An outstanding FTP well worth the wait

The Foreign Trade Policy, which has been almost 10 months in the making, was, on the whole, worth the wait as it has created an export- friendly environment by easing ways to do business, something the export community had been pleading for over the years. The commerce ministry, with the cooperation of the revenue ministry, has to be complimented for going into the micro details that have been hampering exporters, who were handicapped like participants in a threelegged race. The possibility of exporters meeting the $ 900 billion target in five years is fairly positive as the global economy also is expected to revive by then. The FTP has many outstanding features, but among the most welcome are the provisions reducing transaction costs, simplifying processes by the introduction of two umbrella schemes ( Merchandise Exports from India Scheme and Service Exports from India Scheme), paperless transactions, transparency, digitisation, provisions to make complaints online and liberalising the use of “scrips”, or tax credits, to enable exporters to use them to pay import duties, excise duties and service tax. Transaction costs were estimated to be almost eight to nine per cent of total manufacturing exports. One estimate is that of total exports of $ 303 billion, transaction costs amounted to over $ 14 billion. It added significantly to affecting the competitiveness of exporters. This is now expected to come down to one per cent if the policy works as envisaged. What is important is that with total digitisation of processes and procedures exporters will not have to submit over 90 documents for applications and permissions.

Another important achievement of the FTP is the time limit set for all the work to be done. For example, an import licence has to be given in 48 hours, but earlier you were lucky if you got it in six months or a year. Or the electronic export- import code, which is mandatory, will now have to be given within two working days of application; earlier, it used to take several months. The interface with the bureaucracy has been eliminated; this will bring down corruption to near zero. Whilst the FTP has removed several elements of subsidy to be in tune with WTO requirements, there are enough incentives to boost the animal spirits of the exporters. Getting the states involved is a huge plus that has to be welcomed because the state governments have a big role to play in easing the way of doing business.

Now whilst a policy may be superbly drafted, the taste of the pudding is in the eating. One has to see how these are implemented at the ground level. There will have to be strict monitoring of the policy, perhaps on a six- monthly basis, by the Prime Minister himself, at least in the first year.