L. Mansingh, DGFT
on the New Exim Policy and matters relating to Indian Trade
tQ.1 What are the main focus areas of this 2003 EXIM Policy? Is it a cosmetic change from the five-year policy or a new dimension has been given to it?
One of the basic objectives of having a 5 year EXIM policy is to provide a stable policy environment in which Indian exporters can look beyond short-term gains, developed market for their products and services on a sustainable basis. Annual policies, therefore, have to be within the framework of the 5 year policy. However, one can remain ahead in international trade only if we adjust to developments and opportunities quickly and even anticipate these. From this point of view, the EXIM policy 2003-04 represents India’s determination to become a significant player in the world trade.
Q.2 The Medium term export strategy focuses on certain export markets and products. How have these been translated for implementation in the new EXIM Policy?
The medium term export strategy has identified major markets and products for greater focus. We can grab the opportunities in world trade only if our products and services are competitive both in terms of quality and price. We must, therefore, aim at the Indian exporters developing international competitiveness to be in a position to further increase our rate of growth in exports. EXIM policy 2003-04 reflects this objective by identifying thrust sectors particularly, the services export sector and facilitation for our exporters to boost their exports.
Q.3 There are occasional reports on DEPB scheme being abolished. Has the Commerce Ministry made up its mind one way or the other.
DEPB scheme is only one of the options available to the exporters for neutralizing the duty element in the export product. All these schemes have to be WTO compatible. It has, therefore, been decided to work towards harmonizing DEPB and Drawback schemes on the basis of SION with rates being decided by a single committee for both the schemes. This will pave the way for eventual merger of the two schemes.
Q.4 Agricultural sector has been stagnating for some time. What concrete steps the Govt. is taking to galvanise Agri Export Zones.
Agro products of this country have a tremendous potential for exports. Government is keen that the rural sector in general and farmers in particular, also get the benefit of globalisation and reforms. In view of this, agro products export has been identified as one of the thrust areas in the new policy. This would certainly motivate the farmers to adopt latest technology and practices to improve farm productivity and grow particular varieties in demand abroad. We expect that this should, couple with the other initiatives taken by Ministry of Agriculture and the State Governments, help bring about a sea change in Indian agriculture.
Q.5 VAT regime is being implemented from Ist April, 2003 across all states. What are its implications on the export production sector and how the EXIM policy is facilitating such issues.
Introduction of VAT is very welcomed from the point of view of exports. So far, Indian exporters had to absorb the cascading effect of local taxes which is estimated to be as high as 48% of the cost of some of the products. Since this was neutralized under the different schemes, it certainly affected the competitiveness of Indian products. Implementation of a comprehensive VAT scheme would, therefore, gradually improve the competitiveness of Indian products.
Q.6 Our share of international trade at the time of independence was 1% which has come down to 0.6%. How do you view Indian export scenario?
It is a fact that our share of international trade was steadily declining since the time of independence to reach a low of 0.45% towards the end of the eighties. However, with the introduction of policy of liberalization in 1991, our share has improved to 0.67%. We have adopted the target of reaching 1% share of world trade by 2007 which now seems quite achievable, possibly IMF schedule.
Q.7 What is the framework for removal of remaining QRs on imports? Has such removal affected the domestic industry?
India can no longer take recourse to QRs either on the ground of conservation of foreign exchange or for protection of domestic industry. In view of this, we have progressively removed all QRs under our import regime. We had a total of 600 tariff lines in the prohibited and restricted list, which has now been reduced by 69 items under the new policy. We will continue to review the items in the restricted list and remove those items, which do not justify any restriction on imports on such grounds as security concerns, environmental protection, public morale and religious sentiments etc. The removal of QRs have not lead to any surge in imports and have had no adverse impact on Indian industry. The import of sensitive items are in any case monitored closely and corrective actions are taken to protect domestic industry through available alternatives such as countervailing in safeguard action as well as raising of import tariff.
Q.8 How do you perceive the China threat to Indian industry? Would resorting to anti dumping on such Chinese imports give relief to domestic industry?
Data of imports from Chine do not lead to any conclusion that it is a threat to Indian industry. As a matter of fact, two way trade between the two countries is increasing. Anti dumping action is being initiative when there are formal complaints of dumping of any product in this country.
Q.9 Kelkar Panel had recommended better coordination between Customs and DGFT. Has DGFT addressed these issues in this Policy?
Since it is the Customs who implement the DGFT policies, there has to be regular and effective coordination between the two. We have already taken steps to ensure this and there is already a satisfactory level of coordination between the two organizations at all levels. The best proof of this is that for the first time, all Custom Notifications have been issued simultaneously with the announcement of the EXIM policy.
Q.10 What new initiatives have been taken to make the Policy and Procedures more transparent and client friendly?
This was one of our basis parameters for review of existing Policy and Procedures. Everywhere we have tried to bring about a high degree of transparency and client friendly procedure without diluting accountability. This will be a continuous process in our attempt to minimize transaction cost for the Indian exporters.
Q.11 Export Promotion and duty loss complement each other. While framing EXIM Policy, what balancing act has been done to protect revenue loss but at the same time, provide an impetus to exports?
Duty Neutralisation Scheme do not lead to “Loss of Duty”. It is a universally accepted principle that products and services are exported and not taxes. Our exporters are entitled as per agreement on subsidies and countervailing measure of GATT, as per Duty Neutralization of the inputs going into the export products. It is tend to reason that loss of revenue is notional and higher the exports, higher the level of duty.
Q.12 Upgradation of domestic industry is a must in order to produce quality export goods. With this in view, what is the Govt.’s policy on import of second hand capital goods?
As far as the second hand import of capital goods is concerned, India has to protect itself from becoming a dumping ground for old and discarded machinery. However, in order to build up a manufacturer base for meeting the requirements of exports as well as domestic demand, the policy allows import of second hand capital goods upto 10 years old without any restriction. There is no change in this position. Only concession this time is that second hand capital goods upto 10 years old has been permitted to be imported under EPCG scheme in line with the general policy.
Q.13 After 9/11 a number of stringent entry conditions have been imposed by the US Govt. on its imports. Is the Govt. doing something about this?
This is not really a factor, our exports to USA, our main trading partner, is growing at a satisfactory rate. In any case, export of goods and services to any country has to satisfy the mandatory requirements of that country. If same entry restriction amount to non-tariff barrier, the matter can be reserved either bilaterally or through the WTO.
Q.14 Over the past few years, export subsidies and income tax benefits on exports are getting slashed. Should the Govt. not protect the export sector like the agriculture sector?
The Indian economy has to be internationally competitive if the country has to become a significant player in world trade. For this purpose, we have been moving away from subsidies and exemptions which lead to vision as well as distortion of priorities. We have to provide a level playing field to our exporters through facilitation and benefits which are WTO compatible.
Q.15. Do you feel Indian exporters will be adversely affected because of Iraq imbroglio?
It is too early to say.
Q.16 Deemed exporters are not treated at par with physical exports despite saving precious forex earnings for the country. How do you propose to bridge this gap?
Deemed exporters are already being provided almost all the benefits available to physical exporters. Some further concessions have been made to deemed exporters in the new policy.