of trade like administrative red-tape, corruption at multiple levels and complicated procedures should be done away with. The three main economic indicators, Service, Agriculture and Manufacturing should be given due importance and care, so that economic growth is robust and strong, he said.

Prof. C.M. Sastry, G.M. (Retd.), MMTC Ltd., with around 35 years of experience in exports and foreign trade, presented the industry view of the current Policy. He said that the hassle for the exporter in terms of the formalities should be minimized. Assistance to states for developing infrastructure and allied services is encouraging for the industry, and the exemptions offered are a welcome incentive for exporters. ‘Towns of Export Excellence’ policy would also encourage the specific industries and would boost exports, he added.

The interactive session with Mr. Upadhyay also saw a pertinent point being raised by Mr. KK Pokhariyal, DGM-Exports from GHCL Ltd. which is a major exporter of Soda Ash in India. In the current economic slow down, Mr. Pokhariyal pointed out, Pakistan has started exporting surplus quantity of soda ash to India at lesser price while Indian Soda Ash import is banned in Pakistan. The markets in North India have been targeted by Pakistan’s soda ash companies since they have a logistical advantage over Indian Soda Ash plants, located in Saurastra in Gujarat. Soda Ash industry has taken up matter with various govt. forums to stop supply from Pakistan, but to no avail as yet, doubly affecting this industry; firstly due to recession, as also by the cheaper supply of Soda Ash from Pakistan. He urged FIEO to take up the matter. In his response, Mr. Upadhyay made a note of it, and promised to take it up with the Government in his efforts to do justice to the issue.