The 5-year foreign trade policy (FTP) (2015-20) was issued to provide a framework for generating employment and increasing value addition. It also aimed at increasing the exports of goods and services to $900 billion by 2020. The mid- term review of this policy by the government has provided a relief to the Indian exporters. During the review, the government declared liberal incentives of Rs. 8,450 crore ($1.3 billion).
It has been observed that the exports have declined from $468 billion to $437 billion between 2014-15 and 2016-17. The external trade performance of India has been critical. As a result, the current account deficit in the first quarter of the current fiscal year has reached a four year high of 2.6%. The most disturbing aspect is that this trend is still continuing. An important role in this is played by the unpredictability concerning the execution of the Good and Services Tax (GST). There are very less chances of any improvement in the situation because processing of refunds to exporters under GST has influenced trading activities. Therefore, the so called incentives provided in the mid term review should contribute in increasing of exports to an extent. There is a need for the Indian policy makers to understand that the trade challenges for India are structural. These cannot be repaired by quick solutions. The Government needs to deeply investigate the structural fragility of the trade policy before India loses its comparative advantage to world markets.
By: Anuja Arora