The government has announced a slew of measures including extension of EPCG scheme to all sectors and sops for Special Economic Zones to boost shipments. The initiatives, announced by Commerce and Industry Minister Anand Sharma as part of the annual supplement to the Foreign Trade Policy, are aimed at pushing exports. In an interview with ET Now, Dr Ajay Dua, Former Secretary, Ministry of Industry & Commerce, Government of India, shares his take on the same. Excerpts:
ET Now: Your initial take really on all that you heard from Mr. Anand Sharma?
Dr Ajay Dua: It is a good policy announcement. He has explained the constraints, admitted that it has been a tough time to increase the exports from the country and then try to suggest the incentives for increasing exports. It is a step in the right direction. The question is whether that is adequate, whether it has been an incremental approach only or something else could have been done.
ET Now: So what else could have been done? What to your mind has been missed out of this policy?
Dr Ajay Dua: The macro picture is what has not benefited much despite a fall in the value of the rupee. Despite a sizable fall in the value of rupee, we have not quite been able to increase our exports. We have crossed the 300-billion mark, yet we are about 2% below the last year's figure and about $50 billion dip will be about 15% to 16% below the anticipated $350 billion.
The larger picture means management of the real value of the rupee. We should not be allowing our exports on a sustained basis any appreciation beyond the real value in the rupee, very effective management of the currency.
We continue to have a thrust on indirect taxes to mop up the money. Just to give you a figure in India the ratio of direct taxes to indirect taxes or the total tax is the direct taxes only account for 37%, other 63% comes from indirect taxes whereas in the United States over 75% of the taxes are direct, which means our commodities, including the ones which we export, tend to be costly either because of the basic cost of production is high or we have added a whole lot of taxes to it. Are we off setting all these huge taxes which we levy on our products may be by way of excise duties, central, state or other.
Our trade facilitation, the cost of doing business continues to be very high. Do we have comparison cargo movement system of international standards, do we have paperless transactions at our customs?
ET Now: With SEZs, the government was betting on to boost our export sector. Has enough been done on that end?
Dr Ajay Dua: What has been done was anticipated that the minimum area requirement would be reduced, there will be some flexibility brought in the operation of the SEZs.
What was also being talked in the media as well as by the exporters was that the benefits of the special focus schemes both on products as well as markets would also be extended to exports from SEZs that has probably not happened.
ET Now: The trade minister said market diversification is the key. Is it important that we shift our focus away from traditional markets of Europe and the US?
Dr Ajay Dua: Yes. But we need to worry about our energy bill first. We have become a big importer of coal given the coal production in the country and the demand which has been created by the new capacity creation. Last year we have added 20,000 MW and the year before also about as much. All those plants are working at less than full capacity.
Our coal bill is going to rise drastically and I am not sure whether the fuel price, the hydrocarbon price will hold out given the fact that now there is a bit of recovery in Japan. It might impact our import bill and consequently the CAD.
About the diversification to the market, adding more markets is very desirable, but we could have also looked at adding BRIC countries like Brazil and South Africa to the list because with them we are developing special relationships now. Both these economies are big.
Our trade within the region with South Asian countries, with our neighbours etc. certainly needs to be much more than what we have today. The Eurozone recovery is going to be slow and that is our FDA.
Source: economictimes.indiatimes.com