Annual Supplement to Foreign Trade Policy FTP (2009-14)

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LawCrux Advisors (P) Ltd.

The annual supplement to the FTP (2009-14) is likely to be announced in the mid of April 2013.The trade data for the month of March will be taken into consideration by the Commerce Ministry before announcing the annual supplement of the FTP.

The Government had actually set an export target of $350 billion for the financial year 2012-13. But exports reached to only $266 billion as on 28th Feb, 2013 representing a 4% dip in exports as against the corresponding period of the last year (April2011 to Feb 2012).It seems that the trade data for the month of March would not be sufficient to meet that huge target but let s see how much close the figures could go. This will be the first financial year since the economic downfall when exports would see a fall compared to the previous year.

The Government is looking to provide incentives worth Rs 1,500-2,000 crores as part of the annual review of the Foreign Trade Policy (FTP) 2009-2014. These incentives are basically in the form of interest subvention, lower costs for credit, reduction in transaction cost, rebate on duties and taxes, enhancement of the duty drawback rates etc. for the various sectors which have seen a great fall this year due to falling of demand in the European and American markets.

Interest rate subvention on export allows an exporter to source cheaper loans for manufacturing goods for overseas clients. This adds to the price competitiveness of Indian goods, which is essential to maintain market share in overseas markets at a time when demand for goods is facing a downward scenario. During April-January 2013, export of engineering products, gems and jewellery ,textiles and petroleum products declined by four per cent, 10 per cent, eight per cent and four per cent, respectively. At present, the export sop offers 2 per cent interest subvention on export-related credit. This means that exporters can get loans at two percentage points cheaper than the prevailing rate Prime Lending Rate (PLR) at which loans are offered.

All the stakeholders like CII, FICCI, FIEO etc. are in constant touch with the Commerce Ministry in finalizing the annual supplement to the FTP by providing their recommendations. The main focus would be on to boost exports and to reduce the trade deficit through various incentives. The trade deficit had reached to $167 billion in April-January, 7.9 per cent higher compared to $155 billion in the corresponding period of 2011-12. A trade deficit occurs when the value of a country s imports is greater than the value of its exports. The government is also expected to propose the creation of an Export Development Fund, an incentive for exporters to venture into newer markets. Besides export boosting measures, the FTP supplement is likely to announce corrective measures to keep in check non-essential imports.

Let s see what measures our Commerce Ministry can take in this annual supplement of FTP(2009-14) after taking into consideration the recommendations of the various stakeholders to bring back our exports on the positive track. Meanwhile our Finance Minister Mr. P Chidambaran has assured his support to the measures that will be taken to boost exports.

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