“In recent years India’s exports have increased considerably. Much of it is due to various export promotion schemes run by the Department of Commerce, Government of India. Those schemes received a much-needed boost when a long-term vision about the role of trade in national development was envisaged in India’s foreign trade policy. However, small producers are not benefiting much from this impressive export performance,” said Pradeep Mehta, Secretary General of CUTS International.
Mehta was releasing a study which looked at the process of implementation of India’s foreign trade policy and its impact on small producers. “Most of export promotion schemes such as market development programme, towns of export excellence are targeted to large producers and exporters,” Mehta added. “Small producers are not much aware of export promotion schemes as there is a general lack of awareness generation activities on the benefits that such initiatives could bring to them.”
The CUTS study was conducted under a project entitled Grassroots Reachout & Networking in India on Trade & Economics. It was implemented in eight states from different parts of India. A variety of products ranging from grapes in Maharastra to niger seeds in Orissa to marine products in Tamil Nadu to mangoes in West Bengal were studied.
The study found that there is not much involvement of state governments in implementing export promotion schemes. Inter-State Trade Council, which was formed in 2004 as part of the Foreign Trade Policy of 2004-09, largely remained defunct. In most state WTO Cells are dysfunctional due to lack of resources and expertise.
The central government should provide budgetary support and other incentives such as direct revenue sharing with state governments to generate their interests on the benefits of international trade in local development. Administration of special economic zones and other export-oriented initiatives should be handed over to the state governments so that they have a better stake in their development including infrastructure development and functioning.
The CUTS study recommended that the process of formulation and implementation of India’s foreign trade policy should be made more inclusive by involving multiple stakeholders who are affected by international trade. An inclusive trade policy-making process could be a tool for improving the overall environment of economic governance in India.
“It is good that since 2004 the Government of India has replaced the annual export-import policy with a five year foreign trade policy. The next policy is due in 2014 and it should have a benefit sharing mechanism between producers and exporters,” said Mehta. “The policy should balance the interests between large and small producers who are also net consumer,” he added. At present, consumer interests in India’s foreign trade policy are not balanced with those of large producers and exporters.
More policy research is needed to understand expected as well as actual impact of foreign trade policy on consumer welfare, producer welfare, on future prices of commodities traded, and on poverty and other social welfare variables. The CUTS study recommended that the next policy should have a built-in agenda for conducting its economic, social and environmental impact analysis.
CUTS is a Jaipur-based international non-governmental organisation working on trade and regulatory issues. Among others, it regularly conducts Internet-based discussion on contemporary issues of trade and economic regulations including competition and investment policy.
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