Published: Financial Express, 14 October, 2004,

By Pradeep S Mehta

This year’s trade policy appears to be most ambitious amongst all previous policies as it aims to double India’s share in world trade to 1.5% by 2009. And accelerate development through an export-led strategy. However, this can succeed only when all stakeholders are involved in it. It is a pity that state governments have not been involved in the formulation of the new trade policy, without which we will not be able create a national movement which is so essential.

This becomes more crucial as nearly every state is also formulating its own industrial and trade policy. Rajasthan adopted a trade policy a few years ago, which set a target of 18% growth rate in exports. The new government will soon be formulating a new trade policy. Various other states too have been adopting trade and industrial policies to boost exports. In the 2003 Industrial Policy Statement of Gujarat, the government introduced special initiatives for 12 agricultural products, in consultation with APEDA.

However, some incentives have been provided in the new trade policy towards increasing state involvement through the Assist-ance to States for Infrastructure Development of Exports (ASIDE) programme. The promotional measures listed in the ASIDE programme include a suitable provision in the department of commerce’s annual budget for fund allocation to the states on the twin criteria of gross exports and the rate of growth of exports.

This amount will be available for a raft of activities: developing roads connecting production centres with ports; setting up of inland container depots and container freight stations; creation of new state-level export promotion industrial parks; equity participation in infrastructure projects; development of minor ports; setting up common effluent treatment facilities; stabilising power supply and so on.

This does reflect the realisation that there is a growing need for incentivising states’ export thrust. However, permeation of all this to the ground is yet to be seen. A substantial part of infrastructure-related policies fall within the jurisprudence of the Union List such as seaports and airports. Further, custom duties, tariffs and other revenue generation mechanisms in trade fall under the exclusive domain of the Centre.

The assessment of states’ comparative advantages has received a thrust in this new trade policy by special initiatives to promote towns of export excellence. However, there is little state-Centre formal cooperation in this domain. States also need to understand the contours of the international trading system operating under the WTO. A very small number of them have forayed in promoting WTO capacity building. For example, one of the objectives of the Industrial Policy Statement 2003 of Gujarat is “To equip the industries … to meet with the challenges of WTO regime as also exploit the opportunities to their advantages”. Similarly, Karnataka and Rajasthan have stepped beyond rhetoric to set up institutions to work on capacity building on WTO issues.

• There is a growing need to incentivise the states’ export thrust
• Promoting the states as stakeholders calls for out-of-the-box thinking

There have been times when state governments have been wrathful of the WTO, often reflecting the views of their constituencies. In Andhra Pradesh, the WTO has been blamed for the low prices of cotton, the subsequent impoverishment and resultant farmer suicides. In this milieu, confused stakeholders fall prey to misconceptions. The role of state governments in India’s international trade policy thus needs to be rejuvenated. There is clear need for both WTO-related capacity building as well as capacity building for export promotion.

“How do you promote states to be active stakeholders in promoting international trade”, is a question that requires out-of-box thinking on the part of the department of commerce such as establishing a national trade policy council. This body will have representation from the states, various central ministries dealing with WTO issues, research institutions, business chambers, trade unions, parliamentarians, media and NGOs. Such a council will have two broad tracks of work programme: firstly the foreign trade policy and secondly, trade agreements at the multilateral, regional and bilateral levels. If nothing else, the council will be a good forum to allow people to let off their steam and thus aid the process of better understanding. This will not only make the life of the commerce ministry honchos easy, but promote a national movement to enhance our international trade.