‘Project Exports can promote both merchandise and services together’

Ajay Sahai,
Director General & CEO, Federation of Indian Export Organisations (FIEO).
After the 1991 economic liberalisation, India’s Foreign Trade has been zoomed in manifold from less than USD 50 billion in 1991 to over USD 850 billion in 2013, says Ajay Sahai, Director General & CEO, Federation of Indian Export Organisations (FIEO). While the new Foreign Trade Policy (FTP) (2014-19) is expected to unveil shortly, he details his view on existing FTP, FDI in retail, regional and bilateral trade agreements of India and the key focus areas of the new FTP, in an exclusive interview with Rakesh Roy.

After the 1991 economic liberalisation, how did Foreign Trade Policy (FTP) of India play a crucial role to propel the country’s GDP and economy growth?
The economic liberalisation set India on the path of globalisation and made it an outwardly looking economy. The Foreign Trade of India zoomed from less than USD 50 billion in 1991 to over USD 850 billion in 2013. The share of International Trade (both goods and services - imports as well as exports) contribute to over 55 per cent of country’s GDP. FIEO feels that the share can touch 60 per cent by 2018-19.

The Foreign Trade Policy did contribute to such growth particularly on export front by diversification of markets as well as products. The focus programmes announced by the Ministry of Commerce did help in diverting the attention of Indian exporters from traditional markets to new and emerging markets. This has changed the product profile of exports. New and emerging sectors of exports like Engineering, Pharmaceuticals, Chemicals, Electronics, Marine, etc are playing dominant role in country’s exports.

What is your take on existing foreign trade policy (FTP) of India? Is it adequate to compete with developing countries to boost trade & business?
The Foreign Trade Policy should look at providing a conducive environment for manufacturing and exports. The focus of the policy should be on providing technology required for exports, reducing cost of credit, encouraging aggressive marketing, and addressing ground level transaction cost. The introduction of Export Promotion Capital Goods Scheme, Interest Subvention for Exports, MAI & MDA Support, besides, High Powered Committee on Reduction of Transaction Cost did attempt these issues respectively. However, the challenges remain and the new Policy should hopefully address the left over concern.

What is your perspective on FDI in retail? Is it a boon or bane to Indian Economy?
100 per cent FDI in single retail trade is already permitted. The reservation is with regard to multi-brand retail which may impact the small shopkeepers in the neighborhood. Since such shopkeepers are vital for socio economic need of the country, we are little cautious in entering multi-brand retail in the country. There is need for detailed study about its impact on country as a whole before a final call is taken.

While FTP is aiming to provide consumers with good quality goods and services at internationally competitive prices, what are the measures should be taken at the same time in creating a level playing field for the domestic produce & for creating employment?
The Foreign Trade Policy did provide level playing field to domestic manufacturers. In fact, it is only the trade policy of India which has a concept known as Deemed Exports to provide same level field to the Indian exporters as is available to a foreign supplier. Under the mechanism, the Indian supplier of goods (both Capital Goods & Raw Material) can supply the goods near the international price as the component of taxes and duties (excise and basic customs duties) are refunded by the DGFT under Deemed Exports provision. Once you are encouraged to supply free of taxes component and with freight advantage, you can replace a foreign supplier. This has been found a very effective instrument of imports substitution.

Could you please throw light on India’s regional and bilateral trade agreements?
India has been a great votary of multi-lateralism but was forced to join the race of Free Trade Agreements as over 60 per cent of world trade happens within the trading partners. Most of the FTAs/CECA/CEPA has been signed recently only and therefore, it would be a little pre-mature to judge the efficacy of such arrangements. However, on a broader basis, we can safely say that the gains on export front has been more as compared to imports, if we look at CAGR on both front.

The situation may be little different with a particular trading partner, where we may have conceded more on imports rather than gains on exports side. Such situation is unavoidable as we are looking at addressing such anomalies through gains in services exports as well as investments.

According to you, what would be the key areas of focus of the new FTP (2014-19), which is all set to commence, to rev up trade in the country?
The key focus of the Foreign Trade Policy should be on imparting competitiveness to exports. The strategy to achieve this objective should entail various components. We should attempt to integrate in the global value chain as most of the trade is happening this way. The focus should also be on labor intensive sectors of exports which will propel manufacturing in the country. I personally feel that the Foreign Trade Policy should have a strategy to supplement ‘Make in India’ which can be a game changer in years to come.

What are the key sectors should to be focused by the new governmen