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MAJOR DECISIONS AND INITIATIVES
COMMERCE
The UPA Government completes one year on May 21, 2005. During this period, the Government has taken several important initiatives. Some of these are being brought out in the series ‘Major Decisions and Initiatives’.
Record growth in India’s exports
A record growth in exports has been one of the major highlights of the one year of UPA Government. India’s merchandise exports have hit an all time high of US $80 billion during the financial year 2004-05, with highest ever growth rate of 24 per cent in US dollar terms over the previous year’s exports. Thus, the actual growth of merchandise exports in the first year of the UPA Government (and also in the first year of the Foreign Trade Policy) has far exceeded the target of US $ 74 billion, envisaging a growth rate of 16 per cent, which was initially set for the year 2004-05. This record performance has been achieved despite strengthening of the Rupee vis-à-vis the dollar and the rise in oil prices. If this momentum is maintained, India will cross the milestone of US $ 150 billion in exports well before the target date of 2009. In view of the record performance, the export target for 2005-06 has been revised upwards to US $92 billion.
Economic engagement with the world
India’s exports and imports total up to US$185 billion (2004-05). This is 30 per cent higher than last year’s total of US$142 billion (US$64 billion exports + US$78 billion imports). This represents India’s economic engagement with the world. In economic and geo-political terms, both exports as well as imports matter.
Announcement of first ever Foreign Trade Policy
For the first time, a comprehensive Foreign Trade Policy (2004-09) was announced by the Commerce and Industry Minister, Shri Kamal Nath, in August 2004. It was followed by an Annual Supplement to the Policy announced on April 8, 2005. The Foreign Trade Policy takes an integrated view of the overall development of India’s Foreign Trade. The objective of the Foreign Trade Policy (FTP) is two-fold: (i) to double India’s percentage share of global merchandise trade by 2009; and (ii) to act as an effective instrument of economic growth by giving a thrust to employment generation, especially in semi-urban and rural areas. The key strategies are: (i) unshackling of controls; (ii) simplifying procedures and bringing down transaction costs; (iii) adopting the fundamental principle that duties and levies should not be exported; (iv) identifying and nurturing different special focus areas to facilitate development of India as a global hub for manufacturing, trading and services; and (v) creating an atmosphere of trust and transparency.
The Annual Supplement to FTP announced in April 2005, aims to carry the task forward with several key decisions like setting up of an Inter-State Trade Council to actively engage the State Governments in order to create an enabling environment for promoting international trade. It also contains a number of measures to enhance the competitiveness of India’s manufacturing sector, and to boost exports from agriculture and other sectors.
Two other important initiatives in this area were: (a) Setting up of a Committee on Simplification of Procedures and Reduction of Transaction Costs. The Committee has already submitted its first report which has been accepted and implemented and (b) A study on export-related employment was assigned to RIS (Research & Information Systems for developing countries). The study not only tells how much direct and indirect employment is generated through exports, but also gives an idea of which exports are more employment-intensive. The interim findings have been received and the final report will be ready shortly.
Exports create additional 12 lakh jobs
The $16 billion worth of incremental exports last year (from $64 billion to $80 billion) created an additional 12 lakh jobs – 85 per cent of these directly arising from increased manufacturing and 15 per cent in indirectly related sectors (such as transport, logistics, etc). RIS has estimated that the current total number of export-related jobs is over 1 crore. If exports remain on target, then within four years, an additional 1 crore jobs will be created. The study shows that agricultural exports are the most employment intensive. These figures relate to merchandise exports. A similar study is proposed to be done for service exports.
Bilateral initiatives with China and Pakistan
Trade between India and China has shown a record growth and has crossed the level of US $ 12 billion in 2004-05. During the visit of the Chinese Prime Minister to India in April 2005, India and China agreed to make joint efforts to further increase the bilateral trade volume to US $ 20 billion by 2008.
In a year of record growth in bilateral trade, India and Pakistan decided to set up a Joint Study Group (JSG) at the level of Commerce Secretaries of the two countries, in pursuance of the decision taken in the meeting of the Commerce Ministers of both the countries in Islamabad in November, 2004. The first meeting of the JSG was held in New Delhi on February 22-23, 2005. Two Sub-Groups on Customs Cooperation & Trade Facilitation and Non-Tariff Barriers were also formed.
India’s interests fully protected in WTO Framework Agreement
India has played a very proactive role in the WTO negotiations. India’s interests especially those of the Indian farmers, have been fully protected in the WTO Framework Agreement signed on August 1, 2004, as a result of successful negotiations by the Indian delegation which was led by the Union Commerce & Industry Minister at the World Trade Organisation (WTO) talks held in Geneva in July 2004. The Framework Agreement, specifying the guidelines and principles for further negotiations in the WTO, was adopted by the WTO members on August 1, 2004 in the meeting of General Council of the WTO. India was able to achieve all its major objectives in the Framework Agreement.
In agriculture, India’s main objective was to secure the interests of millions of its farmers. A huge gain for India at Geneva was a clear commitment on the part of developed countries to eliminate all their agricultural subsidies by a specific date. They have also committed to reduce their levels of trade-distorting domestic agricultural support, which would mean a level playing field for farmers in the international market. On the other hand, the principle of special and differential treatment with regard to developing countries has been given primacy.
India’s interests in the areas of non-agricultural market access (NAMA) were also fully secured by ensuring that the interests of the sensitive industrial sectors are taken care of. India has also gained significantly in the services sector. Furthermore, India strongly resisted and succeeded in getting three of the four Singapore issues namely, the issues of Trade & Investment, Trade & Competition Policy and Transparency in Government Procurement of the negotiating table in WTO. The fourth issue, i.e., Trade Facilitation on which negotiations will commence, will benefit India. This is because essentially Trade Facilitation means improvement and transparency in customs, cutting down on transaction costs.
Major coalition building initiative in WTO
India hosted the G-20 Ministerial Meeting – an alliance of developing countries in WTO negotiations on agriculture – the first ever WTO-related meeting to be hosted by India. It is to the credit of India that the alliance called for elimination of all export subsidies in the field of agriculture in the next five years with front-loading of commitments. The G-20 also noted with concern the increasing use of non-tariff barriers (NTBs) by developed countries which act as impediments to the export of products from developing countries. India also stressed that elimination of tariff escalation was of importance to developing countries, as that would help them to diversify their export basket and increase export revenues by adding value to their agricultural production.
RK:LV
PIB SF-4 (7.5.05)
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