South Asia Blog: Indian companies welcomed the new interim trading policies of the Commerce and Industry Ministry

On February 26, 2009, Kamal Nath, Commerce and Industry Minister, India, declared a new set of business policies that further simplified various export procedures. Indian businessmen welcomed this new interim trade policy. Mr. Nath was hopeful that India would suffer less from the global economic slowdown. In 2008, India set an export target of $200 billion and earned $162 billion from exports. Mr. Nath expects that the amount would increase upto $175 billion in the fiscal year of 2009 despite economic recession. Indian government has set a target to double the amount of trading in the next five years. The government has also made necessary recalculations of FDI.

Indian government has decided to increase the number of nominated agencies, declared Surat as a town of export excellence, and increased the amount of jewelleries that can be carried personally. It also decreased the custom duty under Export Promotion Capital Good Scheme (EPCG) to 3% from 5% and extended the Duty Entitlement Passbook (DEPB) upto the month of December. Mr. Nath hopes to achieve exports worth Rs. 90,000 crore from Special Economic Zones in 2008 and 2009.

After years of robust growth, currently, export, which makes up approximately a fifth of the annual GDP of India, contracted sharply to 16% in January 2009 and would further fall in the next two months due to worldwide economic recession. In order to cope up with the declining exports, Indian government cut interest rates since October 2008, decreased duties and increased subsidies for exporters.

Indian companies are saying that this new trade policy would give courage to exporters who are incurring losses in the face of worldwide economic recession. A Sakthivel, President, Federation of Indian Export Organizations (FIEO), said that the measures were pragmatic and it would save valuable time and money of the exporters. Confederation of Indian Industry (CII), another major Indian business body, also expressed its happiness over the new foreign trade policy. Chandrajit Banerjee, Director General, CII, said that the announcement of the supplement trade policy would go a long way in increasing employment and increase export.

However, export lobby group are asking for more incentives to cut further losses. FIEO requested the government to simplify the reimbursement procedure for instant refund of service tax.

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(This entry was first published in February 2009. Because of a technical problem, the entry had to be deleted and I am reposting again now.)