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Trade Policy thrust to rural jobs;aims at 120 bn dollar export

Written by: Staff

New Delhi, Apr 7: Setting an export target of 120 billion dollars, the government today announced major changes in the Foreign Trade Policy with a focus on employment generation, especially in rural areas, and giving thrust to sectors like gems and jewellery, automobile, aviation, marine products and BPOs.

The Annual Supplement to the FTP 2004-09 scrapped the controversial Target Plus scheme and replaced it with the twin schemes of Focus Product and Focus Market.

''India's merchandise exports have crossed the magic figure of 100 billion dollars. In fact, they have touched the auspicious figure of 101 billion dollars with an annual growth rate of 25 per cent'', Commerce and Industry Minister Kamal Nath said while releasing the changes in the policy.

Imports have grown by 32 per cent and stand at 140 billion dollar of which 43 billion dollar is on account of oil imports. ''Our non-oil imports are 97 billion dollar, a full four billion lower than our exports. On the non-oil front, therefore, we have a positive balance of trade'', the Commerce and Industry Minister said.

Two new schemes will give a push to employment generation, particularly in semi-urban and rural areas -- a key objective of the foreign trade policy.

The schemes are the ''Focus Product Scheme'' to give a thrust to the manufacture and export of certain industrial products which could generate large employment per unit of investment compared to other products and the ''Focus Market Scheme'' to penetrate markets to which India's exports are comparatively low and which the exporters had been neglecting due to high freight costs and undeveloped networks.

The Focus Product Scheme would allow duty credit facility at 2.5 per cent of the freight on board (FOB) value of exports on 50 per cent of the export turnover of notified products, such as value added fish and leather products, stationery items, fireworks, sports goods and toys and handloom and handicraft items.

The Focus Market Scheme, on the other hand, allows duty credit facility at 2.5 per cent of the FOB value of exports of all products to the notified countries.

The scrip and the items imported against it for both these schemes would be freely transferable. The two schemes would replace the Target Plus Scheme.

These two schemes would be notified soon, Mr Kamal Nath said. In fact, according to sources, the Commerce and Industry, immediately after the release of the policy went to meet Prime Minister Manmohan Singh seeking his support for the faster notification of these schemes which have the revenue implications and have to be dealt with by the Revenu Department.

With a view to promoting generation of employment in rural and semi-urban areas, it has been decided to incentivise the export of village and cottage industry products by awarding a duty free scrip at the rate of five per cent of the FOB value of exports. This would be done under the expanded Vishesh Krishi Upaj Yojana, which has been renamed as Vishesh Krishi and Gram Udyog Yojana (VKGUY) A built-in incentive has been introduced under the VKGUY for exporters utilising domestic raw material for export production.

Such exports would now get additional benefits under the Vishesh Krishi and Gram Udyog Yojana at the rate of 1.5 per cent of FOB value of exports compared to those who use imported agricultural inputs who shall get benefits at a reduced rate of 3.5 per cent.

''This will encourage indigenous procurement of inputs for agricultural exports and help the farming community'', the policy document said.

Service exports in Indian ruppee, will now qualify for benefits under the Served from India scheme. In addition, the foreign exchange earned through the International Credit Cards and other instruments as permitted by the RBI shall be taken into account for the purposes of computation of entitlement under the scheme.

Benefits of the scheme earned by one service provider of a group company can now be utilized by other service providers of the same Group Company including managed hotels. ''The measure aims at supporting the Group service companeis not earning foreign exchange in getting access to the international quality products at competitive price and providing services of international standards''.

The Duty Free Replenishment Certificate (DFRC) is being phased out and the scheme will be available only for the exports upto April 30, 2006. The users of the scheme can migrate to the Duty Free Import Authorisation Scheme as it offers more flexibility.

Refuelling of long distance flights will now be treated on an equal footing with other exports and brought under the export promotion scheme.

Currently, most foreign airlines replenish supplies of food, beverage and other items or refuel at Thailand, Malaysia or Singapore. Since these supplies were not treated as exports in India so far and suppliers could not obtain the duty neutralisation benefits available to other export products, the store supplies were not competitive enough.

''We've decided to treat such supplies on an equal footing with other exports, qualifying for benefits under various export and promotion schemes,'' said Mr Nath.

The changes in trade policy also include permission to import second-hand aircraft spares on recommendation from the Directorate General for Civil Aviation (DGCA) Export oriented units have been allowed to set up retail outlets at international airports for sale of goods. The items remaining unsold for two months will be returned to the EoUs, according to the new policy decision.

The policy allows import of new vehicles by auto component manufacturers for research and development purposes without homologation.

India is fast emerging as an important centre for sourcing auto components and the Government has already extended a number of facilities to the sector However as the facility is for promoting R&D in the sector, the imported vehicles can not be registered under the Motor Vehicle Rules in the country.

''The vehicles will not be allowed to ply on India roads,'' the minister clarified.

Exports are likely to generate 81.57 lakh (8.1 million) direct jobs in the economy in the next five years.

''Doubling of exports to 150 billion dollars by 2009-10 is likely to generate 136 lakh new jobs (81.57 lakh direct and 54.61 lakh indirect) in the economy in the next five years,'' according to a report - Towards an Employment Oriented Export Strategies: Some Explorations - by Research&Information System for Developing Countries (RIS).

The report further said India's merchandise exports by 2009-10 could reach 165 billion dollar which would generate 21 million (210 lakh) new jobs (directly and indirectly).


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