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The inaugural year of the United Progressive Alliance (UPA) government saw a virtual boom in the country’s foreign trade front with both exports and imports displaying bullish trends. Against the export growth rate target of 16 per cent originally set for the year 2004-05, the third year of the Tenth Five-Year Plan, the country’s merchandise exports touched nearly 80 billion dollars. Thus the export target of 73.4 billion dollars has been exceeded by as much as 50 per cent. In rupee terms, the exports were worth Rs 3,57,076.54 crore between April 2004 and March 2005, which is 27.12 per cent higher than the value of exports during 2003-04.
The phenomenal growth in exports was achieved notwithstanding some inherent constraints such as appreciation of the rupee vis-à-vis the United States dollar, high fuel prices and distinct moderation in demand from some of India’s key export destinations. The export feat reflects the inherent resilience of the Indian economy. A cursory recapitulation of trends on the foreign trade front shows that the country logged remarkable gains on merchandise exports during 2000-01 to 2004-05, except for 2001-02 when growth turned tepid. In the last three years, exports, measured in US dollars, grew by more than 20 per cent per annum in 2002-03 and 2003-04 and by 24.41 per cent in 2004-05.
Soon after assuming office, the UPA government announced its Foreign Trade Policy (FTP) on August 31, 2004 for a five-year period. This was followed up by the annual supplement to the FTP on April 8, 2005. Emboldened by the upward momentum in the country’s exports, the annual supplement to the FTP set the target of exports for the current fiscal at 92 billion dollars. If the first year of the FTP’s export performance is any sign and if the trend gets repeated in the rest of the quinquennium, India would be exporting about 150 billion dollars of merchandise by 2008-09. Assuming an export target of $150 billion, the total jobs associated with export-oriented activity is likely to be 19.8 million in the next five years.
As the bulk of the jobs associated with export activity would be in the unorganized and informal sectors, the strategy of the FTP is, in consonance with the National Common Minimum Programme (NCMP), to focus on some of the labour-intensive sectors such as agriculture, handlooms, handicrafts, gems and jewellery and leather and footwear. The latest annual supplement to the FTP has taken further steps such as removal of export cess on agriculture and plantation commodities, additional benefits under Export Promotion of Capital Goods (EPCG) to get at reduced duty imported machinery for agriculture and small industries and special initiatives for the marine sector. Besides, export promotion schemes like “Vishesh Krishi Upaj Yojana” and “Served from India” scheme to accelerate the growth of agriculture and service exports were also announced.
According to the WTO annual trade volume, released recently, India’s share in the world merchandise exports, which was 0.66 per cent in 2000, increased to 0.82 per cent in 2004. What is particularly noteworthy is that around 80 per cent of India’s merchandise exports emanates from manufactured products. It is also gratifying to note that there has been a sustained spurt in the productivity of the manufacturing sector through fresh investments and technological upgradation. It is also for the first time that the FTP has recognised trade as a driver of greater economic activity and of incremental employment rather than just earning foreign exchange.
The FTP announced in 2004 for the first time took a holistic view of integrating foreign trade within the overall framework and development needs of the economy. Hence the Government has been making efforts to foster a more conducive milieu for trade by unshackling controls, simplifying procedures, reducing transaction costs and providing spurs to make the country a global hub for manufacturing trade and services. An Inter-State Trade Council is being set up to engage State governments in providing an enabling environment for promotion of global trade.
In an economy with just one-fourth of its GDP flowing from industry and more than one-half from the services sector, it would be a fallacy to set aside the export performance of the services sector. Services exports during 2004-05 are estimated to have grown by 80 per cent, i.e., more than thrice the rate of growth of merchandise exports. Consequently, the share of services in the country’s exports of goods and services is all set to increase from about 28 per cent in 2003-04 to above 35 per cent in 2004-05. What is important is that the export of miscellaneous services is expected to grow by more than 100 per cent with software service exports escalating by more than 45 per cent. It is no wonder that the annual supplement to the FTP has announced a separate Export Promotion Council for Services which would help in setting a road map for as many as 160 services India could showcase to the world in the years to come. It is not only for business process outsourcing that India is getting famous, but also a whole lot of other lucrative business involving back-room operations for multinationals, medical tourism and health services, architecture, tourism and travel.
On the multilateral trade arena, the UPA Government took a proactive stance in the revival of the Doha process by interacting with both the developing and the developed countries. The Union Commerce and Industry Minister Shri Kamal Nath articulated the development dimensions and the rich dividends that such inclusive approach to trade negotiations would bring about. India was able to achieve its key objectives in the Framework Agreement that was adopted by the WTO member countries in the General Council meeting on August 1, 2004. The key areas in which tangible and substantial gains for the developing countries could be counted in the July Framework because of active involvement of India and the G-20 alliance partners cover agriculture, non-agricultural market access and services.
India also hosted for the first time in New Delhi a meeting of the G-20 form March 17 to 19, 2005 at the end of which the New Delhi Declaration set a time frame to eliminate the agricultural export subsidies being doled out by the developed world to its rich farmers. The meeting also consolidated the G-20 alliance to establish an important outreach to other developing countries, Africa Group and Caribbean Group advance the genuine developmental objectives in the negotiations in the run-up to the Hong Kong Ministerial of the WTO, scheduled to be held in December 2005.
India today stands at the crossroads with its foreign trade of both goods and services reaching a new peak, helping the country in its continuing quest to advance in terms of not only material prosperity but also human welfare for an improved quality of life to its people.
*Journalist
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