The new Foreign Trade Policy carries forward the Make in India scheme by incentivising foreign manufacturers to set up shop in India. However, the Government must ensure that the consumers’ concerns are also addressed
It is not a coincidence that the Rourkela Steel Plant’s capacity doubling inauguration by Prime Minister Narendra Modi and the unveiling of the Foreign Trade Policy 2015-2020 by Union Minister of State for Commerce Nirmala Sitharaman happened around the same time. Both have a common goal: Take India to new heights, ushering in better economic health and well-being of the citizens. The two events complement each other. The inauguration at Rourkela Steel Plant signifies India’s resolve to become a global manufacturing leader while the FTP aims to capture a larger chunk of the global trade. The iron and steel industry laid the foundation of the Indian economy in the 1950s and remains an integral part. The FTP, on the other hand, is crucial to improving the ease of doing business in India. It provides a framework increasing the export of goods and services and generating new employment opportunities. The plan is to support both the manufacturing and service industry.
Interestingly, there are also efforts to commoditise yoga, as a service export, to fulfill Mr Modi’s dream. Yes, yoga, India’s best known soft power export product, is now part of the country’s trade policy. The FTP aims to double exports from $466 billion in 2013-2014 to $900 billion. In 2014-2015, the exports moderated to $265 billion. The aim is to capture 3.5 per cent of the global trade annually. At present, India controls about two per cent. Ms Sitharaman says she will focus on addressing constraints within the country, including weak infrastructure and bureaucratic hurdles, and turn India into a major player.
India hopes that, over the next four years, the Modi Government will remove major hurdles like ambiguous tax and toll laws, complex rules, land problems, energy shortages and poor dialogue between the States and the Centre that have kept away large-scale private investments. The FTP 2015-2020 has introduced two new schemes: the Merchandise Exports from India Scheme (for export of specified goods to specified markets) and Services Exports from India Scheme (for increasing exports of notified services, which will replace a plethora of earlier schemes which had different conditions for eligibility and usage).
There will be no conditionality attached to any scrip issued under these schemes. Duty credit scrip issued under MEIS and SEIS, and the goods imported against these, are fully transferable scrip. Exports cannot form a large part of the economy unless India manufactures hi-tech, good quality goods. The Make in India drill, with a large defence manufacturing component, aims to plug this loophole. While it is not likely to happen in the next five years, there can be a small beginning. The new FTP has measures to nudge procurement of capital goods from indigenous manufacturers, under the Export Promotion Capital Goods scheme, by reducing specific export obligations to 75 per cent of the normal export obligation. This will promote the domestic capital goods manufacturing industry. Such flexibilities will help exporters develop their productive capacities for local and global consumption.
At the same time, e-commerce export of handloom products, books and periodicals, leather footwear, toys and customised fashion garments, through courier or foreign post office, will also get benefit of MEIS (for values up to Rs25,000). These measures will not only capitalise on India’s strength in these areas and increase exports but also provide employment. It is a step towards tailoring exports to suit indigenous manufacturing efforts. In a way, this also takes care of Mr Modi’s Rourkela mission that increases steel production capacity — which is essential for the success of the Make in India programme.
As a first, inviting foreign manufacturers to set up shop in India may be fine. In the long-run, however, that will not be enough. Many production houses, like Samsung, lG, IFB and even Videocon, have anti-consumer policies. This is turning a large chunk of Indian consumers against these companies. For example, for a small spare part worth Rs50, the consumer often has to pay more than Rs1,000 because the company insists that he or she get it fixed through their own agency — a forced service. For every such ‘extortion’, moving the consumer court is an uphill task.
The manufacturing sector can grow but there has to be standardisation and easy availability of spares to poor Indian consumers. That has to be part of the manufacturing policy. Manufacturing will grow on two counts: More employment and more purchasing power. The people also need businesses that won’t fleece them. If the Government ensures these twin objectives, the country can take a leap forward. Allowing manufacturing, while ignoring the needs of the consumer, is not the solution.