New trade policy to focus on ease of doing business: Pravir Kumar, DGFT

New Delhi, November 29, 2014
In anticipation of the release of the new foreign trade policy of India, on 29th November 2014, CUTS International jointly organised a Roundtable on India’s Foreign Trade Policy in collaboration with the Federation of Indian Chambers of Commerce and India and IPE Global Ltd. It provided a platform for an exchange of views between Indian business and concerned policy-makers to discuss various critical aspects of India’s trade policy.

Welcoming the participants, Sunil Mitra, Adviser to IPE Global’s DFID-supported Knowledge Partnership Programme, noted that the purpose of the Roundtable was to allow stakeholders to provide suggestions for the new foreign trade policy. Delivering his opening remarks, Manab Majumdar, Assistant Secretary General of FICCI expressed his gratitude to the Director General and Additional Director General of the Directorate General of Foreign Trade, Department of Commerce for their participation in the Roundtable.

Following the introductory remarks, Bipul Chatterjee, Deputy Executive Director of CUTS International gave a presentation of its publication: ‘Development Dimensions of India’s National Foreign Trade Policy’. He highlighted the findings of a pan-India project that was undertaken by CUTS International earlier this year. It was based on both primary and secondary data and included a literature review of the economic profile of states and various schemes and policies and benefitted from consultations with about 300 stakeholders.

He noted that a few gaps were identified in the previous trade policy, namely: the lack of inclusion of all relevant stakeholders in the formulation of its agenda; insufficient coordination between government ministries and other agencies; a need to improve benefit-sharing mechanisms; and the underlying assumption that increased exports enhance employment generation.

His recommendations for the new policy therefore included: a monitoring and evaluation mechanism that distinguishes and juxtaposes export promotion and employment generation; increased engagement between national and sub-national actors in the formulation of India’s trade policy and its implementation; the implementation of a whole-of-government approach to tackling trade-related issues; and the strengthening of value chains.

He also highlighted that there needs to be more synergy between India’s trade policy objectives and its negotiating objectives as well as improved coherence between India’s trade and investment policies, particularly foreign direct investment where there needs to be increased attention on export-oriented FDI. There also needs to be increased focus on markets with high potential such as African, Latin American and CIS countries.

He underlined that given India’s domestic imperatives, particularly for employment generation through growth in manufacturing, India’s trade policy should aim to generate at least one per cent additional long-term growth as that could generate 15 million new jobs. The goals of this policy should therefore be: promotion of economic welfare and mainstreaming trade into the national development. This could be achieved through effective regional and global partnerships and will help in alleviating poverty and establishing policy coherence.

He concluded by saying that for trade policy to be an effective institution there must be convergence between trade policy and broader economic welfare objectives through the promotion of two-way trade and investment and there should be an inclusive trade policy for better economic governance.

Delivering the keynote address, Pravir Kumar, Director General of Foreign Trade, Department of Commerce, Government of India, noted that the previous policy had been extended due to a number of extenuating circumstances. He explained that in preparing the new trade policy there had been extensive consultations with all stakeholders and to the extent possible, these suggestions had been included in the draft. He also noted that its formulation is still in progress and it would be announced as soon as it is completed. The Office of the Directorate General of Foreign Trade of the Department of Commerce is responsible for the formulation and implementation of India’s trade policy.

He explained that the foreign trade policy is an instrument and framework for trade and its underlying assumption is that trade is good for the economy as it leads to wealth and employment generation. India’s task therefore is to contextualise its trade policy within India’s domestic scenario. Various initiatives such as ‘Make in India’ have therefore been initiated with this in mind.

He added that the underlying philosophy of a foreign trade policy is to define the rules of the game and the first priority to achieve this is by putting in place measures to facilitate trade and make doing business easier for traders. He noted that this will be done through measures such as government reforms; procedures that minimise interaction between trading community and customs officers; and increased transparency in various trade-related processes. Transparency, he noted, will remain a focus area of the government both in and outside the domain of the trade policy.

The second priority issue is the need to enhance the competitiveness of India’s exports. He noted that the government is looking at addressing the issue of not exporting taxes to ensure that Indian goods are exported at their real cost. He argued that many Indian companies also face a number of infrastructural deficiencies and that there would be measures to compensate such constraints. He also stated that the new trade policy would be dynamic to enable it to respond to issues as they arise.

Market and product diversification, he stated, will be another theme of the new policy. He explained that this approach produced dividends during the financial crisis as Indian exporters were able to direct their goods to other markets. He emphasised that India should capitalise on its strengths such as technology and skilled manpower. He gave the example that although India is not a diamond producer, it is a key player in its global value chain as it has the necessary skills to add value to rough diamonds.

He concluded by saying that that there is a need to emphasise on ‘how’ India can improve the effectiveness of its trade policy to achieve the objectives that were highlighted in CUTS’ presentation. He made a call to the participants for suggestions on implementation strategies. He noted that there needed to be increased dialogue among diverse stakeholder groups on implementable suggestions.

More than 70 participants representing various industry bodies and other stakeholders participated in this Roundtable. The presentations were followed by a robust discussion between the audience and the presenters, including D K Singh, Additional Director General of Foreign Trade, Department of Commerce, Government of India.

Participants noted that indeed the enlargement of focused markets had led to new employment generation; however, there still existed a number of product-specific issues including the accessibility and processes of attaining certain incentives that hampered the export of their products. They reiterated that specific measures should be taken to increase the competitiveness of India’s exports.

Other suggestions included: further expansion of focused markets and incentives to trade with India’s neighbours; streamlining of trade procedures; and addressing supply-side constraints through public-private partnerships. Issues such as the wide discrepancy between import and export requirements, discriminatory excise duties, and the need to revise the value addition requirements on goods imported for exports were also raised.

In his concluding remarks, Bipul Chatterjee made three suggestions to improve the effectiveness of India’s trade policy. First is to expand the coverage of awareness generation about this policy to small and medium enterprises so as to make it more inclusive. Secondly, DGFT should undertake an annual impact assessment of the objectives of the policy as that would help understanding its effectiveness for producer and consumer welfare and there will be a better buy-in among the stakeholders of this policy. Thirdly, trade policy should have strong linkages with other policy initiatives, particularly those for enhancing India’s manufacturing growth and improving domestic standards, for helping Indian companies to enter and strengthen their positions in global value chains and for addressing issues relating to inessential imports.

For more information, please contact:
Bipul Chatterjee,,+919829285921
Archana Jatkar, , +919928207628