Policymaking space has been curtailed

Tag : Riding Garments

The Union ministry of commerce & industry ritually announces anannual supplement to the foreign trade policy in April every year,wherein changes are necessarily made within the broad framework ofthe goals set out in the governments five-year trade policydocument. These changes in policy necessarily address thechallenges emerging from changes in global trade and the problemsfaced by the countrys trade sector in such changing situations.Such an annual supplement is also expected to review whetherpolicies have achieved the medium-term targets. As a result, in allsuch instances, international traders expectations run high.
Like in earlier years, the government announced its annual tradepolicy recently. It was expected to bring in changes that addressthe current concerns of Indias export and import trade. Such tradepolicy statementswhether short- or medium-termand theireffectiveness have to be gauged against current trade concerns, andthe space available for policymaking in general. With regard to thelatter, with extensive liberalisation of the trade sector in termsof qualitative restriction removal and tariff reduction, the spaceavailable for policymaking has been curtailed.
To me, trade policymaking in India now remains restricted to tradefacilitation measures through procedural simplification andaddressing challenges arising out of the globalisation process, inparticular WTO-related issues. Trade policymaking in India, thus,has a rather limited scope in general and such annual supplementsto foreign trade policy have further limited scope. Before gettinginto the question of what this policy document delivered, it isprudent to observe the concerns of the trade sector.
Even though Indias exports and imports have grown robustly in thelast five years, export growth performance has not beenparticularly encouraging during the past one year. The evidence ofa slowdown in export growth, even though widespread, isparticularly alarming in case of labour-intensive manufactures,including textiles & garments, gems & jewellery, and leather &manufactures. Much of this slowdown is on account of a 12%appreciation of the rupee against the dollar during this period.Even though the exchange rate has stabilised at around Rs 39.50 adollar, year-on-year appreciation of the currency continuesunabated and is likely to remain in place for some time.
Riding the impact of currency appreciation is the impact of theslowdown in the world economy. In particular, the slowdown in theUS economy, one of Indias major trading partners, has contributedin a significant way to the fluctuation in export...