Commerce Ministry’s report card on government’s one year

The Commerce Ministry headed by Nirmala Sitharaman has had to battle a weak global environment, which has hit the growth of Indian exports. She also had to woo foreign investors to buy the India story again and get the ball rolling on the governments ‘Make in India’ mission. Exports are down, FDI inflows are higher year to date and liberalisation of the FDI caps in sectors like insurance and defence could see things improve even further. No ‘acche din’ for exports Indian exports have not seen any “acche din” under the Modi government in the past one year. When BJP’s firebrand spokesperson Nirmala Sitharaman took over as the Commerce and Industry Minister in May 2014, she inherited a double digit export growth, but a year later India’s exports were in deep red. India recorded an export growth of 12.4 percent in May 2014, but within 4 months, exports growth slipped to single digits and in April 2015, hit rock bottom by declining 21 percent at USD 24 billion. A massive 35 percent decline in exports to EU, combined with weak export demand from Asian markets pulled down India’s exports. But what made matters worse was an outdated foreign trade policy, which was being administered under extension by Udyog Bhawan. Plugging the loopholes Sitharaman announced a new foreign trade policy on April 1. Two new schemes were launched by amalgamating old policies through which government will refund 2-3 percent of the value of a consignment to exporters. A similar scheme for service exporters that is hotels, IT, hospitals, and accountants serving foreign clients was also launched. The contentious issues In the past one year, Commerce Ministry engaged with trade bureaucrats from US, Japan and China in an effort to bridge differences over issues like Intellectual Property Rights (IPR), trade deficit, market access and easier investments. These dialogues led to formation of inter-ministerial panels to facilitate trade and investments from US, China and Japan. While, on the trade front, the Modi government is yet to show conclusive results, one saw big bang policy interventions on the investment side. FDI in railway and infrastructure was fully opened, FDI in construction development was eased with relaxed norms for minimum area and lock in period, FDI in medical devices was opened and FDI in defence was hiked to 49 percent. The defence sector also saw validity of industrial licences being hiked to 10 years and Department of Industrial Policy and Promotion (DIPP) cleared licence applications which were stuck for over 5 years. The ‘Make in India’ push The biggest initiative to boost investments came through the DIPP’s ‘Make in India’ campaign through which 25 focus sectors will see interventions related to ease of doing business and creation of new infrastructure. Since the launch of Make in India campaign in September, FDI equity inflows in to the manufacturing sector rose by an annual 45 percent. In fact, in FY15, FDI equity inflows grew an annual 26.15 percent at USD 31.8 billion as against 10 percent rise a year ago at USD 25.27 billion. Boosting India’s global appeal The Ministry will need to work on ensuring a better ranking for India in the doing business index, which will be released this autumn by the World Bank. But for that to happen, the ministry will have to convince states to adopt best practices like a robust single window clearance system and time bound approvals at the ground level.

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