Waiting for the foreign trade policy
Tomorrow, on June 5th, the honorable Minister of Commerce will unveil the annual supplement to the Foreign Trade Policy. I keep my fingers crossed and I pray for some creative measures to boost exports. I wonder what measures would I take if I was the chief consultant or something like that to the minister. To put things in perspective, the key points in current scenario while making the policy are:
- A merchandise trade deficit of more than 180 billion USD.
- An increasing gap between exports and imports year on year, with imports showing highly inelastic behavior.
- A decreasing global demand for our exports, with no signs of turnaround anytime soon.
- The real/perceived policy paralysis and lack of confidence in the markets.
- The threat of loss in employment if growth (including trade) suffers.
- The exchange rate that is deteriorating, which on surface, seems to be helping exporters, but makes the imports costlier putting further pressure on Current Account Deficit, which is already hovering towards 5% of GDP.
- Incentive schemes that somehow seem to fail to make the exports grow faster than imports.
- The services exports that are doing reasonably well as of now but are difficult to predict in future.
- The challenge of expanding export market to new destinations and diversification of export products basket.
- Generation of more employment through exports and earning more forex.
So those are some of the points that might be on the minds of people making the policy. There is no simple answer that can balance and meet all expectations. The export promotion bodies would have made their pitch in the last couple of months, the industrial bodies would have tried turning the right levers in the administration and the administration itself would have tried to strike a balance between the budget outlay and the balancing of all interested parties.
So, yours truly waits, to see what comes out. Given the situation, a regular approach of 1% incentive here and 2% there, would not work. A creative approach is required that can bring on a paradigm shift about how we think about foreign trade policy. I shall write my review once the policy is out. To be on record, all views expressed are strictly personal.