The Paper has proposed that India should negotiate a few free trade agreements (FTAs), regional trade agreements (RTAs) and comprehensive economic cooperation agreements (CECAs) that facilitate export of manufactured goods and services.

The paper captioned ‘India's Merchandise Exports: Some Important Issues and Policy Suggestions' notes: “India's push towards regional and bilateral agreements should result in meaningful and result oriented FTAs /RTAs/ CECAs. So a reality check of existing RTAs//FTAs/CECAs is needed.”

It says: “Some FTAs/RTAs/CECAs of India have led to an inverted duty structure (IDS)-like situation with import duty on some finished goods being nil or lower than the duty on raw materials imported from other countries. Besides, the domestic sector involving livelihood concerns has also been affected by some of them.”

Under IDS, finished goods are taxed at lower rates than raw materials or intermediate products which discourage domestic value addition.

As regards special economic zones (SEZs), the Paper notes that “SEZs were promised a tax-free regime, but minimum alternate tax (MAT) on SEZ units and developers and dividend distribution tax (DDT) were levied two years back. These have impacted the long term stability of the scheme and investor‘s confidence in SEZs and investments into SEZs have slowed down.”

It says: “A clear signal needs to be given for Indian SEZs as fresh investments are slowing down in recent years and the greenfield SEZs have not really taken off full swing.”

It adds Some other issues related to SEZs include the non-applicability of FTA concessions for SEZs‘ sales in domestic tariff areas (DTAs) need to be sorted out.

Referring to multiple and overlapping export promotion schemes, the Paper proposed restructuring of the schemes to a bare minimum to reduce transaction cost and trade litigations.

It says: “There should not be many rates of concessions. Even for duty drawback scheme, there should be limited rates instead of having different rates even for similar items. This will make things simpler and limit discretionary decisions. Wherever tariffs are low or can be reduced, export incentives should be withdrawn as the transaction costs would be higher than the benefits owing to duty concessions.”

It has also built a rational case for strengthening export credit facilities in India and reducing their costs. It says: “Export credit as a proportion of net bank credit has declined from 9.8 per cent in March 2000 to 3.7 per cent in March 2013. While many countries such as Canada, Germany, Italy, Japan United States, China, etc., have become aggressive in their export credit financing, India has been losing its export potential, due to paucity of export credit.”

Calling for developing export infrastructure on a “war footing”, the Paper notes: “Export infrastructure, particularly ports-related infrastructure, which affects trade, needs immediate attention. Port infrastructure issues include poor road conditions and port connectivity, congestions, vessel berthing delays, poor cargo handling techniques and equipment, lack of access for containerized cargo, and frequent EDI server down or maintenance, resulting in multiple handlings, increased lead time, high transaction costs, and thus loss of market competitiveness.”

As put by the Paper, “If we compare the share of India and China in 1990 (after which economic reforms were introduced in India) and 2013 (the latest year for which data are available), India‘s merchandise exports share in world exports increased from 0.5 per cent to 1.7 per cent and China‘s share increased from 1.8 per cent to 11.8 per cent. India‘s aim should be to increase its share in world merchandise exports from 1.7 per cent in 2013 to a respectable ballpark figure of, say, at least 4 per cent in the next five years. For this the CAGR of exports in next 5 years should be around 30 percent, which is not an impossible task.”