Change this ritual

Exports are doing well, and should continue to do so. Doubling India’s trade in the next five years (now the official goal) should not be a difficult task, given the improved competitiveness of many manufacturing sectors, and the interest in agricultural exports being shown lately by some enterprising businessmen.

Equally, the factors holding back Indian exports are issues like rigid labour laws that keep away investors, the poor state of infrastructure, and higher costs of essential services like shipping and power. None of this, however, figures in what is called India’s export-import policy, since none of it is under the control of the commerce minister.

Even what the minister is in control of—like the duty entitlement passbook scheme, or DEPB—has become the subject matter of dispute with the finance ministry (over whether the benefits given to exporters are taxable).

This underlines the limited importance of the annual changes to exim policy, and explains why the highlight of this year’s policy has been to put in place announcements that were made last year–such as the one on exporters who more than met their targets in the form of the Target Plus scheme.

The announcement by Mr Kamal Nath which has got the country’s exporters all fired up is that the taxman’s attempts to take his share from export benefits in the form of the Duty Entitlement Pass Book (DEPB) scheme, have been put on hold.

The fact, however, that the taxman hasn’t been told to lay off completely (this will be decided by the Prime Minister’s economic advisory council) reveals the pulls and pressures that any Exim policy has to face.

It is precisely this tussle between two wings of the government that ensured last year’s promises on increased export benefits didn’t see the light of day and caused this year’s policy to be delayed by a week; even now, the matter has only been deferred to another day.

It is also this conflict that has ensured that the Chinese-style Special Economic Zone (SEZ) Bill has still not been tabled in Parliament. In any case, it now seems clear that the SEZs will not have flexible China-style labour laws.

Within the limited ambit of what he can do, the minister has initiated moves on the promised electronic data network, and to simplify the paperwork required for clearances.

While the export cess on various agriculture products was not large, it created another layer of bureaucracy, and its abolition is welcome. Reducing the onerous export obligations of the past, similarly, is a good idea, in keeping with more systemic approach to export promotion.

But the decision to allow retailers concessional duty on imports of capital goods, emphasised as a great new initiative, is neither here nor there since it requires buyers to spend in foreign exchange (the concessional duty is given when retailers can show large forex earnings).

This is out of line with the fact that India has a foreign exchange surplus, not shortage. If the idea was to allow retailers lower-cost imports, then why not allow it without the caveats?

But then, the exim policy itself is an outdated idea—a modern economy with little or no import controls and low import duties does not require the kind of concessions doled out each successive year to boost exports.

The primary purpose of the whole exercise in any case is to keep the babus employed. The commerce ministry could usefully scrap most of what it does now in the name of promoting exports, and focus its (as well as the country’s) mind on the macro-factors that limit export growth; intelligent reports, grounded in contemporary data, on sector-wise competitiveness, SWOT analyses, international comparisons, and the like would be a more useful exercise.