Modi unveils new trade policy, to increase exports to 900 billion $ per year by 2019

With a view to make India a significant player in World trade the Government of India unveiled its Foreign Trade Policy on April 1^st.  It sets a very ambitious target to double exports by 2020 to $900 billion. India's total exports were $465.9 billion in the 2013/14 fiscal year that ended on March 31, 2014. At present its share in global exports in under 2%. India’s share in global trade (overall) languishes much behind other big economies. It stands at about 2.07 % for the year 2013. India’s exports have not grown in the recent years. The slowdown in EU and US, has accounted for this stagnation. USA has fared better but European Union which is a big partner has slowed down. The turmoil in the Middle East also has compounded the problems. European Union, Japan, Russia and Middle East combined account for 20% of Indian exports. 

India exported goods worth $312 billion in 2013-14. Here is table showing the stagnation that has hit India’s overall trade with the world. Exports for the years 2014-15 are most likely to be in the same range.

Year	Total Trade : Value in US $ Billion		Percentage share of India   in World Trade
	World	India
2011	36830	767.4	2.08
2012	37012	785.4	2.12
2013	37658	778.3	2.07
Source: World Trade Organisation ( Calendar Year )

Talking about the new policy, Commerce Minister Nirmala Sitharaman said that PM Narendra Modi's pet projects, 'Make in India' and 'Digital India' will be integrated with the new Foreign Trade Policy.

The new policy will focus on sectors like defence, pharmaceuticals, green goods, e-commerce, hi-technology products and project exports.

 How it is going to happen

The Foreign Trade Policy (2015-20) is supposed to focus on tasks that will make it easier to do business in India and reduce bottlenecks. It will seek to change the perception of India as a not so business friendly country by working in collaboration with Digital India campaign making full use of technology.

Ø  It proposes to develop online procedures to upload digitally signed document by Chartered Accountant/Company Secretary/Cost Accountant to be developed.

Ø  No need to repeatedly submit physical copies of documents available on Exporter Importer Profile.

Ø  Inter-ministerial consultations to be held online for issue of various licenses

India followed the SEZ model (Special Exports Zone), however it hasn’t quite worked as expected. Out of formally approved 566 SEZs, only 185 are in operation. SEZs contribute to about 25% of our exports.  FTP 2015-20 introduces two new schemes, namely "Merchandise Exports from India Scheme (MEIS)" and "Services Exports from India Scheme (SEIS).  The 'Services Exports from India Scheme' (SEIS) is for increasing exports of notified services.

It has reduced Export Obligation (EO) (75%) for domestic procurement under EPCG scheme.

New Initiatives sector wise

Defense

352 defense related products including the core products, dual use products, general use products will be supported under the MEIS.

E Commerce

The new policy will support exports of Leather products, handloom, books, toys, leather. The value of each consignment will have to be above 25000, it would have to be exported under courier regulations. 

SEZs

The benefits of SEIS and MEIS have been exported to units located within the SEZs.

Branding:

To strengthen the Brand India, a branding campaign in the pharmaceutical and engineering products will begin soon. Also a plan will be devised to improve the quality of Indian merchandise.

Strategies for different markets

European Union:

The focus will be on meeting the phytosanitary standards of EU. Also India would focus on increasing the value the addition to the products which it exports to Europe, processed foods, services etc.

USA:

The focus will be on resolving the Intellectual property rights issue, ensuring access to skilled professionals. All the employment generating sectors will continue to receive attention.

South Asia:

Focus areas will be textiles, engineering goods, automobiles, and pharmaceuticals, plastic and leather products

Africa:

Agro-processing, Mining, textiles, Mining, infrastructure, Development and construction projects.

Latin America

Large scale farming would a major focus area there, also exploiting the raw materials will be on agenda too.

CIS (Kazakhstan, Uzbekistan and former Soviet Union states)

Operationalizing the International North South Corridor.

China

Seeking access to Chinese markets in services, Pharmaceuticals, IT sectors. Removal of non-tariff barriers will also be on agenda.

Summary

 It provides a stable and sustainable policy environment for foreign trade. It seeks to diversify India’s foreign exports basket, strengthening Brand India and giving a boost to merchandise and services exports. It would be reviewed after two and a half years. It also mainstreams the states and union territories by establishing a Council for Trade Development and Promotion which will have representatives from the states and UTs.

The policy is very well calibrated to strengthen the Indian economy’s links with the global economy

Note : This article was originally published on Narendra Modi Portal, TheKarmayogi...Please check it for more articles on Narendra Modi and his plans for developing India

http://thekarmayogi.com/modi-unveils-new-trade-policy-to-increase-exports-to-900-billion-per-year-by-2019/

Modi's Vision of Team India, Co-operate Federalism and 14th Finance Commission

Though the word ‘Federation’ doesn’t find a mention in our constitution and it declares India as a Union, albeit India is a Federation with strong center. The circumstances at the time of independence mandated it be so. The times have changed and a policy shift is needed, a radical one. Going by the steps and his actions Modi is taking India successive co-operative federalism. He has been an advocate of the same since the days when he was chief minister of Gujarat. By accepting recommendation of 14^th Finance Commission report he has signaled a clear policy shift to co-operative federalism and competitive federalism too.

Modi has stated that his government is determined to take India in the era of ‘Cooperative federalism’ and ‘Competitive federalism’ replacing the earlier systems of centralized federalism in which the state governments were reduced to the states of subordinates to the central government’s overwhelming authority over all the 29 states and 7 union territories of India. 

He started his journey towards this radical but needed shift with dismantling the Planning Commission and announcing a new body called NITI Aayog, elaborately covered in the previous articles. Now by accepting the recommendations of the 14th Finance Commission headed by Y.V. Reddy, former RBI governor, he has indicated an action plan to implement the same.

This articles doesn’t delve more into the details and recommendations but tries to give reasons why this was needed.  

Preface:

Federation: The best example of a federation is USA which is result of agreement between states and where sates have more autonomy in terms of legal and administrative personality.

Co-Operative Federalism: National and state governments tackle issues together in a cooperative fashion as compared to the unitary system or a system which strong centralizing tendencies. This concept also traces its roots to USA. The center assumes role of a facilitator and states and center work as a team.

Why India needs Co-operative Federalism: We Need a Team India

The diversity of India’s geographic, demographic, political space and also the difference is level of development has made it necessary to give states more freedom with respect to implementing plans according to its needs. For example: A sanitation program that

attempts to solve problem of lack of toilets would be more needed in other parts of India than Sikkim, Goa, and Kerala.

 Under this model the center becomes enabler and states get more freedom and autonomy to make plans according to their needs taking into account their location, demography etc. In words of Narendra Modi “Can we develop a new mechanism, that plans according to India's strengths, empowers states, and brings on board all economic activity, including that which happens outside the government,"

It is worth noting that even in 2012 the parliamentary committees had recommended a serious re-look at Centralized Planning model, Modi has gone ahead with a great emphasis on that.

What the 14^th Finance Commission attempts to do

Modi Government accepted the recommendations of 14^th Finance commission on February 14^th, 2015.

What is Finance Commission?

It is a statutory body (set up in the constitution, Article 280). It deals with following:

1. Distribution of net proceeds of taxes between Centre and the States, to be divided as per their respective contributions to the taxes.
2. Determine factors governing Grants-in Aid to the states and the magnitude/amount of the same.
3. To make recommendations to president as to the measures needed to augment the Consolidated Fund of a State to supplement the resources of the panchayats and municipalities in the state on the basis of the recommendations made by the Finance Commission of the state.

It decides how the revenue will be divided between center and states (Vertical Distribution) and between different states (Horizontal Distribution)

What’s most noteworthy about it?

The salient feature of new fiscal federalism is that there is a ten per cent increase in the share of states in the center’s tax revenue from earlier 32 per cent to 42 per cent. (from the Divisible Pool)

Modi himself stated that the “states are free to change” centrally sponsored schemes and they should “decide for themselves”. 

Governing Principles (weight-age in percentage)

Though the increase which is 10 % is lowered when adjusted against the budget dilutions as there would substantial reductions in the centrally sponsored schemes. But still there is a significant increase in the state’s resources and enhances their resources and also their responsibility and would be expected to display financial prudence and discipline.

It is not that the Planning model would be abandoned, on that things would be clearer when details of NITI AAYOG would be out.

Summarizing:

Though there were voices of dissent, like eminent economist and a member of the 14^th Finance commission Abhijit Sen.  Some ‘enlightened’ voices are saying this Fiscal federalism is only pretense to facilitate the emergence of capitalist market system for the whole country. But as Victor Hugo said, nothing is as powerful as an idea whose time has come.

Including the increased share of devolution from the ‘divisible pool’, now more than 70 percent fund will flow through the Finance Commission .This is indeed a very welcome move that will strengthen the states and give them liberty to choose according to their needs, also making them more responsible.

With 14^th Finance Commission, the question is not of arithmetic (32 % VS 42 %) but signaling of a policy shift, we say great going.

Note : This article was originally published on Narendra Modi Portal, TheKarmayogi...Please check it for more articles on Narendra Modi and his plans for developing India

http://thekarmayogi.com/modi-accepts-14th-finance-commission-report-gives-more-fiscal-autonomy-to-states/

  

Kashmiri Pandits: Why we owe them a collective apology and a corrective action now

Comparing Kashmir with Palestine is an absurd, misplaced thought. Palestinians are a persecuted community, wronged by the west. Kashmiri pandits are also a persecuted but resilient community, wronged by the country because their number strength does not guarantee enough political mileage. Kasmiri Pandits are the Plaestinians of kasmir. The land belongs to them first, before anybody else.

They had to leave Kashmir for security reasons...no matter how good and welcoming the Kashmiris would be to them, there would always be threats to their security.  Goodwill does not solve security problem...it has been there all along...it was pretty much there in the late 80s and early 90s too but it could not stop their exodus. Kashmir today has become radicalized, The Kashmir in the early 20s do not view them a part their culture.

 I have had interactions with many Kashmiri Pandits​ in past 9 years, in Delhi and Punjab. The circumstances in which they had to leave Kashmir were unbearable. A kashmiri Pandit, 'Kaul' told me that her father decided to leave when his younger brother (her late uncle) was shot dead by a bullet fired from a worship place...not very far from her house.

In my interactions with them I came know to that Kashmir are divided on the basis of age. The older ones are still more welcoming but the generation that grew up after the militancy rise in Kashmir views them differently.

Most people in India are family oriented, who do not want to jeopardize the lives of their near and dear ones. The government should move ahead with the plan. If they cannot be settled in the mixed townships then there should be separate townships for them, in any case there would be dangers to their security but the later one has greater chances of success.

We, as a society, proud of our democracy, freedom of speech, our constitution owe a collective apology to our Kashmiri Pandit brethren.