'India is capable of 20% CAG in exports'

Commerce & Industry minister Kamal Nath says the target of doubling Indiaâ€™s share in global merchandise trade by â€™09 is not difficult to meet. The country is capable of 20% plus compound annual growth in exports, thanks to quantum jumps in exports from a few sunrise sectors, he told KG Narendranath and G Ganapathy Subramaniam of ET in an exclusive interview. How is the Foreign Trade Policy different from the Exim Policies of the past? Exports generate incremental economic activities in the country, which are not totally absorbed in the domestic economy. These are incremental activities that do not replace domestic demand and supply. The policy enunciates this vision of exports as more than a dollar-generating vehicle. Imports also would spur economic activity, besides helping the economy to gain strength by way of technology upgradation. The foreign trade policy is primarily different from the exim policies of previous years in this sense. Besides, the policy attempts to bolster the trade-related infrastructure in the country by setting up free trade warehousing zones (FTWZs). Also, the question of inverted duty structure that cripples many segments of domestic industries is proposed to be addressed as and when the country signs more regional and free trade agreements. You have set the target of doubling Indiaâ€™s percentage share of global merchandise trade within next five years. Isnâ€™t this very ambitious? I have set a target of increasing our share in global merchandise trade from over 0.7% now to 1.5% by â€™09. This means that the country has to increase its exports from $62bn at present to $175bn. I donâ€™t think it would be difficult to achieve this, as India is capable of achieving compound annual growth in exports of over 20%. The strategy would be to give special emphasis on sectors that can achieve a quantum jump in exports. Also, new sunrise industries have been identified for export push. For example, some farm products such as fruits, flowers and their value-added products can contribute to the export basket much more than today. The flower sector alone is capable of annual exports of Rs 1,000 crore. Similarly, gems and jewellery exports can be increased to Rs 18,000 crore in a few years. What are the sectors that would be helped most by the policy? In services, non-IT services such as healthcare and clinical research are capable of exporting more. I have spoken of creating an export chain in the policy. This can benefit sunrise areas like flower, fruits and their value-added products, which have been given a special treatment in the policy. While focusing on emerging sectors that have huge potential, the policy also removed bottlenecks on existing sectors. By giving incentives to employment generating sectors like agriculture, handlooms, handicrafts, gems and jewellery etc, the policy established a direct link between export promotion and employment generation. You have spoken of neutralising the incidence of duties and levies on exporters. But there arenâ€™t major initiatives in this regard, except the service tax exemption to EOUs and refund to other exporters? At the level of the central government, we are taking measures to unburden exports from taxes, although there are revenue implications. More incremental measures aimed at duty neutralisation may come in future. We are also asking state governments to exempt exports from taxes. States that donâ€™t do this might lose out, as exporters would be disinclined to set up shop in such states. SEZs are another mechanism to reduce the tax burden on exports. I will try to incorporate more provisions for duty neutralisation in the SEZ bill. How would the proposed Free Trade Warehousing Zones (FTWZs) different from the special economic zones? The FTWZs are meant to create trade-related infrastructure like warehousing. They would be developed as trading hubs on the lines of existing zones in the Middle East and many other countries. The FTWZs will enjoy all benefits of SEZs, which are manufacturing hubs. The underlying principle is to recognise sophisticated warehousing and trading as services. We hope that FTWZs can come up in virtually every port in the country. While these zones would mostly engage in providing trade-related infrastructure, minimal value-additions like re-labelling and re-packaging may be permitted. What are the measures taken to reduce transaction costs? Exporters have been unshackled from redundant procedures. A host of measures have been taken to reduce the transaction costs of exporters. The number of forms for exporters have been reduced drastically from 25 to 5. Exporters with minimum turnover of Rs 5 crore have been exempted from the bank guarantee requirement. We have established a grievance redressal mechanism in the Director General of Foreign Trade.

'India is capable of 20% CAG in exports'

Commerce & Industry minister Kamal Nath, in an exclusive interview to ET, says the target of doubling India's share in global merchandise trade by '09 is not difficult to meet.

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