To give a boost to the country's ailing export sector, the government is set to convene a Board of Trade (BoT) meet on March 22, to prepare the way for the annual supplement to the Foreign Trade Policy (2009-2014), expected to be unveiled in April.
Commerce secretary S R Rao told Business Standard: "The meeting (is) to seek inputs from all stakeholders such as industry chambers, exporters and various export promotion councils, to identify the problems and how those can be solved. Once these consultations are over, the finance and commerce ministers will be meeting to sort out the main problems, based on which incentives will be announced to support the sector."
The board is an advisory body on foreign trade to the government. The meeting is to be chaired by commerce and industry and textiles minister Anand Sharma. There will be representation from the ministries of finance, external affairs and micro and small and medium enterprises, among others.
During the first 10 months of the 2012-13 financial year, through January, merchandise export declined 4.9 per cent to $240 billion from $252 bn in April-January last year. The decline was mainly on account of a fall in export of engineering goods, gems and jewellery, textiles and petroleum products, making up almost 80 per cent of the country's export basket. During April-January, export of engineering products, gems and jewellery, textiles and petroleum products declined by four per cent, 10 per cent, eight per cent and four per cent, respectively, due to a massive slowing of demand in the American and European markets.
Rao added the target of $360 bn for the current financial year seemed "difficult" to achieve. He said the government's focus was to address short-term and medium-term concerns, in the wake of a burgeoning current account deficit (CAD). In 2011-12, the CAD had reached an all-time high of 4.2 per cent of gross domestic product (GDP) and is set to be higher in the current financial year. In the first half of 2012-13, the CAD was 4.4 per cent, against four per cent of GDP in the corresponding period of 2011-12.
Rao said in the annual supplement to the FTP, the government would give a thrust on penetrating the markets of Latin America, Africa, the CIS countries, the Near East, Far East and South and Southeast Asia. Last week, Anand Sharma has said that exports this year had a poor run, mainly due to contraction in global trade. He had also clearly stated the export target of $360 bn would be missed.
The minister is to meet the Federation of Indian Chambers of Commerce and Industry tomorrow to discuss the export strategy, while taking inputs from them on the support the government could extend.
"Forget $360 bn. This year, the main challenge is to attain even what was achieved last year, of $300 bn worth of export. The government has to now take some serious long-term steps to sustain the growth in export. We need to strengthen our presence in the traditional markets of the US and Europe; else, the Chinese will eat that up," highlighted Sanjay Budhia, chairman of the Confederation of Indian Industry's national committee on exports and imports, and managing director, Patton Group.
After eight months of contraction, exports rose a tad in January at 0.8 per cent to $25.6 bn. However, the trade deficit continued to widen, to around $20 bn, the second highest ever in a month, as imports rose 6.1 per cent to $45.6 bn in the month. The commerce department is yet to announce the figures for February.
Earlier this week, finance minister P Chidambaram had said the CAD was a bigger worry than the fiscal deficit. He said export of manufactured products and services were the two ways to pay for India's rising imports.
In December, the government had announced an incentive package for exporters. It introduced an incremental export incentivisation scheme with effect from January this year, under which incremental exports made during the last quarter of the financial year over the corresponding period of the previous year to specific destinations would be eligible for benefits. The two per cent interest subvention scheme was also extended to include 134 sub-sectors of the engineering sector till March 31, 2014.
In line with the export strategy paper issued in May 2011, the government had set an ambitious target of achieving $500 bn worth of exports by 2014. Last year, the government has announced the annual supplement to the FTP in June, where it mainly extended the zero duty Export Promotion Capital Goods Scheme till March 31, 2013, from March 31, 2012, beside other minor incentives that did not help the sector much.
Notably, the share of merchandise exports in the country's GDP has increased from 13.9 per cent in 2009-10 to 17.7 per cent in 2011-12, according to a recent government data.