FTP review to focus on labour-intensive sectors

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Maintaining the annual tradition, the ministry of commerce and industry is planning yet another review of the Foreign Trade Policy (FTP) for 2009-2014, in an effort to achieve the earlier stated aim $500 billion worth of annual exports within the next three years.

Since the beginning of this financial year, export of some products such as engineering goods, electronic items and gems and jewellery have helped pull up the growth rate, to a whopping 57 per cent in May at $26 bn, and 34.4 per cent in April at $24 bn.

The government had earlier indicated it might not conduct another review of the FTP this year, as it had already floated a strategy paper on boosting exports to $500 bn by 2014. However, there are still some sectors, especially small and medium enterprises (SMEs), that need financial assistance. The government is likely to re-introduce a two per cent interest subvention for SMEs and some other labour-intensive sectors in the FTP review, ministry officials told Business Standard.

Last week, commerce and industry minister Anand Sharma said the government would be conducting another sector-wise review of export-oriented firms, to be completed in the next 45 days by the Directorate General of Foreign Trade, to determine an incentive package for some of the ailing export sectors.

The incentive of two per cent interest subvention was withdrawn on March 31, as a result of which the cost of export finance, seven per cent last year, is now 11-11.5 per cent.

Besides, the government might also consider pruning the list of items under the Special Focus Product Scheme, as export of some products have performed well. Some still lag, such as leather, readymade garments, steel and ferro alloys. On the other hand, it might enhance the coverage of markets by adding new destinations under the Focus Market Scheme (FMS). The duty credit under FMS might also be increased from three per cent at present to five per cent for 2011-12.

The objective of FMS is to offset high freight cost and other externalities to select international markets with a view to enhance India’s export competitiveness. Freight costs have gone up substantially during the past year, thereby making exports from India to far-off countries less competitive.

The ministry might also look at expanding the all-industry duty drawback rates, by bringing in items currently under the Standard Input Output Norms, officials said.

The government has also released a strategy paper to propel export growth momentum. It has also set sector-wise targets for some of the main sectors to achieve the $500 bn export target.

The aim set is $125 bn worth of engineering product exports, $70 bn of gems and jewellery exports, and $42 billion of textile exports.

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