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Shri Kamal Nath, Union Minister of Commerce & Industry, has indicated that the first meeting of the Inter State Trade Council which has been set up to ensure greater involvement of states in the country’s external trade is to be convened soon. Presiding over the Parliamentary Consultative Committee of the Ministry of Commerce & Industry, here this morning, Shri Kamal Nath said the Inter State Trade Council, the setting up of which was announced as part of the Annual Supplement of the Foreign Trade Policy 2005 would provide an institutional mechanism for making the states a partner in India’s export effort. The agenda of today’s meeting was a general review of the Ministry of Commerce & Industry (Department of Commerce and Department of Industrial Policy & Promotion). Members of the Committee including S/Shri Sudhangshu Seal; Mohammed A Shahid; M.P. Veerendra Kumar; and Sambasiva R Rao participated along with Shri EVKS Elangovan, Minister of State for Commerce & Industry, Shri S.N. Menon, Commerce Secretary and other senior officials.
Shri Kamal Nath in his remarks and Shri Menon in his presentation flagged the following (a) India’s merchandise exports have touched a record level of US $ 80 billion during 2004-05 with a growth rate of 24% which is the highest ever in US dollar terms; (b) the growth was achieved despite appreciation of the rupee vis-à-vis US dollar and high fuel prices, besides moderation in demand from some of India’s major export destinations, reflecting the resilience of the Indian economy; (c) India’s share in the world merchandise exports which was 0.66% in 2000 has increased to 0.82% in 2004, according to the WTO Annual Trade Statistics; (d) Around 80% of India’s merchandise exports come from manufactured products; and (e) there has been a sustained increase in the productivity of the manufacturing sector through fresh investments, technological changes etc. For the first time, the Foreign Trade Policy had recognised trade as a driver of greater economic activity and of incremental employment rather than just earning foreign exchange, the Minister said and also pointed to the synergy between merchandise and services exports as services activities linked to manufacturing got a substantial boost through rise in merchandise exports.
Stating that the biggest challenge is to sustain the export growth momentum and inflows of foreign direct investment (FDI), Shri Kamal Nath said, “FDI is of utmost importance in bridging the investment gap. Without FDI, we will not be able to maintain our 7 or 8% growth figures. FDI, especially greenfield FDI which is incremental to Indian capital, is very important for the country’s economic growth… With 20% rise in the retail sector, should we not try and create a modern retail sector in the country? I know there are strong feelings about FDI, as for instance in telecom (in the past). But today everybody has a cell phone in his pocket! We have to carefully calibrate this and see to it that FDI in any particular sector leads to incrementality and does not displace Indian capital”.
In the presentation on the industrial scenario, it was indicated that industrial growth was 8.1% and manufacturing growth 8.7% during the period April-February 2004-05, as against 7% and 7.3% growth respectively in 2003-04. Cumulative FDI inflows (equity component only) from August 1991 to February 2005 were US $ 33.41 billion. As per international practice, FDI data should comprise (i) equity capital; (ii) Reinvested earnings and (iii) other capital component. FDI data is being revised jointly with RBI to align with the international practice and as per the international definition, FDI inflows into India in 2004-05 (up to February 2005) are valued at US $ 4.47 billion, it was stated.
Members raised several issues relating to export of some agro products especially perishables such as fruits & vegetables and also suggested measures to promote exports of leather & leather manufactures, meat products and handicrafts. There was a suggestion to have a separate board for chillies (presently under the Spices Board) as also to create a special purpose vehicle to support tobacco farmers in the event of fall in prices. The Minister informed that he had personally taken up the issue of tobacco exports with the authorities in Russia and China and agreed to a suggestion to send a trade delegation for tobacco to tap these two markets. Responding to a query about the quality of tea, Shri Kamal Nath mentioned that the government had recently issued a new Tea (Distribution and Export) Control Order 2005 replacing the earlier Order in order to maintain quality and the brand equity of Indian teas. All teas, whether imported or exported, would be required to conform to the specifications of the new order, he said.
SB/MRS
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