MINISTER'S SPEECH

On August 31 last year the Government spelt out a bold vision to double Indiaís share in world trade within five years, and to focus on the generation of additional e

mployment in the process. The current trade figures indicate that India is not only on the right path but approaching the goal at an accelerated pace.

Against a target of 74 billion dollars worth of exports and an envisaged growth rate of 16%, quick initial estimates show that the actual growth of merchandise trade in the very first year of the Policy period has been of the order of almost 80 billion dollars, corresponding to a growth rate of nearly 24% over last yearís exports. This growth is unprecedented in Indiaís economic history! If we can maintain the momentum, I am confident that India will cross the 150 billion dollars milestone substantially earlier than the end date of the Policy period.

You may recall that in a departure from earlier practice when export targets were announced almost mid-way during the year, I had specified our targets for the next four years as far back as in December last year. This was done, so that we could plan systematically and strategically, sector-wise. In this scheme of things, I had indicated an export target of 88 billion dollars for 2005-06, on the expectation that we would touch 75 billion dollars last year. But in view of our unprecedented achievement, I have no option but to revise this yearís target upwards to 92 billion dollars. It will be a challenge, but I am confident that we will meet it.

Since trade is not just about exports, but also about imports, I am sure that you are eager to know the value of our imports last year. It was 105 billion dollars, representing a growth of 34% over last year. It is significant that oil imports accounted for 29 billion dollars, whereas the negative balance of trade is 25 billion dollars, indicating that if oil imports were not to be counted, then our exports exceeded our imports by almost 4 billion dollars. Though we have a trade deficit in terms of merchandise goods, this is more than made up for by our services exports, which are estimated at about 30 billion dollars.

The second objective of the FTP was providing a thrust to employment generation, particularly in semi-urban and rural areas. The FTP announced special focus initiatives in the employment intensive sectors. The employment generation has been encouraging not only in these sectors, but in other sectors across the board.

A study commissioned by the Ministry (and done by Research & Information Systems for Developing Countries, i.e. RIS) reveals that exports generated an incremental direct employment of 10 lakh jobs in the year 2004-05, over the previous year. The total employment generated during the year corresponding to export activity valued at 75 billion dollars was 1 crore jobs ‚ 86 lakhs of direct employment, and 14 lakhs of indirect employment in the logistics, transport and related sectors. Since our exports were actually 80 billion dollars, these figures would improve proportionately. The study further reveals that if we achieve our target of 150 billion dollars over the next four years, we shall be adding an additional 1 crore jobs: 85% of it direct employment, and 15% indirectly associated jobs.

The dynamics of global trade and the opportunities provided by the multilateral trading platform necessitate a continuous realignment of our international trade strategies and priorities. While Indiaís international trade will continue to function under the overall framework of the Foreign Trade Policy announced last August (and which has proved so hugely successful), some fine-tuning needed to be done to take into account the changing international trade dynamics. In fact, as periodic reviews are done, even in the future, some strategic realignment and reassessment would always be necessitated. This is the genesis of the Annual Supplement. It is not a ënew policyí that I am announcing today, but just something to supplement the existing policy. This Annual Supplement endeavors to incorporate additional policy initiatives and simplify procedures, thereby facilitating and enhancing Indiaís international trade.

Export Cess:

I have been taking a consistent stand from a policy perspective that taxes and duties should not be exported. The various cesses levied under the different Commodity Board Acts is a tax on exports, which is a handicap and a major irritant to our exporters, since it erodes the competitiveness of our agricultural exports. We therefore propose to abolish cess on export of all agricultural and plantation commodities levied under these Acts. We shall also engage in consultations with other Ministries which may, under Acts administered by them, be levying cesses on exports, so as to eliminate these. We cannot subsidise our exports, but let us at least not tax them!

EPCG Package:

The Export Promotion Capital Goods Scheme is an important building block for sustained export growth and so we have worked out several elements in the form of an attractive ëEPCG packageí.

(a) With a view to accelerating exports under the Scheme and to incentivise fast track companies, firms fulfilling 75% or more of their export obligation in half the original obligation period, shall be freed from the balance export obligation.

(b) To create modern infrastructure in the retail sector, concessional duty benefits under EPCG scheme shall be extended for import of capital goods required by retailers, who shall be required to fulfill their export obligation from payments received against ëcounter salesí in foreign exchange through banking channels.

(c) For providing a thrust to the agricultural sector as well as to promote capacity expansion and quality upgradation in the SSI sector, import of capital goods shall be allowed at concessional rates and there shall be a reduced export obligation. We hope this will provide an impetus for modernization of plant and machinery, which will enhance overall competition in the medium term.

(d) In order to augment facilities available at secondary ports with modern equipment and thereby reduce cargo handling turnaround time and related transaction costs, Minor Ports, Integrated Container Depots and Freight Stations would be allowed to count payment received in rupees for port handling services against discharge of export obligation.

(e) The facility of clubbing of EPCG licences has been further liberalized, and restrictive conditions relating to same licensing year and same products and services have been deleted. Henceforth, all EPCG licences issued under the same Customs Notification can be clubbed. This will considerably reduce paperwork, both for the exporter and the licensing authorities and lead to easier monitoring. 

Package for Marine Sector:

Marine products constitute an important element in our export basket. The tsunami tragedy has wrought havoc on our eastern coastline. Fishermen and their families have suffered greatly, and the long term benefits on coastal marine productivity are yet to be realised. We have therefore prepared a special package for marine sector.

(a) It is proposed to allow import of mono-filament long line system for tuna fishing at concessional duty.

(b) In order to enter new export markets and achieve a higher value addition, certain special flavourings and ingredients for seafood processing are required. These inputs will be allowed to be imported free of duty to the extent of 1% of the FOB value of exports.

(c) The present system of allowing disposal of waste of perishable commodities like seafood only after inspection by a customs official is cumbersome and leads to unhygienic conditions. To overcome this, a self removal procedure for clearance of waste shall be put in place.

Agri Exports:

In order to give a boost to rural areas, benefits under the ëVishesh Krishi Upaj Yojanaí shall be extended to exports of poultry and dairy products in addition to export of flowers, fruits, vegetables, minor forest produce and their value added products.

To promote export of ëMinor Forest Produceí products Shellac Export Promotion Council has been designated as a nodal EPC for minor forest produce.

Tea - In order to maintain quality and retain the brand equity of Indian teas, all teas, whether imported or exported, would be required to conform to specific quality norms.

The new Order also prescribes a minimum value addition norm of 50% on export of all imported tea and stipulates a time period of 6 months from the date of import for the export of imported tea.

Handlooms ‚ Government has decided to develop a trademark for Handloom on lines similar to ëWoolmarkí and ëSilkmarkí. This will enable handloom products to develop a niche market with a distinct identity.

All Export Promotion Councils shall open a separate Cell to involve and encourage youth and women entrepreneurs in the export effort.

In fact, I would like to invite your suggestions on a proposal to change the names of Export Promotion Councils to ëTradeí Promotion Councils!

Service Exports:

(a) To enable Service providers to upgrade infrastructure in their associate companies, goods imported under the ëServed from Indiaí Scheme shall be transferable within the Group companies.

(b) At present, Hotels & Restaurants are required to submit a Chartered Accountant certificate that the entire duty benefits availed under the ëServed from Indiaí Scheme have been passed on to the consumer. From now on, only a declaration will suffice.

Advance Licensing Scheme:

We have also brought in a number of rationalizations into the Advance Licensing Scheme. Some of the important changes are:

(a) Different categories of Advance licences i.e. advance licence for physical export, advance licence for intermediate supplies and advance licence for deemed exports have been merged into a single category for procedural facilitation and easier monitoring.

(b) The scope of Advance Licence for Annual Requirement has been extended to all categories of exporters having past export performance. Earlier, the option was limited to Status Holders only. Also, the earlier limit has been enhanced from 200% of FOB value of exports to 300%.

(c) Clubbing of advance licences for export regularization purpose has been allowed even for licences pertaining to 1992-97 period.

(d) Transfer of Duty Free material imported under Advance Licence from one unit of a company to another unit is simplified.

Duty Free Replenishment Certificate:

The list of Sensitive Items restricted for import under the DFRC has been pruned down to just nine items.

DEPB:

DEPB benefits shall be available for supply of goods from DTA to SEZs for the period 1.04.2003 to 11.05.2004.

Target Plus Scheme:

The Target Plus Scheme aimed at rewarding incremental exports would continue in the year 2005-06 with such modifications as will be notified, separately for preventing misuse, if any.

Export Oriented Units:

EOUs account for 10% of our exports. They provide the nation the same service as do SEZ units, in spite of the fact that the environments in which they function are not always conducive. It is our intention to facilitate their functioning, and remove procedural irritants. The supplement contains the details of such initiatives.

Procedural Simplification & Reduction of Transaction Costs:

Last year I had promised to initiate action to bring about procedural simplification and reduction of transaction costs to exporters. With this in mind, a broad-based Committee was set up under the Chairmanship of the DGFT. The Committee has submitted its report and has made several useful and relevant recommendations. I have accepted the recommendations, and we shall be implementing them. Broad details are given in the Supplement.

As a first step towards this exercise, the DGFT has devised a single set of common forms called ëAayaat Niryaatí Forms. This is a 50 page set of forms, as against the 120 page set currently in use.

Trade Facilitation:

The DGFT shall strive to move towards an automated electronic environment for filing, retrieval and authentication of documents.

To enable the users to make commercial decisions in a more professional manner, trade data shall be made available with minimum time lag in a query-based structured format.

All DGFT offices shall continue to provide facilitation to exporters in regard to developments in international trade, for example, WTO agreements, Rules of Origin, SPS requirements and Anti Dumping issues to help exporters strategise their business decisions in an internationally dynamic environment.

As I mentioned at the start of my speech, Indiaís total trade engagement (imports plus exports) with the world is 185 billion dollars ‚ up 30% from last yearís total of 142 billion dollars. With this kind of involvement, India is inching towards becoming a significant player in international trade. This rapid growth signals a more pronounced integration with the global economy. Our tariffs are coming down to ASEAN levels, our FDI regime is increasingly liberal, our domestic laws are TRIPS-compliant.

The paradox, however, is that while India is opening up more and more, certain developed economies seem to be shutting up. This ëshutting upí in obviously not in terms of tariffs and quotas; these are on their way out. But the barriers now are more subtle ‚ they are NTBs and SPS regulations: the non-tariff barriers to trade, often in the guise of health or environmental or social concerns. It is these new instruments of discrimination which we have to fight against.

Inter State Trade Council:

In order to achieve our Foreign Trade Policy objective of becoming a major player in world trade, coherence and consistency among trade and other economic policies of both the Union and the State Governments is vital. State Governments are increasingly required to partner with the Union Government. Some States have formulated export policies. But a lot needs to be done to coordinate these efforts.

It is therefore proposed to engage the State Governments in providing an enabling environment for boosting international trade, by setting up an Inter State Trade Council. It is hoped that the Council would provide an appropriate institutionalized dialogue mechanism on the subject.

A policy of partnership:

The FTP provided a road map that could help Indian companies become globally competitive and simultaneously aimed at giving Indian consumers world class products and services. I believe that it is the new equation of partnership and co-operation engendered by the FTP last year that has paid the rich dividends we are now encountering. Business and industry have responded remarkably.

Government is committed to resolving all outstanding problems and disputes pertaining to the past policy periods through the Grievance Redressal Committee set up last year, for condoning delays, regularizing breaches by exporters in bonafide cases, resolving disputes over entitlements, granting extensions for utilization of licences etc. The atmosphere of partnership between Government and Business will be enhanced and taken forward.

Thank you.