New Integrated Five Year Foreign Trade Policy

Different Foreign Trade Policies of India in the past are typically made to resemble each other. Not because our Babus where reluctant to apply innovation, ingenuity to the subject but because it was always good to maintain status quo. Status quo has been good for the industry since it makes things more predictable and long term planning at the organizational level can be done more so while dealing with large international foreign partners. Nevertheless it is very unlikely that the most anticipated Foreign Trade Policy 2015-20 (or 2014-19) is going to resemble the earlier ones. Probably this is the reason new government is taking its own time to announce the same which is pending to be announced since April 2014.

Institutions representing different stakeholders have already given their inputs for the new integrated five year foreign trade policy. Federation of Indian Export Organization had suggested applying more focus on ‘Services Exports’ and ‘High Tech Products’ in the anticipated policy. Services sector which contribute around 55% to the total GDP is comparatively a laggard when it comes to overall export of India which has been languishing around 300 Billion USD per year over the last few years. Growth of overall exports is sluggish and an only area for further gains seems to be services exports.

All of the export and import activities of India are governed by foreign trade policy aim of which in the past has solely been to enhance exports and facilitate imports for overall economic growth of the country. The share of India in the world trade has been dismal 2 % approximately in recent years as against the approximate 11% share of China. No wonder it remains one of the major objective for any foreign trade policy of India to increase its share in the world trade. Typically the objective of the new integrated five year policy too will aim at more than doubling India’s share in the world trade in next five years. New Policy is likely to echo many of the recently announced missions of ruling party BJP, more importantly ‘Make in India’, ‘Smart Cities’ Project, ‘Housing for all by 2020’ and probably also about ‘Swachh Bharat Abhiyan’.

Directorate General of Foreign Trade was already giving final touches to the new foreign trade policy by as early as August 2014. Why the new government has probably taken time is to incorporate the significant provisions of foreign trade policy in order to leverage foreign trade exploits for these missions. One of the schemes which have always benefitted from past foreign trade policies measures is the Export Promotion Capital Goods (EPCG) Scheme. In the wake of ‘Make in India’ mission, there are likely to be significant further gains for the aspirants, under this scheme. Probably these gains will be more significant than tried in earlier policies.

However WTO guidelines will ensure there are no ‘knee jerk’ measures to boost exports. One of the areas which are likely to be the major focus of the new foreign trade policy seems to be the ‘simplification of foreign trade procedures’ both for exports and imports. This goes well with the new government focus on improving India’s world ranking in ‘ease of doing business index’. A major focus can be in exploring new areas of ‘Electronic Data Interface’ between regulatory bodies, customs and traders. Inland tax formalities may also be made simpler. Likely impact of introducing GST in 2016 will require new provisions in procedures and documentation. However these provisions may not be announced in the main policy documents expected in next few months, but may be included in annual policy notifications.

With the new acts being already passed by the new government related to mining and industries, insurance and new initiatives related to expanding overall infrastructure of the country more specifically transportation, railways and ports facilities, a series of new measures helping these areas, are likely to be appearing in the new foreign trade policy. Aviation, waterways, seaways and railways are likely to be figuring prominently in the new provisions. There are likely to be new provisions helping develop high-speed railways and waterways infrastructure in the country. India, at present has very dismal know-how and technologies related to these areas and is solely dependent on foreign companies and foreign rolling stock.

There is likely to be a major thrust to regional cooperation including those related to SAARC nations, FTA partners and other regional blocks of the world. New provisions are likely in this regard in the forthcoming foreign trade policy. Regional cooperation has been associated with regional security in the South Asia and protection of India’s interests in the Indian Ocean. Therefore this regional cooperation is likely to include several far-east nations and Australia. ‘Market focused schemes’ are likely to be given new color in this respect. Our trade cooperation with countries like Sri Lanka, Bangladesh, Nepal and Myanmar among others in the neighborhood is likely to be taken care of.

International Tourism and Festivals of India

One of the most ignored part of India’s efforts to become a world tourism hub is its unique festival culture which can ensure year round inflow of tourist traffic. This video discusses about some of these great festivals celebrated in different parts of India. These festivals offer a unique experience to foreign tourists visiting India during these festivals. Discussion also touches upon the significance and meaning of these special events, folklore and culture.

The Lankan Opportunity

Hambantota

The March 13-14 visit of Shri Narendra Modi is the first standalone trip by any Indian PM to Sri Lanka since last 28 years. This is likely to be one of the most watched visits of PM Modi by China, if you look at what China has done in last 10 years to further its ‘String of Pearl’ strategy in Indian Ocean. It is more a luck than a geopolitical maneuver that Sri Lanka is not going all out to woo China’s investments in this small southern neighboring nation of India. With the recent change of government at Sri Lanka, situation is more favorable for India to counter the ‘String of Pearl’ at least in Sri Lanka, the strategy so passionately crafted by China in India Ocean. High interest rates at which China advanced its credit lines and personal favors given by China to erstwhile powers in Sri Lanka ensured that Sri Lankan mood is not very favorable for more Chinese favors especially in its infrastructure sector, more specifically in new ports and current port city development in Colombo. Sri Lanka has now increased its review of most construction projects with China.

This geopolitical opportunity should not be missed by India. It is important that India siege this opportunity by ensuring all cooperation to Sri Lanka to meet its aspiration to become a powerful maritime nation similar to what Singapore is today. It is in the interest of India to have a strong and rich maritime nation in its neighborhood. For one Sri Lanka being a smaller nation, is easy to take to next level of development than India. Secondly Sri Lanka being closer to International Maritime highways and situated at probably more strategic maritime location than even Singapore, India can benefit with maritime progress of Sri Lanka by having strong logistical connectivity with this smaller neighbor. Geographical proximity makes India its natural partner in International Logistics and a large scale third country foreign trade. China’s natural advantages with Sri Lanka are far limited. SAARC platform is already in place for an all out trade cooperation with Sri Lanka, where China is at a disadvantage.

Any regular engagement of the type demonstrated by India in the past such gestures with Sri Lanka can’t ensure full exploitation of this unique geopolitical opportunity India is facing, probably for a very short period to exploit. Sri Lanka is key to the grand plans of China, who is pushing for a permanent establishment of infrastructure in Indian Ocean to benefit from the ‘String of Pearls’, starting from Myanmar port to Chittagong to Hambantota to Gwadar to Kenya and take it further to Atlantic Ocean. Such infrastructure will not only ensure complete Chinese domination of the sea trade highways of the world but also make it possible for China to ‘stock and sale’ most of its ‘manufactured goods’ throughout the Indian Ocean Highways at so called ‘Pearl Ports’. This will ensure making these goods much more price attractive to Western Nations, who will be able to get quick deliveries, severely denting Indian price attractiveness, whatever the outcome of ‘Make in India’ mission.  Military and defense consequences are also diverse in such situation.

India has already lost similar opportunities to contain Chinese advances in Indian Ocean by consistently ignoring larger trade cooperation and investments in Bangladesh and Myanmar especially in Maritime sectors. Rather India chose to engage Vietnam in South China Sea, the location which is relatively more difficult to monitor and is perhaps militarily more dangerous place to indulge. India’s major opportunity had been the SAARC platform in order to simultaneously engage most of our strategic neighbors. This opportunity may still be there but for the perception of the SAARC members about the efficacy of the institution now.

Presently, with new government is place, Sri Lanka is looking at its largest and nearest neighbor to come out with more suitable options and ideas to help Sri Lanka emerge as an economically powerful and strategically important South Asian nation. India can really do a lot for Sri Lanka at this juncture to make it happen for it. The situation seems to be similar to creating what today is ‘Singapore – Malaysia’ equation, where a larger Malaysia’s current progress is pegged with that of its smaller neighbor Singapore. No one can deny the contribution of Malaysia in providing general support to Singapore become what it is today. That contribution is now the best economic defense for Malaysia for any future economic recession.

Let is wait and watch how our PM is able to siege the opportunity.