Exports grounded, all eyes on FTP

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Bikky Khosla | 31 Mar, 2015
The export sector is not doing well. Overseas shipments fell for the third consecutive month in February by a record 15 percent to 21.5 billion. During the April-February 2014-15 period, cumulative exports stand at USD 286.58 billion, up only 0.88 percent over the same period last year. One of the major factors that has played spoilsport for the sector is dull global demand. In January, the IMF forecast that global growth would pick up from 3.3 percent in 2014 to 3.5 percent this year, but now the early signs are that growth may again be downgraded.

Indian exporters are already feeling the heat of lower global demand. A PHD Chamber survey, conducted during the months of February and March, has found that majority of exporters are facing a 20 percent decline in their order books for the coming times. They view that heavy dependence on the European markets, which still have not recovered from recession, and weakening prosperity in the US markets are the top external hurdles at this moment. Other issues pointed out by them include rapid rupee appreciation as compared to other developing economies and domination of low-cost Chinese products in the international markets.

Among the internal factors, exporters identify high operational and transactional costs, complex tax structure, high interest rates, inadequate incentives and difficulty in availing incentives, difficult custom procedures, like labour laws and tedious transportation processes and harassment by officials. At the beginning of the current fiscal year, every economic forecast for the year rested its case for economic revival to a large extent on promotion of exports, but unfortunately on this last day of the year, we find ourselves nowhere near where we thought we'd be. Exporters are still facing more or less the same problems as they did then.

In this scenario, it will be interesting to see what the new Foreign Trade Policy, scheduled to be released tomorrow, comes with. It has been reported that the commerce ministry is likely to consolidate a number of schemes to simplify the subsidy regime. I also expect that some new subsidies will be introduced. In addition, efforts should also be made to integrate the export strategy with the flagship initiatives like Make in India and Digital India. Also, the scope of the Focus Market Scheme (FMS) and the Focus Product Scheme (FPS) should be widened so as the push diversification. In addition, strong efforts should be directed towards conceptualizing more sensitive export-friendly policies based on the realities at the ground level.

I invite your opinions.