Mar 12, 2013

Annual supplement to Foreign Trade Policy - Input gathering

Post Budget, every year, ministry of commerce/DGFT brings out a supplement to the existing Foreign Trade Policy (FTP). Depending on the circumstances, policy is fine-tuned to maximize exports, within given fiscal constraints. It's a typical optimization problem with the boundaries being set by the Budgetary allocations. Consultations between industries, traders, export promotion bodies, regional authorities of DGFT offices and other stake-holders are continuously on for this process. This year, commerce department has gone one step ahead by sending representatives across the country, to gather inputs from the stakeholders, for policymaking.  

The blogger had an opportunity to participate (passively) in one such meet in Chennai, where a senior official from Commerce department came to gather the inputs. FIEO with the local DGFT officials, had organized the meet with exporters and industries. The venue was Le-Meridian and the lunch was good. 

The inputs by most of the export promotion councils, industry representatives, and exporters were utterly forgettable. All they came up with, was a one percent extra incentive here, a two percent interest subvention there, and this dole and that favor. One industry representative went on and on about the power problems in TamilNadu and how his industry is getting affected. I was aghast to listen to the export promotion bodies, who too wanted more doles, without giving any justification/ideas (FIEO was the only exception). 

The problem with such inputs to policy-makers is that it's not easily actionable. The doles have been already optimized to match the fiscal constraints. Unless the purse expands, such inputs are useless. Infrastructure issues such as ports, power, roads are indeed important, but cannot be addressed by short-term policy supplements. What was needed was some out of the box suggestions. Nothing came. I believe that the money spent on incentives can be better used for creating the markets, by efforts such as advertisements, buyer-seller meets, buying stalls in international exhibitions, working to protect our trade interests in international forums and so on. Except a rare voice, such inputs were totally missing in the meet. The root cause of declining exports starts with economics woes of the world. Demand slump is the prime cause. There was hardly any suggestion that talked about development of new markets or efforts to make our products accessible to existing markets. 

Trade policy can address only few issues. It remains narrow in scope unless it is integrated to the higher level of national macroeconomic planning. Infrastructure is single most trade enabler and trade policy, in the shape it stands in India today, can hardly address this issue. You can read my rant about ASIDE, which is one such infrastructure scheme run by FTP. Also, FTP of India, for some weird reasons, covers only merchandise trade. Services, as an animal, is unknown to it, except for a touch and go here and there. The understanding on services is simple. We don't know much about it, so let's not talk about it. Let's eat lunch. It's beyond the mandate, if someone asks. 

Anyway, I still liked the fact that these consultations are happening. It's better to take the inputs before embarking on policy-making. I wish to see some more measures to expand the markets, measures to create demand for our products, and measures to diversify our export products, measures to protect our interests, and measures to ensure better utilization of existing funds and so on in this supplement. 

The blogger will publish a review of FTP supplement as usual, once it is out.