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Exim policy: shorter, simpler?

A K Bhattacharya | March 25, 2003

Almost a decade ago, we had a commerce minister, who announced at a press conference that the export-import policy document should not be longer than three pages. That statement caught newspaper headlines. It was hailed as a bold reformist move. And why not?

The export-import policy document in those days used to be published by the commerce ministry in two or three heavy volumes. Economic reforms had just begun. Discretionary and physical controls were being replaced with transparent rules and fiscal regulations. So why should there be long lists of items which could be imported under different licences? Why should there be detailed procedures for claiming export incentives?

Ten years later, it is interesting to find out how far that promise has been fulfilled. There is no doubt that the export-import policy book has become considerably lighter. The policy has become simpler and easier to understand. But the policy is far from being a three-page document.

In 2002, the first year of the current five-year policy period, the main document outlining the policy had 66 pages. And the more important document, the first volume of handbook of procedures, contained 137 pages. As the commerce ministry prepares to present the first set of amendments to its five-year policy next Monday, the trading community is naturally wondering what new initiatives the commerce minister will take in making the policy simpler.

The forthcoming amendments to the current exim policy are special because these are being framed under a completely new dispensation. Murasoli Maran was the commerce and industries minister when the exim policy was announced last year. N L Lakhanpal was the director general of foreign trade. And commerce secretary, Deepak Chatterjee, had just moved to Udyog Bhavan and his predecessor, Prabir Sengupta, had completed the bulk of the policy work by the time he retired.

Next week's policy will be presented by the new Commerce and Industries Minister, Arun Jaitley. For Deepak Chatterjee, it will be the first policy in which he will have a full say. And the post of the director general of foreign trade also has a new incumbent in Lalit Man Singh.

No less significant is the background against which these amendments are being framed. The surge in exports in November and December has not been sustained in January. Export prospects have been further hit by the US decision to attack Iraq. Estimates of the exports loss as a result of the disturbances in West Asia vary. But attaining double-digit export growth will certainly be a tough task.

The other important external factor that might influence the exim policy makers in Udyog Bhavan is the recent deadlock over the next round of international trade negotiations. On all the key issues, which figured at the last ministerial round at Doha in 2001, little progress has been made in the last few months.

The Doha round had set targets for completing negotiations on intellectual property rights for pharmaceutical products, movement of personnel from developing to developed countries, government procurement norms and services. But most of the target dates for completion of the negotiations have been missed. What the exim policy does in this context remains to be seen.

Jaitley's first foray in exim policy formulation will also give him an opportunity to revisit his predecessor's pet scheme to set up special economic zones. Announced with much fanfare a few years ago, the special economic zones were expected to be India's answer to the hugely successful free trade zones in China. Maran had proposed that the special economic zones would be free from the restrictions imposed by all the domestic economic laws.

The policy framework for the special economic zones had been finalised quite some time ago. The initial response to the scheme was also encouraging. But it now seems that the scheme has not made much headway, with not a single zone having been set up by the promoters. The much-hyped Positra special economic zone in Gujarat seems to have been almost abandoned. The ones proposed in Maharashtra and Madhya Pradesh are nowhere near completion.

So a new proposal that is doing the rounds in Udyog Bhavan is to convert the existing export processing zones and redesignate them special economic zones. That seems to be the sign of a desperate government trying to somehow make a success of its scheme for special economic zones.

Perhaps a better solution would be to let export processing zones operate the way they have been doing in the last many years. If the scheme for special economic zones has not taken off, the government should investigate the reasons for its failure. Why tinker with the export processing zones when they are doing reasonably well?

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Sub: positive features of india's current EXIM policy

i am richa working in ICFAI, India. i want to know that as an exporter what are the positive features of india's current EXIM policy. ...

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Sub: excise duty on powerlooms

dear sir, your article is excellent. I have also written a article to Business Standard. But it is yet to be pulished. I am a ...

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