India Govt. unveils new foreign trade policy to boost exports, greeted with mixed response

While India's exports grew only 3.4 percent in 2008-09 to $168.7 billion, exports have been falling in annual terms since October as the recession in developed nations has sapped demand. They were down 31.3 percent in the quarter ended June 30 from a year earlier, a sharp contrast from the annual growth of more than 20 percent between 2004-05 and 2007-08. Government data released earlier Tuesday showed that India's exports fell for the 10th straight month in July. According to the data, India's exports fell an annual 28.4 percent in July 2009 over July 2008 to $13.62 billion.

To reverse the trend, the government unveiled a new foreign trade policy which focuses on expanding exports markets to the emerging economies in regions such as Africa, Latin America, Caribbean, East Asia, Oceania and the Pacific, which are less impacted by the financial turmoil.

As a long-term measure to push exports, the policy has also increased incentives on exports to 'focus markets' - whose number has been increased by 26 - from 2.5 percent to 3 percent. Similarly, export incentives to 'focus products' is up from 1.25 percent to 2 percent of the value of exports. These are expected to help diversify the markets for Indian exports, trade analysts said, though the measures will take time to yield results.

While the policy has extended a number of existing schemes, including the popular import duty reimbursement scheme or Duty Entitlement Pass Book Scheme (DEPB) and enhanced Export Credit Guarantee Cover (ECGC) till the end of the fiscal year and beyond, it also introduced new measures like the zero-duty Export Promotion Capital Goods Scheme (EPCG) that will enable exporters to upgrade technology through cheaper imports of capital goods.

Other relief measures include interest rate subvention of 2 percent on export credit and providing dollar credit to exporters that will be overseen by a committee consisting of the finance secretary, commerce secretary and the chairman of Indian Banks Association. To protect small and medium exporters, who are unable to seek expensive legal help for foreign markets, a Directorate of Trade Remedy Measures will be set up.