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Strategy Paper

for theDepartment of Commerce

Submitted by

Jayant Dasgupta

&

Depinder Singh Dhesi

Phase V Training Programme, LBSNAA Mussoorie

January 7, 2011

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Table of Contents

Page

1. Section 1: Ministrys Vision, Mission, Objectives 3and Functions

2. Section 2: Assessment of the situation 6

3.

Section 3: Outline of the Strategy 11

4. Section 4: Implementation Plan 20

5. Section 5: Linkage between the Strategic Plan and RFD 22

6. Section 6: Cross Departmental and cross functional issues 23

7. Section 7: Monitoring and Reviewing arrangements 24

8. Annex 1: Strategic Targets for 2014-15 26

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SECTION- 1

Ministrys Vision, Mission, Objectives and Functions

The Department of Commerce has been tasked with the regulation,

development and promotion of Indias international trade and commercethrough the formulation of appropriate policies and their implementation.

This has also been stated in the Annual Report (2009-10) of the Department

as follows1:

The basic role of the Department of Commerce is to facilitate the creation

of an enabling environment and infrastructure for accelerated growth of

international trade. The Department formulates, implements and monitors

the Foreign Trade Policy which provides the basic framework of policy and

strategy to be followed for promoting exports and trade.

1.2 The Vision of the Department as enunciated in the Results Framework

Document (RFD) 2010-11 is to make India a major player in world trade by

2020 and for India to assume a role of leadership in international trade

bodies commensurate with its importance in the contemporary world.

1.3 The Mission of the Department outlined in the Foreign Trade Policy

(2009-2014) and the RFD is to double Indias exports of goods and services

by 2014 in the medium term along with doubling Indias share in global

trade by 20202 as a long term goal, through appropriate policy support. The

Department is targeting an annual growth rate of exports of 25% during the

period 2011-12 to 2016-17 to achieve these twin targets3.

1.4 The Objectives formulated by the Department are as follows:

(i) Apart from focusing on increasing our exports in traditional sectors

like textiles & clothing, gems & jewellery, handicrafts etc., sustained efforts

would also be made to give a boost to our exports in hitherto non-traditional

1Annual Report (2009-10) of the Department of Commerce, Government of India, New Delhi

2Foreign Trade Policy (2009-2014) and Results Framework Document of the Department of Commerce,

Government of India, New Delhi3

Strategic Plan (2009-10), Department of Commerce, Government of India, New Delhi

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areas like machinery and transport equipment (accounted for 37% of global

trade between 2003-07), chemicals, pharmaceuticals and agro-products etc.

(ii) Special efforts would be undertaken to increase the production,

productivity and profits of the plantation crops i.e. rubber, tea, coffee, spicesand tobacco, which have been a traditional source of strength for our exports

as well as providing employment to millions of workers.

(iii) Along with product diversification, efforts would also be directed to

diversify our markets instead of concentrating just on the traditional ones

like the US and the EU, because the advanced economies are expected to

grow much slower than the developing and emerging economies in the next

decade.

(iv) Steps would be taken to conclude our ongoing Free Trade Agreement

(FTA) negotiations and to conclude the Doha Round negotiations, which

would provide additional market access for our goods and services. Non-

tariff measures (NTMs), which adversely impact exports, would be

addressed both through the FTAs as well as the WTO.

(v) Concerted efforts would be made to reduce our trade related

transaction costs.

(vi) Infrastructure bottlenecks, especially in respect of power, roads,

railways and ports would be addressed on priority basis. The Assistance to

States for Development of Export Infrastructure and Allied Activities

(ASIDE) scheme would continue to be used to cover critical gaps in export

infrastructure. More allocations would be sought for the ASIDE scheme

coupled with improvements in quality of output and effective monitoring,

which would help address the infrastructure deficit in a speedier manner.

(vii) The coverage of export credit as well as its quantum needs to be

enhanced. This would be addressed in consultation with the Ministry of

Finance, including the feasibility of utilizing the foreign exchange reserves

of the country for the purpose.

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(viii) Protecting sensitive sectors of the Indian economy against the

adverse impact of trade liberalization.

1.5 The major functions of the Department are as follows:-

(i) Formulation of the Foreign Trade Policy, setting annual targets ofexports and implementation of programmes for increasing Indias exports

(ii) Implementation of Focus Market and Focus Product schemes for

export diversification, both in terms of new markets as well as products

(iii) Undertaking export promotion activities through Market Development

Assistance (MDA) and Market Access Initiative (MAI) schemes

(iv) Negotiation of bilateral and regional trade agreements with different

countries and trade partners for securing preferential access in their markets

(v) Negotiation of multilateral trade agreements in the WTO, UNCTAD

etc.

(vi) Facilitating the creation of infrastructure for promoting exports

through the implementation of the Special Economic Zones (SEZs) Act and

Assistance to States for Development of Export Infrastructure and Allied

Activities (ASIDE) Schemes

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SECTION- 2

Assessment of the situation

2.1 External Factors

2.1.1 A countrys export performance depends on a number of external

factors. First and foremost among these is the export competitiveness,

including the level of technological sophistication, of the major global

suppliers. On this count, the major threat facing the rest of the world is the

manufacturing behemoth that China has been able to put up since 1979.

Intertwined with its large capacities is the implicit and explicit subsidies that

its industries receive, specially for exports. Though the Chinese subsidies are

getting challenged lately in the WTO, because of the non-tranparent nature

of many Chinese government procedures, it would take a long time before

all the knots are unraveled. Another contributing factor to Chinas

competitiveness is the artificial pegging down of the renminbi, which makes

imports from China additionally attractive. In 2009, China emerged as the

largest exporting country in the world with 9.6% share of global trade,

thereby displacing Germany. It has also surpassed Japan as the second

largest economy, from the third quarter of 2010. Contrary to the dire

predictions of many economists, the Chinese economy did not suffer

much on account of the economic downturn and has bounced back tonear 10% growth levels in the second half of 2010. The Chinese with

their large pool of technical manpower and alleged reverse engineering

skills and persistent violation of IPRs, are also among the front runners

in the sunrise sector of green technology. With their IT skills and

rapidly growing numbers of English speaking young persons (including

the largest number of foreign students in the US, Australia, Canada, UK

etc) are poised to move up in the Services field also from their current

standing of 5.

2.1.2 The second factor impacting upon exports is the state of the global

economy. Indias exports, which recorded an average annual growth rate of

23.9% during the period 2004-05 to 2008-09, came down to 13.6% in 2008-

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09 and showed negative growth during 2009-104. The economies of the EU

and the US, which are still our major markets, have not recovered

completely from the economic downturn. Unemployment levels are still

quite high in these countries, leading to contraction in demand for consumer

goods. The EU has had to rescue Greece and Ireland from their sovereigndebt problems in 2010 and the US has had to unfold a $600 billion package

by way of Quantitative Easing 2 a few months ago to continue with its

stimulus to the economy. The net result is that consumer spending in these

countries is still low and luxury or gift items are not being purchased as

much as in 2007. This has affected the exports of many of our traditional

items like gems &jewellery, handicrafts and carpets. It has also impacted

upon our textiles and clothing exports because consumers are now more

likely to defer purchase of non-essential items.

2.1.3 Another fall-out of the economic downturn has been that investments

in the developed countries have come down, resulting in a contraction in the

demand for engineering goods, which is the largest sector of our exports

currently.

2.1.4 Our traditional strengths in exports have been our comparatively low

wages (steel forgings and castings, powerloom fabrics), our skilled workers

(carpets, gems& jewellery, clothing), low cost of primary raw materials(cotton, tea, coffee, rubber, iron ore, hides and skins), low import intensity

of raw materials (except rough diamonds) and low energy intensity of our

export products (handicrafts, hand-knotted carpets, gems & jewellery,

embroidered clothing). The typical Indian export oriented industry worker,

most likely illiterate or non-matriculate, is intelligent, skillful, innovative

and able to absorb and carry out instructions well. He is, however, saddled

with a high morbidity burden and is most likely working on piece rate basis

in the unorganized sector, staying away from his family and living in low

rental housing in slum like surroundings.

2.1.5 With our rising wages, low levels of mechanisation and productivity,

infrastructural bottlenecks and comparative lack of product development and

4Annual Report (2009-10), Department of Commerce, Government of India, New Delhi

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innovation, our exports have grown at a rate far lower than that of China or

the other East Asian tigers in the nineties. Unless we are able to break out of

this mould and provide products of greater technological sophistication and

variety at globally competitive rates, it might be difficult to make a

significant difference in our export performance in the years to come.

2.1.6 In order to achieve this breakthrough, we have, however, a very able

ally in the shape of our new generation of entrepreneurs/stakeholders, who

are young, energetic and willing to take risks. What they expect of the

government and the planners to do is to provide an enabling and facilitating

environment for them to go out into the global arena and climb new peaks.

These stakeholders want to have world class infrastructure, an inspector Raj

-free and hassle-free working environment and predictability and

transparency in government policies and functioning. This in essence is what

we need to deliver.

2.2 A SWOT analysis of our exports is presented below against the

backdrop of the above general discussion.

Strengths

Availability of most natural resources and long coastline

Diversified Industrial Base

Skilled manpower, including entrepreneurial ability

English language skills

Growing middle class and disposable incomes represent a

robustly growing domestic market

Low wages compared to all developed and emerging developing

countries like China and Brazil

Younger population as compared to all developed countries and

China

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Weaknesses

Major infrastructural deficit in terms of power, ports, roads,

railways

Lack of state of the art technology in many manufacturing sectors

Low investments in R& D

Low literacy levels and generally poor quality of technical

education (except in a few colleges)

Low productivity and high morbidity burden on labour

High transaction costs and cost of lending

Red tape and procedural delays (including in the judicial

proceedings)

Corruption

Opportunities

Good combination of skilled manpower and comparatively lower

wage costs could act as a catalyst to attract FDI for a wide range

of manufacturing activities, provided we bridge the

infrastructural deficit

Improvement in farm productivity and establishment of cold

chain could transform into an agro-products exporting power,

specially in fruits and vegetables

Large greying population among wealthier countries would

compel them to outsource many of their activities to lower cost

suppliers like India

The availability of large numbers of skilled IT professionals could

be leveraged to turn India into the global back-office

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Threats

Higher labour productivity, world class infrastructure and

large manufacturing base of China could make it difficult for

India to gain a larger share of global exports. Indias bilateraltrade with China is also currently running an annual trade

deficit of $17 billion.

Lower cost competitors like Bangladesh (in textiles and

clothing) and Vietnam (for textiles, clothing, tea, coffee and

some spices) could erode Indias share in global trade.

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SECTION - 3

Outline of the Strategy

3.1 Projections for exports

3.1.1 Indias exports of goods and services in 2009 were $ 155 billion and $

86 billion and its share of global trade was 1.2% and 2.6% in goods and

services respectively5. Including intra-EU trade, Indias standing was 22 and

12 among the worlds leading exporters of goods and services.

3.1.2 Based on WTO data on global trade in goods pertaining to 1990-2009

and taking the trend growth rate for this period, which was 13.27%, global

exports projection for 2014 and 2020 work out to $18450 billion and

$29,450 billion respectively6

. Indias exports share as a proportion of globalexports in goods in 2014 and 2020 works out to 1.64% ($303 billion) and

2.17% ($640 billion) respectively.

3.1.3 As regards Services, the projections indicate that global trade would

increase to $5050 billion and $8060 billion in 2014 and 2020 respectively, in

which Indias share would be 4.42%($223 billion) and 8.1% ($653 billion).

3.1.4 Thus the secular growth projections would appear to indicate that

India should be able to meet its twin export growth objectives for 2014 and2020 respectively. However, there are some major caveats to this, which are

discussed below. Before we proceed to discuss them, however, it would

be pertinent to point out that there are some gains to be made if we

align the timelines for meeting our objectives, to coincide with the 12th

Plan period (2012-17). This would be especially relevant for the areas

where inter-departmental coordination and joint efforts are required. It

is for the Department of Commerce to take a call on this issue.

3.2 Outline of Potential Strategies

5World Trade Report 2010, World Trade Organisation, Geneva

6Unpublished joint report of the Centre for WTO Studies and FIEO, December 2010

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3.2.1 At present, engineering goods, gems & jewellery and textiles &

clothing account for 19.8%, 17.8% and 11.3% respectively of our exports

basket. Petroleum products account for another 13.8% of our exports. The

value addition in gems & jewellery exports is low at present, because it is

mainly concentrated in the diamond polishing business. However, withbetter design inputs and product innovation and diversification, we can

increase our exports in this sector.

3.2.2 Similarly, there are natural limits to growth in the traditional products

of our textiles & clothing sector because of the structure of our industry (still

mostly in the small or unorganized sector) and our rising wages. Lower cost

producers like Vietnam and Bangladesh have already overtaken us in textiles

and clothing and we can only improve our position in this sector if we move

up the value chain by establishing brand names and designer labels as well

as venturing into the production of hitherto non-traditional items like mens

and womens business suits for example.

3.2.3 In the case of the leather sector, which provides employment to lakhs

of workers, our exports are mainly confined to exports of finished leather,

mens shoes, garments and accessories. We have negligible exports in

childrens and ladies footwear as well as non-leather footwear, which

together account for more than 80% of global trade. There is tremendousscope for improving our position in leather products and non-leather

footwear exports, provided we take the right policy initiatives.

3.2.4 It is most unlikely that we would be able to double our exports in the

medium term by just producing more of the same. It appears imperative

to have a paradigm shift in our manufacturing and exports strategy, so

as to move onto a different growth path. For this, we have to significantly

diversify our product basket in addition to putting in efforts to produce

higher value added products in our traditional exports sectors. The new areasin which we could provide a thrust could, for instance, include engineering

goods, chemicals and pharmaceuticals (including biosimilars), electronic

goods, agro-products etc.

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3.2.5 In order for us to move up the value chain, we would need to : (i)

provide R&D and state of the art testing facilities (ii) marketing support

for thrust sectors and countries, (iii) attract foreign investments and

technology through further liberalization of our investment regime and

schemes like the Special Economic Zones and (iv) build up a brand imageof quality and reliability for India, through use of the India Brand Equity

Fund and other appropriate schemes.

3.2.6 In view of the low growth rate projections for the advanced

economies in the next 4-5 years, the intense competition for market share in

these countries as well as the robust growth projected for the emerging

economies and some other developing countries, we could be benefited by

focusing our attention also on penetrating new markets. The bilateral Free

Trade Agreements (FTAs) and the Regional Trade Agreements, could

provide the right platform for moving into non-traditional markets, through

preferential access. Thus the emphasis has to be to conclude the FTAs that

India is negotiating as soon as possible along with entering into fresh FTA

negotiations with new trade partners where careful analysis indicates mutual

benefits for both partners. Efforts must also be made to conclude the Doha

Round as soon as possible because of the promise it holds for further trade

liberalization.

3.2.7 With the progressive reduction in tariffs, specially in the developed

country markets (the average tariffs in both the US and the EU are currently

at 4% for industrial products) and with further reductions proposed in the

Doha Round negotiations, tariffs are going to play a much reduced role in

inhibiting exports in future. On the other hand, non-tariff barriers (NTBs)

and Sanitary and Phytosanitary (SPS) measures are going to play an

increasing role in determining trade flows. In order to address these issues,

we would need to include a fast track mechanism for their resolution in our

FTAs. We would also need to push vigorously for reduction and elimination

of NTBs in the Doha Round negotiations.

3.2.8 Inadequate availability (specially to the MSME sector) and

comparatively high cost of export credit (as compared to the developed

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country or Chinese exporters) pushes up the costs of our exporters. In the

absence of Indian bank branches in many of our export destinations, our

exporters also have to rely on expensive third country banking services.

Consolidation of our nationalized banks (on the lines of what the SBI is

trying to do through mergers of its associates) will enable our banks to attaina critical mass and provide some of these facilities in our export destinations.

One of the ways of providing low cost short term credit in foreign currency

could be to access part of our foreign exchange reserves, which is invested

in foreign treasury bonds and other securities. The whole issue of adequacy

and cost of borrowing needs to be addressed urgently in consultation with

the Finance Ministry and RBI.

3.2.9 Another factor impacting our global competitiveness is our high

transaction costs. A part of this is infrastructure related but another part is

largely procedural. The latter could be addressed effectively through

appropriate IT solutions. Computerisation of clearances by Customs, DGFT

and other associated agencies and integration of their networks to facilitate

timely payment of duty drawback and other export incentives is imperative

to reduce transaction costs.

3.2.10 In Services, we would need to diversify beyond IT/ITES and Tourism

to get deeper into Financial Services, Telecom Services, Audio VisualServices, Professional Services (e.g. medicine, dentistry, nursing, law,

accountancy, management consulting, architecture, medical diagnostics)

etc. as well as developing better infrastructure for the Tourism sector, which

contributes significantly to our exports earnings. In order to make further

gains in both IT/ITES as well as professional services, we would need to

press hard for liberalization of Mode 4 (movement of natural persons) by the

developed countries in the Doha Round negotiations.

3.2.11 Our infrastructure, be it power, road, rail or port related, is alreadyunder tremendous pressure because of the demands placed on it on account

of our robust economic growth between 2003-08. With the anticipated

growth in exports as well as concomitant increase in imports in the current

decade, the pressure on our infrastructure is bound to get accentuated and

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hinder exports, unless we take advance action. A brief overview of our

infrastructural requirements is provided below.

3.2.12 Power

In order to meet our export targets, we would need to diversify our

exports basket significantly and get into more energy intensive

manufacturing processes as compared to handicrafts, gems &

jewellery, textiles & clothing etc. at present. This would require high

quality and uninterrupted power for our manufacturing hubs as well as

for our rail transportation network. There is already a significant

energy deficit in the country and even the modest target for additional

power generation during the 11th

Plan is not likely to be achieved.

This sector requires concerted efforts for improvement otherwise itcan act as a huge drag on our exports.

3.2.13 Ports

Ports handle 95% of our total trade in terms of volume and 70% in

terms of value. As per world benchmarking, efficient working is

achieved when the handling capacity of ports is 30% more than the

actual traffic handled. By 2020, our capacity requirement has been

estimated to be 3025 Million Tonnes (MT), whereas the plannedcapacity for 2020 currently is only 1685 MT- a shortfall of 1340 MT.

The Ministry of Shipping is going to come out with a Revised

Perspective Plan for 2020 shortly, which is expected to aim for a

capacity of 3200 MT for 2020. This Perspective Plan would need

adequate and timely financing for execution.

It has been noticed that even when our ports are able to handle the

cargo at their berths, a huge bottleneck is faced in the shape of

inadequate landside evacuation facilities. Thus there would have to besimultaneous development of the feeder rail and road networks along

with port development.

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Currently a lot of time and money is wasted by Indian exporters

because their goods have to be transshipped through either Colombo,

Singapore or Dubai. Effective steps need to be taken to reduce the

pre-berthing and turn around times of vessels, so as to attract mainline

vessels to Indian ports and reduce transportation costs and time.

3.2.14 Roads

Roads carry 61% of freight currently. With the anticipated growth in

export and import volumes by 2020, the road network would need to

be strengthened significantly. In India, expressways are nearly non-

existent, while Chinas highway network consists of over 45,000 kms

of 4 or 6 lane access controlled expressways linking its major cities.

Currently 6 lane highways constitute only 1% of national highways inIndia.

India does not fare well in speed comparisons of its trucks as well.

According to a World Bank study7, the transit time between major

cities in India, on average, is about 33% more as compared to the US.

Moreover, Indian trucks are used for 60000-100000 km a year, which

is less than a quarter of those in developed countries. A joint study 8 by

the Transport Corporation of India and IIM, Kolkata has estimated

that the average effective speed of trucks on Indian roads is only about

20 kmph, because of poor roads and check post delays. Apart from

increasing the width of the highways, the riding quality of the roads

needs to be improved and check posts across state borders need to be

eliminated.

3.2.15 Railways

As per the Ministry of Railways Vision 2020, the target for freight

traffic for 2020 has been pegged at 2165 MT. However, it has been

estimated that the projected traffic would be 4787 MT by 2020,

7Road Transport Service Efficiency Study, November 2005, Energy and Infrastructure Operations Division,

South Asia Regional Office, World Bank8

Operational Efficiency of National Highways for Freight Transportation in India, TCI and IIM Kolkata

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showing a large capacity deficit of 2622 MT. Thus a major thrust has

to be imparted to doubling and quadrupling of lines along major

freight paths and setting up dedicated rail freight corridors from the

hinterland to the major ports.

The size of freight rakes would need to be increased and they would

also need to travel at higher speeds to transport the cargo faster and

reduce transaction costs.

3.2.16Along with rapid and orderly growth of our exports, we have to

also ensure a level playing field for our domestic industry, vis a vis

imports. Large idle capacities and ability to subsidise products heavily

(like China for instance) can wreak havoc for the domestic industry

through dumped/subsidized imports. In order to counter this, we haveto strengthen our import monitoring mechanism and act quickly with

appropriate trade defense measures, to limit the damage.

3.3 Consultation with Stakeholders

3.3.1 The stakeholders would broadly comprise the industry representatives

in different sectors, the concerned administrative ministries and state

governments, research institutions, financial institutions, service providers

like Customs, DGFT, Power, Shipping, Road Transport & Highways, CivilAviation etc.

3.3.2 The Department of Commerce would need to play the role of a

coordinator and facilitator among the various stakeholders. The questions

that need to be asked of the industry and administrative ministries would be

directed towards identification of new thrust areas. The research institutions

would need to be involved in the discussions and asked for technical

solutions to problems that are perceived in the path forward. The industrys

feedback about reforms and procedural changes as well as infrastructurestrengthening would also need to be factored in appropriately. The mode of

interaction could be through open house sessions followed by brainstorming

and then formal meetings of a task force.

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3.4 Building up Knowledge and Capabilities

3.4.1 We need to continuously update both our technology as well as our

management practices to be globally competitive. The obvious source for

access to both the latest technology and management practices in the short tomedium term would be through FDI, joint ventures and outright purchases.

However, in the long run, we need to invest in R&D on our own to provide

our industry with a competitive edge. China has done this spectacularly in

recent times and in an earlier era Japan and Korea have done it. This would

need to be coordinated by the administrative ministries with the industry and

research institutions and the PPP model would be ideally suited for this

endeavour.

3.4.2 On another front, we need to build up our brand image and inculcatequality consciousness throughout our supply and production chain. As far as

brand building is concerned, the Department of Commerce has a vital role to

play in this endeavour, in association with the industry associations. On

inculcating quality consciousness, the major initiative would have to come

from the industry associations and administrative ministries.

3.4.3 We also need to have a sufficiently large number of trained personnel

in different departments of the government, who can take part in

international trade negotiations and contribute to the preservation andbuilding up of an institutional memory. For this we need to build up our own

training institutions, groom young officers and send them for specialized

training courses in India as well as other countries/international institutions.

We also need to build up our capabilities in the Universities and research

institutions to conduct applied research on trade issues. Finally, we need to

groom a set of lawyers in international trade law, who can represent the

government as well as individual firms in the trade defense proceedings

initiated by other countries against us.

3.4.4 We also need to sensitise and inform government departments and the

industry about the NTBs, SPS standards etc. prevailing in important export

destinations and in building up our own infrastructure and testing

capabilities to bring up our own domestic as well as export oriented industry

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segments to adopt global standards and best practices. The Apex Industry

Associations and the Export Promotion Councils and Commodity Boards

would have a leading role to play in this effort.

3.4.5 One of the other important points on which we would need to focuson is sensitization of our service providers to the impact of delays in eroding

our competitiveness in the global market and the national loss that it entails.

This would need to be carried out through Open House Sessions and

Partnership Building Exercises with the participants being the client group

and the service providers. This would need to be carried out under the joint

leadership of the field offices of the service providers as well as the local

industry associations.

3.5 Priorities in Strategic Initiatives

3.5.1 Based on the three criteria of suitablility, feasibility and acceptability,

we would suggest that the following weights be given to the strategic

initiatives listed in the foregoing paragraphs:-

Strategic Initiative 1 (Diversification of export product basket)-30

Strategic Initiative 2 (Diversification into non-traditional markets and

conclusion of ongoing FTA negotiations and initiating new FTAs)-20

Strategic Initiative 3 (Strengthening export related infrastructure)-10

Strategic Initiative 4 (Enhancing credit flows for exports at lower cost)-10

Strategic Initiative 5 (Reducing Transaction Costs)-10

Strategic Initiative 6 (Diversification of Services exports)- 10

Strategic Initiative 7 (Building up a Brand Image of India)- 05

Strategic Initiative 8 (Support to the Plantation Sector)- 03

Strategic Initiative 9 (Protection to sensitive domestic industries) - 02

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SECTION- 4

Implementation Plan

4.1 The Potential Strategic Initiatives have already been dealt with in

some detail in Section 3 and suggestions regarding their prioritization havealso been provided. The issue of stakeholder engagement and the learning

agenda has been discussed in paragraphs 3.3 and 3.4 of Section 3.

4.2 The resources required, whether in terms of human, capital or

infrastructure, for implementing the strategic initiatives, can only be worked

out after holding in-depth meetings with all the concerned stakeholders.

Many of the administrative ministries and state governments as well as

research institutions already have plans, schemes and projects under

implementation, which could be fine-tuned to fit the specific requirements of

each strategic initiative.

4.3 As far as the Department of Commerce (DOC) is concerned, it already

has both a Focus Product and a Focus Market Scheme in operation, for

diversification of export products and penetrating new markets. However, an

independent evaluation of these schemes, if not already undertaken, should

be immediately taken up to enable mid-course corrections as required. The

Market Development Assistance (MDA) and Market Access Initiative(MAI) Schemes of DOC may also require a similar remodeling to meet the

emerging requirements of different sectors.

4.4 In order to have quantifiable parameters to assess progress, detailed

sub-sector and year wise targets would need to be worked out in consultation

with the Export Promotion Councils, Commodities Boards, administrative

ministries and other stakeholders. By way of an indicator, we have

attempted broad sectorwise targets for 2014-15, which is at Annex 1.

The annual targets could be worked out from the overall milestonesfixed, with a certain amount of backloading towards the end of the

period. In addition to the quantifiable targets, the outcomes of the strategic

initiatives would have certain non-quantifiable targets as well, achievements

against which would have to be assessed in terms of the completion of

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certain activities. These activities would also need to be broken down into

elements and both financial and physical targets fixed, as far as practicable,

for each of these elements.

4.5 DOC would have to coordinate with the administrative ministries andother stakeholders to closely review the progress made against each element

of activity as well as the quantifiable targets, preferably on a quarterly basis,

and to examine suggestions for making mid-course corrections/amendments

to policies as appropriate. Currently, DOC brings out Annual Supplements

to the Foreign Trade Policy (FTP) by way of such mid-course amendments

to the five year FTP. If the requirements of major sectors so require, the

Annual Supplements could be converted to ones of a shorter periodicity.

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SECTION-5

Linkage between the Strategic Plan and RFD

5.1 Though there is a considerable degree of convergence between the

Strategic Plan proposed here and the RFD of the Department of Commerce,there are a few differences as well.

5.2 First, the convergence. Both the Strategic Plan and RFD emphasise

the importance of policy support in increasing Indias annual export growth

by a CAGR of around 25%. Both speak about diversification of Indias

exports through exploration of new and emerging markets as well as

promoting employment intensive products and products of high export

potential. The importance of leveraging the SEZ and ASIDE schemes to

narrow the infrastructure deficit is also underscored. Both documents

acknowledge that the FTAs should be used to gain additional market access

and trade facilitation measures are required to reduce transaction costs. Also

support for the plantation sector and increased exports of agro-products is

part of both the approaches.

5.3 On the differences between the two, the RFD prioritises the protection

of sensitive sectors of the Indian economy against the adverse impacts of

trade liberalization and facilitating improvement in the functioning of STC,PEC, MMTC, ECGC and ITPO. On the other hand, the Strategic Plan lays

emphasis on increasing the availability and lowering the cost of export

credit; export related infrastructure development in the power, roads, rail and

ports sectors; building up a brand image of India and diversification of

Services exports as being essential for the fulfilment of the Mission of the

Department. It also mentions protection to sensitive sectors of the

domestic industry as one of the initiatives, though low in order of

priority.

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SECTION-6

Cross Departmental and cross functional issues

6.1 International trade (exports plus imports) today accounts for

more than 40% of Indias GDP. Because of the rising prices of oil andour increasing current account deficit, we have very few options but to

focus on exports growth to reverse the trend.

6.2 Increased exports, especially in labour-intensive sectors like

carpets and handicrafts, gems & jewellery, leather, textiles & clothing,

plantation crops and other agro-products, provides an ideal marriage

between our twin goals of economic growth and greater employment

opportunities for our youth. Thus exports growth would contribute to

partially meeting the challenges of enhancing the capacity for growth as

well as enhancing skills and faster generation of employment, which

have been listed out as two of the challenges to be addressed in the

Twelfth Plan.

6.3 As regards meeting the Mission and Objectives of the

Department of Commerce, it would be essential to seek larger Plan

allocations for departmental schemes like ASIDE, MDA and MAI. Apart

from this, larger allocations for other departments to narrow theinfrastructure deficit for export related infrastructure as well as for

meeting the requirements of R&D support and capacity building, would

also be needed.

6.4 On the subject of Citizens Charter, the Department of

Commerce has a clearly enunciated Charter9 and has shown its

commitment to continuously strive to evolve procedures in the Foreign

Trade Policy that would be of maximum benefit to the public. The

Department has also put in place a Grievances Cell, a quasi-judicialAppellate Committee and a Grievance Redressal Committee.

9Annual Report (2009-10), Department of Commerce, Government of India, New Delhi

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SECTION-7

Monitoring and Reviewing Arrangements

7.1 The Department of Commerce interacts with a variety of stakeholders

on a regular basis. Officers of the Department are members on the Board ofDirectors of all the Export Promotion Councils and are abreast of the

developments/problems faced by the industry on almost a day to day basis.

All the Commodity Boards like the Tea Board, Coffee Board, Tobacco

Board etc. have officers of the Department as their chief executives, who

raise problems faced by the plantation crop growers or exporters with the

Department at the earliest opportunity.

7.2 There is, however, a lacuna in terms of absence of industry bodies

in various segments of the domestic industry, which can effectively

communicate their concerns to the government. To a certain extent this

is reflective of the small and decentralized nature of many sectors of our

industry. Nevertheless, this gap needs to be bridged and an effective

feedback loop needs to be established, perhaps through the agency of

the respective State Governments.

7.3 In addition to the mechanisms mentioned in paragraph 7.1, the

Department of Commerce organizes Open House sessions with exporters,industry associations and apex industry bodies before finalizing the Foreign

Trade Policy (FTP) or the Annual Supplements to the FTP. Meetings with

industry representatives are also held before each Budget Session.

7.4 The three major bodies under the standing institutional mechanism for

consultations on various issues and review are as follows.

(i) Board of Trade (BOT)- This provides an effective mechanism to maintain

a continuous dialogue with trade and industry in respect of major

developments in the field of international trade and make recommendations

to the Government for the various measures required for increasing the

competitiveness of Indian exports. The Board meets every quarter and is

chaired by the Commerce and Industry Minister.

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(ii) Export Promotion Board (EPB)- The Board is chaired by the Cabinet

Secretary to provide policy and infrastructural support through coordination

among different Ministries for boosting exports.

(iii) Inter-State Trade Council (ISTC)- The Council provides a platform fordialogue between the Centre and the States in matters relating to trade

facilitation and to create a framework for making States as partners in the

national export effort.

7.5 The Department of Commerce has resolved to hold regular meetings

of all the three bodies to make them more effective instruments in shaping

policy and in reviewing the situation on the ground.

7.6 It needs to be mentioned that the RFD itself is a review

mechanism and needs to be used to monitor the progress made in the

achievement of the objectives on a periodic basis. The MOUs signed

with the PSUs , viz. STC, MMTC, PEC, ECGC, ITPO need also to be

reviewed regularly in terms of the achievement against each and

subsidiary RFDs could be drawn up for subordinate organizations of

the Department.

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Annex I

Strategic Targets for 2014-15

(in billions of US Dollars)

Product 2010-11

(Estimated)

2014-15

Gems and Jewellery 32.75 64.00

Engineering Goods 45.00 92.00

Textiles

Cotton Yarn and Made- ups 5.00 9.00

Manmade Yarn and Made-ups 3.75 7.00

Clothing 11.00 17.00

Other Textile Products

Carpets 0.90 2.00

Jute Goods 0.45 0.75

Petroleum Products 35.00 61.00

Drugs, Pharma and Fine Chemicals 9.60 21.00

Other Basic Chemicals 7.60 17.00

Electronic Goods 5.50 10.00

Leather Goods 3.75 8.25

Plastic and Linoleum 4.20 8.00

Iron Ore 5.00 8.00

Mica and other minerals 3.10 5.00

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Marine Products 2.20 4.00

Agricultural Products

Fruits and Vegetables 1.20 2.50

Oil meals 1.70 2.80

Processed Cashew nuts 0.60 1.00

Rice 2.00 4.00

Spices 1.60 3.00

Tobacco 0.90 1.40

Tea 0.55 0.80

Coffee 0.55 0.80

Miscellaneous 16.00 50.00

TOTAL 200.00 400.00