Ftp analysis
Upcoming SlideShare
Loading in...5

Like this? Share it with your network


Ftp analysis






Total Views
Views on SlideShare
Embed Views



0 Embeds 0

No embeds



Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
Post Comment
Edit your comment

Ftp analysis Document Transcript

  • 1. Strategy Paper for theDepartment of Commerce Submitted by Jayant Dasgupta & Depinder Singh Dhesi Phase V Training Programme, LBSNAA Mussoorie January 7, 2011 1
  • 2. Table of Contents Page1. Section 1: Ministry’s Vision, Mission, Objectives 3 and Functions2. Section 2: Assessment of the situation 63. Section 3: Outline of the Strategy 114. Section 4: Implementation Plan 205. Section 5: Linkage between the Strategic Plan and RFD 226. Section 6: Cross Departmental and cross functional issues 237. Section 7: Monitoring and Reviewing arrangements 248. Annex 1: Strategic Targets for 2014-15 26 2
  • 3. SECTION- 1 Ministry’s Vision, Mission, Objectives and Functions The Department of Commerce has been tasked with the regulation,development and promotion of India’s international trade and commercethrough the formulation of appropriate policies and their implementation.This has also been stated in the Annual Report (2009-10) of the Departmentas follows1:“The basic role of the Department of Commerce is to facilitate the creationof an enabling environment and infrastructure for accelerated growth ofinternational trade. The Department formulates, implements and monitorsthe Foreign Trade Policy which provides the basic framework of policy andstrategy to be followed for promoting exports and trade.”1.2 The Vision of the Department as enunciated in the Results FrameworkDocument (RFD) 2010-11 is to make India a major player in world trade by2020 and for India to assume a role of leadership in international tradebodies commensurate with its importance in the contemporary world.1.3 The Mission of the Department outlined in the Foreign Trade Policy(2009-2014) and the RFD is to double India’s exports of goods and servicesby 2014 in the medium term along with doubling India’s share in globaltrade by 20202 as a long term goal, through appropriate policy support. TheDepartment is targeting an annual growth rate of exports of 25% during theperiod 2011-12 to 2016-17 to achieve these twin targets3.1.4 The Objectives formulated by the Department are as follows:(i) Apart from focusing on increasing our exports in traditional sectorslike textiles & clothing, gems & jewellery, handicrafts etc., sustained effortswould also be made to give a boost to our exports in hitherto non-traditional1 Annual Report (2009-10) of the Department of Commerce, Government of India, New Delhi2 Foreign Trade Policy (2009-2014) and Results Framework Document of the Department of Commerce,Government of India, New Delhi3 Strategic Plan (2009-10), Department of Commerce, Government of India, New Delhi 3
  • 4. areas like machinery and transport equipment (accounted for 37% of globaltrade between 2003-07), chemicals, pharmaceuticals and agro-products etc.(ii) Special efforts would be undertaken to increase the production,productivity and profits of the plantation crops i.e. rubber, tea, coffee, spicesand tobacco, which have been a traditional source of strength for our exportsas well as providing employment to millions of workers. (iii) Along with product diversification, efforts would also be directed todiversify our markets instead of concentrating just on the traditional oneslike the US and the EU, because the advanced economies are expected togrow much slower than the developing and emerging economies in the nextdecade.(iv) Steps would be taken to conclude our ongoing Free Trade Agreement(FTA) negotiations and to conclude the Doha Round negotiations, whichwould provide additional market access for our goods and services. Non-tariff measures (NTMs), which adversely impact exports, would beaddressed both through the FTAs as well as the WTO.(v) Concerted efforts would be made to reduce our trade relatedtransaction costs.(vi) Infrastructure bottlenecks, especially in respect of power, roads,railways and ports would be addressed on priority basis. The Assistance toStates for Development of Export Infrastructure and Allied Activities(ASIDE) scheme would continue to be used to cover critical gaps in exportinfrastructure. More allocations would be sought for the ASIDE schemecoupled with improvements in quality of output and effective monitoring,which would help address the infrastructure deficit in a speedier manner.(vii) The coverage of export credit as well as its quantum needs to beenhanced. This would be addressed in consultation with the Ministry ofFinance, including the feasibility of utilizing the foreign exchange reservesof the country for the purpose. 4
  • 5. (viii) Protecting sensitive sectors of the Indian economy against theadverse impact of trade liberalization.1.5 The major functions of the Department are as follows:-(i) Formulation of the Foreign Trade Policy, setting annual targets ofexports and implementation of programmes for increasing India’s exports(ii) Implementation of Focus Market and Focus Product schemes forexport diversification, both in terms of new markets as well as products(iii) Undertaking export promotion activities through Market DevelopmentAssistance (MDA) and Market Access Initiative (MAI) schemes(iv) Negotiation of bilateral and regional trade agreements with differentcountries and trade partners for securing preferential access in their markets(v) Negotiation of multilateral trade agreements in the WTO, UNCTADetc.(vi) Facilitating the creation of infrastructure for promoting exportsthrough the implementation of the Special Economic Zones (SEZs) Act andAssistance to States for Development of Export Infrastructure and AlliedActivities (ASIDE) Schemes 5
  • 6. SECTION- 2 Assessment of the situation2.1 External Factors2.1.1 A country’s export performance depends on a number of externalfactors. First and foremost among these is the export competitiveness,including the level of technological sophistication, of the major globalsuppliers. On this count, the major threat facing the rest of the world is themanufacturing behemoth that China has been able to put up since 1979.Intertwined with its large capacities is the implicit and explicit subsidies thatits industries receive, specially for exports. Though the Chinese subsidies aregetting challenged lately in the WTO, because of the non-tranparent natureof many Chinese government procedures, it would take a long time beforeall the knots are unraveled. Another contributing factor to China’scompetitiveness is the artificial pegging down of the renminbi, which makesimports from China additionally attractive. In 2009, China emerged as thelargest exporting country in the world with 9.6% share of global trade,thereby displacing Germany. It has also surpassed Japan as the secondlargest economy, from the third quarter of 2010. Contrary to the direpredictions of many economists, the Chinese economy did not suffermuch on account of the economic downturn and has bounced back tonear 10% growth levels in the second half of 2010. The Chinese withtheir large pool of technical manpower and alleged reverse engineeringskills and persistent violation of IPRs, are also among the front runnersin the sunrise sector of green technology. With their IT skills andrapidly growing numbers of English speaking young persons (includingthe largest number of foreign students in the US, Australia, Canada, UKetc) are poised to move up in the Services field also from their currentstanding of The second factor impacting upon exports is the state of the globaleconomy. India’s exports, which recorded an average annual growth rate of23.9% during the period 2004-05 to 2008-09, came down to 13.6% in 2008- 6
  • 7. 09 and showed negative growth during 2009-104. The economies of the EUand the US, which are still our major markets, have not recoveredcompletely from the economic downturn. Unemployment levels are stillquite high in these countries, leading to contraction in demand for consumergoods. The EU has had to rescue Greece and Ireland from their sovereigndebt problems in 2010 and the US has had to unfold a $600 billion packageby way of Quantitative Easing 2 a few months ago to continue with itsstimulus to the economy. The net result is that consumer spending in thesecountries is still low and luxury or gift items are not being purchased asmuch as in 2007. This has affected the exports of many of our traditionalitems like gems &jewellery, handicrafts and carpets. It has also impactedupon our textiles and clothing exports because consumers are now morelikely to defer purchase of non-essential items.2.1.3 Another fall-out of the economic downturn has been that investmentsin the developed countries have come down, resulting in a contraction in thedemand for engineering goods, which is the largest sector of our exportscurrently.2.1.4 Our traditional strengths in exports have been our comparatively lowwages (steel forgings and castings, powerloom fabrics), our skilled workers(carpets, gems& jewellery, clothing), low cost of primary raw materials(cotton, tea, coffee, rubber, iron ore, hides and skins), low import intensityof raw materials (except rough diamonds) and low energy intensity of ourexport products (handicrafts, hand-knotted carpets, gems & jewellery,embroidered clothing). The typical Indian export oriented industry worker,most likely illiterate or non-matriculate, is intelligent, skillful, innovativeand able to absorb and carry out instructions well. He is, however, saddledwith a high morbidity burden and is most likely working on piece rate basisin the unorganized sector, staying away from his family and living in lowrental housing in slum like surroundings.2.1.5 With our rising wages, low levels of mechanisation and productivity,infrastructural bottlenecks and comparative lack of product development and4 Annual Report (2009-10), Department of Commerce, Government of India, New Delhi 7
  • 8. innovation, our exports have grown at a rate far lower than that of China orthe other East Asian tigers in the nineties. Unless we are able to break out ofthis mould and provide products of greater technological sophistication andvariety at globally competitive rates, it might be difficult to make asignificant difference in our export performance in the years to come.2.1.6 In order to achieve this breakthrough, we have, however, a very ableally in the shape of our new generation of entrepreneurs/stakeholders, whoare young, energetic and willing to take risks. What they expect of thegovernment and the planners to do is to provide an enabling and facilitatingenvironment for them to go out into the global arena and climb new peaks.These stakeholders want to have world class infrastructure, an inspector Raj-free and hassle-free working environment and predictability andtransparency in government policies and functioning. This in essence is whatwe need to deliver.2.2 A SWOT analysis of our exports is presented below against thebackdrop of the above general discussion.Strengths  Availability of most natural resources and long coastline  Diversified Industrial Base  Skilled manpower, including entrepreneurial ability  English language skills  Growing middle class and disposable incomes represent a robustly growing domestic market  Low wages compared to all developed and emerging developing countries like China and Brazil  Younger population as compared to all developed countries and China 8
  • 9. Weaknesses  Major infrastructural deficit in terms of power, ports, roads, railways  Lack of state of the art technology in many manufacturing sectors  Low investments in R& D  Low literacy levels and generally poor quality of technical education (except in a few colleges)  Low productivity and high morbidity burden on labour  High transaction costs and cost of lending  Red tape and procedural delays (including in the judicial proceedings)  CorruptionOpportunities  Good combination of skilled manpower and comparatively lower wage costs could act as a catalyst to attract FDI for a wide range of manufacturing activities, provided we bridge the infrastructural deficit  Improvement in farm productivity and establishment of cold chain could transform into an agro-products exporting power, specially in fruits and vegetables  Large greying population among wealthier countries would compel them to outsource many of their activities to lower cost suppliers like India  The availability of large numbers of skilled IT professionals could be leveraged to turn India into the global back-office 9
  • 10. Threats  Higher labour productivity, world class infrastructure and large manufacturing base of China could make it difficult for India to gain a larger share of global exports. India’s bilateral trade with China is also currently running an annual trade deficit of $17 billion.  Lower cost competitors like Bangladesh (in textiles and clothing) and Vietnam (for textiles, clothing, tea, coffee and some spices) could erode India’s share in global trade. 10
  • 11. SECTION - 3 Outline of the Strategy3.1 Projections for exports3.1.1 India’s exports of goods and services in 2009 were $ 155 billion and $86 billion and its share of global trade was 1.2% and 2.6% in goods andservices respectively5. Including intra-EU trade, India’s standing was 22 and12 among the world’s leading exporters of goods and services.3.1.2 Based on WTO data on global trade in goods pertaining to 1990-2009and taking the trend growth rate for this period, which was 13.27%, globalexports projection for 2014 and 2020 work out to $18450 billion and$29,450 billion respectively6. India’s exports share as a proportion of globalexports in goods in 2014 and 2020 works out to 1.64% ($303 billion) and2.17% ($640 billion) respectively.3.1.3 As regards Services, the projections indicate that global trade wouldincrease to $5050 billion and $8060 billion in 2014 and 2020 respectively, inwhich India’s share would be 4.42%($223 billion) and 8.1% ($653 billion).3.1.4 Thus the secular growth projections would appear to indicate thatIndia should be able to meet its twin export growth objectives for 2014 and2020 respectively. However, there are some major caveats to this, which arediscussed below. Before we proceed to discuss them, however, it wouldbe pertinent to point out that there are some gains to be made if wealign the timelines for meeting our objectives, to coincide with the 12thPlan period (2012-17). This would be especially relevant for the areaswhere inter-departmental coordination and joint efforts are required. Itis for the Department of Commerce to take a call on this issue.3.2 Outline of Potential Strategies5 World Trade Report 2010, World Trade Organisation, Geneva6 Unpublished joint report of the Centre for WTO Studies and FIEO, December 2010 11
  • 12. 3.2.1 At present, engineering goods, gems & jewellery and textiles &clothing account for 19.8%, 17.8% and 11.3% respectively of our exportsbasket. Petroleum products account for another 13.8% of our exports. Thevalue addition in gems & jewellery exports is low at present, because it ismainly concentrated in the diamond polishing business. However, withbetter design inputs and product innovation and diversification, we canincrease our exports in this sector.3.2.2 Similarly, there are natural limits to growth in the traditional productsof our textiles & clothing sector because of the structure of our industry (stillmostly in the small or unorganized sector) and our rising wages. Lower costproducers like Vietnam and Bangladesh have already overtaken us in textilesand clothing and we can only improve our position in this sector if we moveup the value chain by establishing brand names and designer labels as wellas venturing into the production of hitherto non-traditional items like men’sand women’s business suits for example.3.2.3 In the case of the leather sector, which provides employment to lakhsof workers, our exports are mainly confined to exports of finished leather,men’s shoes, garments and accessories. We have negligible exports inchildren’s and ladies footwear as well as non-leather footwear, whichtogether account for more than 80% of global trade. There is tremendousscope for improving our position in leather products and non-leatherfootwear exports, provided we take the right policy initiatives.3.2.4 It is most unlikely that we would be able to double our exports in themedium term by just producing “more of the same”. It appears imperativeto have a paradigm shift in our manufacturing and exports strategy, soas to move onto a different growth path. For this, we have to significantlydiversify our product basket in addition to putting in efforts to producehigher value added products in our traditional exports sectors. The new areasin which we could provide a thrust could, for instance, include engineeringgoods, chemicals and pharmaceuticals (including biosimilars), electronicgoods, agro-products etc. 12
  • 13. 3.2.5 In order for us to move up the value chain, we would need to : (i)provide R&D and state of the art testing facilities (ii) marketing supportfor thrust sectors and countries, (iii) attract foreign investments andtechnology through further liberalization of our investment regime andschemes like the Special Economic Zones and (iv) build up a brand imageof quality and reliability for India, through use of the India Brand EquityFund and other appropriate schemes.3.2.6 In view of the low growth rate projections for the advancedeconomies in the next 4-5 years, the intense competition for market share inthese countries as well as the robust growth projected for the emergingeconomies and some other developing countries, we could be benefited byfocusing our attention also on penetrating new markets. The bilateral FreeTrade Agreements (FTAs) and the Regional Trade Agreements, couldprovide the right platform for moving into non-traditional markets, throughpreferential access. Thus the emphasis has to be to conclude the FTAs thatIndia is negotiating as soon as possible along with entering into fresh FTAnegotiations with new trade partners where careful analysis indicates mutualbenefits for both partners. Efforts must also be made to conclude the DohaRound as soon as possible because of the promise it holds for further tradeliberalization.3.2.7 With the progressive reduction in tariffs, specially in the developedcountry markets (the average tariffs in both the US and the EU are currentlyat 4% for industrial products) and with further reductions proposed in theDoha Round negotiations, tariffs are going to play a much reduced role ininhibiting exports in future. On the other hand, non-tariff barriers (NTBs)and Sanitary and Phytosanitary (SPS) measures are going to play anincreasing role in determining trade flows. In order to address these issues,we would need to include a fast track mechanism for their resolution in ourFTAs. We would also need to push vigorously for reduction and eliminationof NTBs in the Doha Round negotiations.3.2.8 Inadequate availability (specially to the MSME sector) andcomparatively high cost of export credit (as compared to the developed 13
  • 14. country or Chinese exporters) pushes up the costs of our exporters. In theabsence of Indian bank branches in many of our export destinations, ourexporters also have to rely on expensive third country banking services.Consolidation of our nationalized banks (on the lines of what the SBI istrying to do through mergers of its associates) will enable our banks to attaina critical mass and provide some of these facilities in our export destinations.One of the ways of providing low cost short term credit in foreign currencycould be to access part of our foreign exchange reserves, which is investedin foreign treasury bonds and other securities. The whole issue of adequacyand cost of borrowing needs to be addressed urgently in consultation withthe Finance Ministry and RBI.3.2.9 Another factor impacting our global competitiveness is our hightransaction costs. A part of this is infrastructure related but another part islargely procedural. The latter could be addressed effectively throughappropriate IT solutions. Computerisation of clearances by Customs, DGFTand other associated agencies and integration of their networks to facilitatetimely payment of duty drawback and other export incentives is imperativeto reduce transaction costs.3.2.10 In Services, we would need to diversify beyond IT/ITES and Tourismto get deeper into Financial Services, Telecom Services, Audio VisualServices, Professional Services (e.g. medicine, dentistry, nursing, law,accountancy, management consulting, architecture, medical diagnostics)etc. as well as developing better infrastructure for the Tourism sector, whichcontributes significantly to our exports earnings. In order to make furthergains in both IT/ITES as well as professional services, we would need topress hard for liberalization of Mode 4 (movement of natural persons) by thedeveloped countries in the Doha Round negotiations.3.2.11 Our infrastructure, be it power, road, rail or port related, is alreadyunder tremendous pressure because of the demands placed on it on accountof our robust economic growth between 2003-08. With the anticipatedgrowth in exports as well as concomitant increase in imports in the currentdecade, the pressure on our infrastructure is bound to get accentuated and 14
  • 15. hinder exports, unless we take advance action. A brief overview of ourinfrastructural requirements is provided below.3.2.12 Power  In order to meet our export targets, we would need to diversify our exports basket significantly and get into more energy intensive manufacturing processes as compared to handicrafts, gems & jewellery, textiles & clothing etc. at present. This would require high quality and uninterrupted power for our manufacturing hubs as well as for our rail transportation network. There is already a significant energy deficit in the country and even the modest target for additional power generation during the 11th Plan is not likely to be achieved. This sector requires concerted efforts for improvement otherwise it can act as a huge drag on our exports.3.2.13 Ports  Ports handle 95% of our total trade in terms of volume and 70% in terms of value. As per world benchmarking, efficient working is achieved when the handling capacity of ports is 30% more than the actual traffic handled. By 2020, our capacity requirement has been estimated to be 3025 Million Tonnes (MT), whereas the planned capacity for 2020 currently is only 1685 MT- a shortfall of 1340 MT. The Ministry of Shipping is going to come out with a Revised Perspective Plan for 2020 shortly, which is expected to aim for a capacity of 3200 MT for 2020. This Perspective Plan would need adequate and timely financing for execution.  It has been noticed that even when our ports are able to handle the cargo at their berths, a huge bottleneck is faced in the shape of inadequate landside evacuation facilities. Thus there would have to be simultaneous development of the feeder rail and road networks along with port development. 15
  • 16.  Currently a lot of time and money is wasted by Indian exporters because their goods have to be transshipped through either Colombo, Singapore or Dubai. Effective steps need to be taken to reduce the pre-berthing and turn around times of vessels, so as to attract mainline vessels to Indian ports and reduce transportation costs and time. 3.2.14 Roads  Roads carry 61% of freight currently. With the anticipated growth in export and import volumes by 2020, the road network would need to be strengthened significantly. In India, expressways are nearly non- existent, while China’s highway network consists of over 45,000 kms of 4 or 6 lane access controlled expressways linking its major cities. Currently 6 lane highways constitute only 1% of national highways in India.  India does not fare well in speed comparisons of its trucks as well. According to a World Bank study7, the transit time between major cities in India, on average, is about 33% more as compared to the US. Moreover, Indian trucks are used for 60000-100000 km a year, which is less than a quarter of those in developed countries. A joint study8 by the Transport Corporation of India and IIM, Kolkata has estimated that the average effective speed of trucks on Indian roads is only about 20 kmph, because of poor roads and check post delays. Apart from increasing the width of the highways, the riding quality of the roads needs to be improved and check posts across state borders need to be eliminated. 3.2.15 Railways  As per the Ministry of Railways Vision 2020, the target for freight traffic for 2020 has been pegged at 2165 MT. However, it has been estimated that the projected traffic would be 4787 MT by 2020,7 Road Transport Service Efficiency Study, November 2005, Energy and Infrastructure Operations Division,South Asia Regional Office, World Bank8 Operational Efficiency of National Highways for Freight Transportation in India, TCI and IIM Kolkata 16
  • 17. showing a large capacity deficit of 2622 MT. Thus a major thrust has to be imparted to doubling and quadrupling of lines along major freight paths and setting up dedicated rail freight corridors from the hinterland to the major ports.  The size of freight rakes would need to be increased and they would also need to travel at higher speeds to transport the cargo faster and reduce transaction costs.3.2.16Along with rapid and orderly growth of our exports, we have toalso ensure a level playing field for our domestic industry, vis a visimports. Large idle capacities and ability to subsidise products heavily(like China for instance) can wreak havoc for the domestic industrythrough dumped/subsidized imports. In order to counter this, we haveto strengthen our import monitoring mechanism and act quickly withappropriate trade defense measures, to limit the damage.3.3 Consultation with Stakeholders3.3.1 The stakeholders would broadly comprise the industry representativesin different sectors, the concerned administrative ministries and stategovernments, research institutions, financial institutions, service providerslike Customs, DGFT, Power, Shipping, Road Transport & Highways, CivilAviation etc.3.3.2 The Department of Commerce would need to play the role of acoordinator and facilitator among the various stakeholders. The questionsthat need to be asked of the industry and administrative ministries would bedirected towards identification of new thrust areas. The research institutionswould need to be involved in the discussions and asked for technicalsolutions to problems that are perceived in the path forward. The industry’sfeedback about reforms and procedural changes as well as infrastructurestrengthening would also need to be factored in appropriately. The mode ofinteraction could be through open house sessions followed by brainstormingand then formal meetings of a task force. 17
  • 18. 3.4 Building up Knowledge and Capabilities3.4.1 We need to continuously update both our technology as well as ourmanagement practices to be globally competitive. The obvious source foraccess to both the latest technology and management practices in the short tomedium term would be through FDI, joint ventures and outright purchases.However, in the long run, we need to invest in R&D on our own to provideour industry with a competitive edge. China has done this spectacularly inrecent times and in an earlier era Japan and Korea have done it. This wouldneed to be coordinated by the administrative ministries with the industry andresearch institutions and the PPP model would be ideally suited for thisendeavour.3.4.2 On another front, we need to build up our brand image and inculcatequality consciousness throughout our supply and production chain. As far asbrand building is concerned, the Department of Commerce has a vital role toplay in this endeavour, in association with the industry associations. Oninculcating quality consciousness, the major initiative would have to comefrom the industry associations and administrative ministries.3.4.3 We also need to have a sufficiently large number of trained personnelin different departments of the government, who can take part ininternational trade negotiations and contribute to the preservation andbuilding up of an institutional memory. For this we need to build up our owntraining institutions, groom young officers and send them for specializedtraining courses in India as well as other countries/international institutions.We also need to build up our capabilities in the Universities and researchinstitutions to conduct applied research on trade issues. Finally, we need togroom a set of lawyers in international trade law, who can represent thegovernment as well as individual firms in the trade defense proceedingsinitiated by other countries against us.3.4.4 We also need to sensitise and inform government departments and theindustry about the NTBs, SPS standards etc. prevailing in important exportdestinations and in building up our own infrastructure and testingcapabilities to bring up our own domestic as well as export oriented industry 18
  • 19. segments to adopt global standards and best practices. The Apex IndustryAssociations and the Export Promotion Councils and Commodity Boardswould have a leading role to play in this effort.3.4.5 One of the other important points on which we would need to focuson is sensitization of our service providers to the impact of delays in erodingour competitiveness in the global market and the national loss that it entails.This would need to be carried out through Open House Sessions andPartnership Building Exercises with the participants being the client groupand the service providers. This would need to be carried out under the jointleadership of the field offices of the service providers as well as the localindustry associations.3.5 Priorities in Strategic Initiatives3.5.1 Based on the three criteria of suitablility, feasibility and acceptability,we would suggest that the following weights be given to the strategicinitiatives listed in the foregoing paragraphs:-Strategic Initiative 1 (Diversification of export product basket)-30Strategic Initiative 2 (Diversification into non-traditional markets andconclusion of ongoing FTA negotiations and initiating new FTAs)-20Strategic Initiative 3 (Strengthening export related infrastructure)-10Strategic Initiative 4 (Enhancing credit flows for exports at lower cost)-10Strategic Initiative 5 (Reducing Transaction Costs)-10Strategic Initiative 6 (Diversification of Services exports)- 10Strategic Initiative 7 (Building up a Brand Image of India)- 05Strategic Initiative 8 (Support to the Plantation Sector)- 03Strategic Initiative 9 (Protection to sensitive domestic industries) - 02 19
  • 20. SECTION- 4 Implementation Plan4.1 The Potential Strategic Initiatives have already been dealt with insome detail in Section 3 and suggestions regarding their prioritization havealso been provided. The issue of stakeholder engagement and the learningagenda has been discussed in paragraphs 3.3 and 3.4 of Section 3.4.2 The resources required, whether in terms of human, capital orinfrastructure, for implementing the strategic initiatives, can only be workedout after holding in-depth meetings with all the concerned stakeholders.Many of the administrative ministries and state governments as well asresearch institutions already have plans, schemes and projects underimplementation, which could be fine-tuned to fit the specific requirements ofeach strategic initiative.4.3 As far as the Department of Commerce (DOC) is concerned, it alreadyhas both a Focus Product and a Focus Market Scheme in operation, fordiversification of export products and penetrating new markets. However, anindependent evaluation of these schemes, if not already undertaken, shouldbe immediately taken up to enable mid-course corrections as required. TheMarket Development Assistance (MDA) and Market Access Initiative(MAI) Schemes of DOC may also require a similar remodeling to meet theemerging requirements of different sectors.4.4 In order to have quantifiable parameters to assess progress, detailedsub-sector and year wise targets would need to be worked out in consultationwith the Export Promotion Councils, Commodities Boards, administrativeministries and other stakeholders. By way of an indicator, we haveattempted broad sectorwise targets for 2014-15, which is at Annex 1.The annual targets could be worked out from the overall milestonesfixed, with a certain amount of backloading towards the end of theperiod. In addition to the quantifiable targets, the outcomes of the strategicinitiatives would have certain non-quantifiable targets as well, achievementsagainst which would have to be assessed in terms of the completion of 20
  • 21. certain activities. These activities would also need to be broken down intoelements and both financial and physical targets fixed, as far as practicable,for each of these elements.4.5 DOC would have to coordinate with the administrative ministries andother stakeholders to closely review the progress made against each elementof activity as well as the quantifiable targets, preferably on a quarterly basis,and to examine suggestions for making mid-course corrections/amendmentsto policies as appropriate. Currently, DOC brings out Annual Supplementsto the Foreign Trade Policy (FTP) by way of such mid-course amendmentsto the five year FTP. If the requirements of major sectors so require, theAnnual Supplements could be converted to ones of a shorter periodicity. 21
  • 22. SECTION-5 Linkage between the Strategic Plan and RFD5.1 Though there is a considerable degree of convergence between theStrategic Plan proposed here and the RFD of the Department of Commerce,there are a few differences as well.5.2 First, the convergence. Both the Strategic Plan and RFD emphasisethe importance of policy support in increasing India’s annual export growthby a CAGR of around 25%. Both speak about diversification of India’sexports through exploration of new and emerging markets as well aspromoting employment intensive products and products of high exportpotential. The importance of leveraging the SEZ and ASIDE schemes tonarrow the infrastructure deficit is also underscored. Both documentsacknowledge that the FTAs should be used to gain additional market accessand trade facilitation measures are required to reduce transaction costs. Alsosupport for the plantation sector and increased exports of agro-products ispart of both the approaches.5.3 On the differences between the two, the RFD prioritises the protectionof sensitive sectors of the Indian economy against the adverse impacts oftrade liberalization and facilitating improvement in the functioning of STC,PEC, MMTC, ECGC and ITPO. On the other hand, the Strategic Plan laysemphasis on increasing the availability and lowering the cost of exportcredit; export related infrastructure development in the power, roads, rail andports sectors; building up a brand image of India and diversification ofServices exports as being essential for the fulfilment of the Mission of theDepartment. It also mentions protection to sensitive sectors of thedomestic industry as one of the initiatives, though low in order ofpriority. 22
  • 23. SECTION-6 Cross Departmental and cross functional issues 6.1 International trade (exports plus imports) today accounts for more than 40% of India’s GDP. Because of the rising prices of oil and our increasing current account deficit, we have very few options but to focus on exports growth to reverse the trend. 6.2 Increased exports, especially in labour-intensive sectors like carpets and handicrafts, gems & jewellery, leather, textiles & clothing, plantation crops and other agro-products, provides an ideal marriage between our twin goals of economic growth and greater employment opportunities for our youth. Thus exports growth would contribute to partially meeting the challenges of enhancing the capacity for growth as well as enhancing skills and faster generation of employment, which have been listed out as two of the challenges to be addressed in the Twelfth Plan. 6.3 As regards meeting the Mission and Objectives of the Department of Commerce, it would be essential to seek larger Plan allocations for departmental schemes like ASIDE, MDA and MAI. Apart from this, larger allocations for other departments to narrow the infrastructure deficit for export related infrastructure as well as for meeting the requirements of R&D support and capacity building, would also be needed. 6.4 On the subject of Citizen’s Charter, the Department of Commerce has a clearly enunciated Charter9 and has shown its commitment to continuously strive to evolve procedures in the Foreign Trade Policy that would be of maximum benefit to the public. The Department has also put in place a Grievances Cell, a quasi-judicial Appellate Committee and a Grievance Redressal Committee.9 Annual Report (2009-10), Department of Commerce, Government of India, New Delhi 23
  • 24. SECTION-7 Monitoring and Reviewing Arrangements7.1 The Department of Commerce interacts with a variety of stakeholderson a regular basis. Officers of the Department are members on the Board ofDirectors of all the Export Promotion Councils and are abreast of thedevelopments/problems faced by the industry on almost a day to day basis.All the Commodity Boards like the Tea Board, Coffee Board, TobaccoBoard etc. have officers of the Department as their chief executives, whoraise problems faced by the plantation crop growers or exporters with theDepartment at the earliest opportunity.7.2 There is, however, a lacuna in terms of absence of industry bodiesin various segments of the domestic industry, which can effectivelycommunicate their concerns to the government. To a certain extent thisis reflective of the small and decentralized nature of many sectors of ourindustry. Nevertheless, this gap needs to be bridged and an effectivefeedback loop needs to be established, perhaps through the agency ofthe respective State Governments.7.3 In addition to the mechanisms mentioned in paragraph 7.1, theDepartment of Commerce organizes Open House sessions with exporters,industry associations and apex industry bodies before finalizing the ForeignTrade Policy (FTP) or the Annual Supplements to the FTP. Meetings withindustry representatives are also held before each Budget Session.7.4 The three major bodies under the standing institutional mechanism forconsultations on various issues and review are as follows.(i) Board of Trade (BOT)- This provides an effective mechanism to maintaina continuous dialogue with trade and industry in respect of majordevelopments in the field of international trade and make recommendationsto the Government for the various measures required for increasing thecompetitiveness of Indian exports. The Board meets every quarter and ischaired by the Commerce and Industry Minister. 24
  • 25. (ii) Export Promotion Board (EPB)- The Board is chaired by the CabinetSecretary to provide policy and infrastructural support through coordinationamong different Ministries for boosting exports.(iii) Inter-State Trade Council (ISTC)- The Council provides a platform fordialogue between the Centre and the States in matters relating to tradefacilitation and to create a framework for making States as partners in thenational export effort.7.5 The Department of Commerce has resolved to hold regular meetingsof all the three bodies to make them more effective instruments in shapingpolicy and in reviewing the situation on the ground.7.6 It needs to be mentioned that the RFD itself is a reviewmechanism and needs to be used to monitor the progress made in theachievement of the objectives on a periodic basis. The MOUs signedwith the PSUs , viz. STC, MMTC, PEC, ECGC, ITPO need also to bereviewed regularly in terms of the achievement against each andsubsidiary RFDs could be drawn up for subordinate organizations ofthe Department. 25
  • 26. Annex I Strategic Targets for 2014-15 (in billions of US Dollars) Product 2010-11 2014-15 (Estimated) Gems and Jewellery 32.75 64.00 Engineering Goods 45.00 92.00 Textiles Cotton Yarn and Made- ups 5.00 9.00 Manmade Yarn and Made-ups 3.75 7.00 Clothing 11.00 17.00 Other Textile Products Carpets 0.90 2.00 Jute Goods 0.45 0.75 Petroleum Products 35.00 61.00Drugs, Pharma and Fine Chemicals 9.60 21.00 Other Basic Chemicals 7.60 17.00 Electronic Goods 5.50 10.00 Leather Goods 3.75 8.25 Plastic and Linoleum 4.20 8.00 Iron Ore 5.00 8.00 Mica and other minerals 3.10 5.00 26
  • 27. Marine Products 2.20 4.00Agricultural ProductsFruits and Vegetables 1.20 2.50 Oil meals 1.70 2.80Processed Cashew nuts 0.60 1.00 Rice 2.00 4.00 Spices 1.60 3.00 Tobacco 0.90 1.40 Tea 0.55 0.80 Coffee 0.55 0.80 Miscellaneous 16.00 50.00 TOTAL 200.00 400.00 27