Subsequent to China’s ‘Go West’ Policy, which aims at driving businesses, investment and talent further into the country from its prosperous Eastern shores, India is heralding in a ‘Go East’ policy, drafting trade agreements and hoping to boost exports with its neighbors to the East.
While India’s January exports rose by 32.4 percent year-on-year, positioning the country to exceed its target of US$200 billion by US$25 billion. The government now aims to double exports by 2014.
The country attributes this optimistic projection to two major factors one being measures undertaken by exporters such as increasing productivity, reducing cost and moving up the value chain which are now yielding dividends, and the second being that India has signed several Free Trade Agreements including that with South Korea, Malaysia and Japan. Similar trade pacts are being planned for ASEAN, Taiwan, the European Union, Israel, Australia, Indonesia and New Zealand. While this will not only aid India to increase its export portfolio, it will also aid to diversify its export basket. “When completed, such agreements would cover over a hundred countries spread across five continents,” Minister of State for Commerce and Industry Jyotiraditya Scindia told the Asia Times Online.
“Our focus [for exports] will be on Malaysia, Thailand, Philippines, Indonesia, taiwan and South Korea in Asia,” Scindia said. “Egypt and South Africa in the African continent; Argentina, Brazil, Chile, Colombia, Mexico and Uruguay in South America,” he also added.
India and the ASEAN countries signed a free trade agreement on commodities one year ago. India hopes that by 2012, the two sides will reach a comprehensive economic cooperation agreement which will realize free trade in services and investments, and bring an estimated trade volume of US$70 billion. Also India and Taiwan have already signed an investment promotion and protection agreement and are expected to seal three more deals on double taxation avoidance, temporary duty-free admission of goods, and customs cooperation within the next two to three months.
During the recently announced annual Budget, New Delhi also made changes to reduce red tapism and give exporters and importers more control. While they are a drop in a large bucket, the reprieve has lessened the export burden. Giving some relief to exporters, Mukherjee’s budget announced a self-assessment process for imports and exports to reduce transaction time and cost. Federation of Indian Export Organisations (FIEO) president Ramu Deora said the move would help India improve its unflattering ranking in the “Trading Across Borders” segment of the World Bank’s “Ease of Doing Business Index”.
Nonetheless, India has to find more ways to snip red tape and improve infrastructure, given that the 2010 Ease of Doing Business Index ranks India a measly 134th out of 183 countries overall, and 100th in the “Trading Across Borders” segment. In contrast, the index hails Singapore and Hong Kong as the world’s easiest places to do business both in overall rankings, as well as in the Trade Across Borders segment.
Efforts to try bridging the gap include a “Task Force to Reduce Transaction Costs”, headed by Scindia, to execute measures that could save exporters US$500 million annually in transaction fees as well as time lost in the bureaucratic labyrinth.
So far, about 23 of 44 roadblocks for exporters have been removed. But the measures – such as streamlining charges in ports, air cargo rates, round-the-clock working at bigger ports for faster clearance of goods – save only about 1 percent of the US$500 million of estimated transaction costs that can be cut.