'We may not need an Exim policy after 10 yrs'

march 31 is a day director general of foreign trade n l lakhanpal has been totally comfortable with for over five years now. after having presided over five annual reviews and a five-year policy, the confidence is natural. the indian governmentâ€™s view of trade policy has also changed so much that lakhanpal, the brain behind the exim policy 2002-07, feels that india many not need an exim policy after 10 years. â€œonce export growth attains critical mass, we need not interfered every now and then we are confident that the momentum would be generated on its own if the current trends are any indication,â€� he said in an interview with g ganapathy subramaniam and j padmapriya. lakhanpal was also bullish on india achieving the 12 per cent export growth target over the next five years and even exceeding it. while terming special economic zones and agri export zones as long-term initiatives, the 1967 batch maharashtra cadre ias officer emphasised that concessions to exports are essential. â€œexternal trade concessions should be treated differently from domestic subsidies because you are playing at an international level. and if any country disturbs the field, we have to respond,â€� he added. excerpts from the interview: what level of export growth do you expect from the new exim policy? this policy draws heavily from the experience of the last two policies. the last two five-year policies cover the entire reforms period. although we have not gone for big-bang reforms, we have spaced them out over the two policy periods. more or less, reforms in the trade sector are in place and this has served us well. even though growth rates have been erratic over the period â€“ sometimes 20 per cent and sometimes 5 per cent â€“ the compounded annual growth rate works to 10.89 per cent. and, that is a good rate of growth. from that experience, we are encouraged to target a medium-term export growth in this policy period at 12 per cent. the target is achievable and we are very confident of not only achieving it but also exceeding it. subject to normal economic cycles prevailing, we are extremely bullish on achieving this target. in fact, we have been very cautious and modest in fixing the target. how do we go about achieving the target? how will implementation of the initiatives announced in the new policy help? the trend over the last couple of years has been solving ongoing problems of exporters and initiation of one or two long-term reforms measures, like the sezs. sezs will not make a difference overnight. but, we have to keep thinking of the future. second, we started on a new avenue by involving states as it was not possible for the centre alone to handle exports from all over the country with a diverse exports basket. for instance, cane furniture of assam or pochampalli sarees of andhra have the potential to become an international brand. the inherent advantages exist and the government has set aside more than rs 300 crore for cluster development which could go up to rs 500 crore in the years to come. last year, we introduced the agri export zones. the idea was to build up advantages in certain specific geographical areas to broaden the base of exports. this year we have tried to do two things: institutionalise industrial clusters and generation of critical mass for self-sufficiency. we have borrowed from a unido study which says that clusters have been successful in various places. in fact, silicon valley is a good example of a flourishing industrial cluster. indian clusters have come up even illegally despite the restrictive regime of the policies. in fact, it is a real free market phenomenon at its best. rather than treating them as untouchable or illegal entities, the effort is to institutionalise them to make use of the big base of capital that is lying unproductive with them. but, we are treading a cautious path in dealing with them and starting off with just 5. what is the extent of cluster development in the country? how will the country create the critical mass? as per the unido study, there are some 354 clusters in india and 34 of them have a turnover of over rs 1,000 crore. interestingly, some of these clusters gross a turnover of over rs 10,000 crore. creation of critical mass is absolutely necessary. here we mean that the once the critical mass is created, a self-sustained system is born. we are visualising signs of achieving a critical mass in the next 5 to 10 years after which time, the system will not require any outside support. the signs of criticality are visible in the fact that despite the east asian meltdown and the very bad year this fiscal, we have not suffered much. the policy is aimed to help the country achieve the critical mass. once india reaches that critical mass, there would perhaps be no need for an export policy. like, the us does not have an export policy. what are the visible signs of achieving that self-sustaining critical mass? one, we came out relatively unscathed by the happenings in the world, be it the asian crisis or the 9-11 attacks on the us. two, the exporting community has shown a lot of potential in quality and technical parameters in line with international standards. production essentially only for the export markets is taking root in the country particularly in garments. three, certain sectors like foodgrain, fruits, vegetables, steel, cement are witnessing surplus production. surpluses in production can be used to achieve the criticality in exports. what is the revenue impact of export subsidies? subsidies have been considered a bad word. even we are against subsidies per se. but, trade concessions have to be looked at differently and not on par with domestic subsidies. because, trade takes place at an international platform and i cannot create a level-playing field internationally. the fundamental of international trade law is that every country exports its products and not its taxes. so, if some country disturbs the level-playing field by offering incentives, i have to respond to that. what is the key objective of the sez package? the idea is to make the sezs internationally competitive both for developers and the units operating in these zones. the logic is to give them easy access of funds. allowing indian banks to set up overseas units at sezs could also spur a host of international financial services. the banks operating in these sezs would have to be incorporated in india. and, these banks would be exempt from indian banking rules like following the crr/slr provisioning norms. rbi will be monitoring the banksâ€™ role in the sezs. as on today, only indian banks will be allowed to operate in sezs as overseas units. what are the procedural simplifications that the exim policy has brought about? one of the biggest irritants of the advance licence scheme, the logging of the duty entitlement export certificate books has been done away with. but, it does not mean you can do what you want. the idea is to minimise harassment. physical examination of export consignments will be reduced to just 2 per cent of all exports if the benefit is below rs 1 lakh. and for above rs 1 lakh, a random sample of 10 per cent would be examined. this would mean that almost 90 per cent of export consignments would not be subject to physical verification. while advocating liberalisation, we also strongly oppose misuse. if anybody is found misusing a concession, by all means, prosecute those involved.

'We may not need an Exim policy after 10 yrs'

MARCH 31 is a day Director General of Foreign Trade N L Lakhanpal has been totally comfortable with for over five years now. After having presided over five annual reviews and a five-year policy, the confidence is natural.

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