Indian Westerlies

The merchandise trade data  for June 2013 was released today . Exports for the month decreased by around 4.6% when compared to June last year, in dollar terms. It decreased by around 1.5% for Apr-June period of this year. So the start has not been good.  The imports decreased for the month by around 0.37% when compared to June 2012. However, for the Apr-June period, the imports have increased by around 5.99% over last year, in dollar terms. So, the trade deficit has widened this year, till now. It stands at around 50 Billion USD till now, compared to around 42 Billion USD last year.  The summary table is given below, from the Press information bureau report : So, to sum up, the year has not been very good. I will discuss about some of the reasons, and potential solutions in coming posts. 

I had covered the Part 1 of chapter 3 of FTP of India, here . The first part covered the promotional measures run by the Department of Commerce. The second part here would cover the promotional measures being run by the Directorate General of Foreign Trade  (DGFT).  A small rejoinder is in order at this point. The promotional measures run by DGFT in this chapter are mostly the incentive schemes that directly benefit exporters. Most of these measures incentivise exports through what is called 'duty credit scrip'. The duty credit scrips can be used to pay customs duty for imports, pay central excise duties or to pay service taxes (from the current year). The duty credit scrip is usually a small percentage of the total value of exports. No direct cash is given as incentives under this chapter. Some of these duty credit scrips are of transferable nature, that is, they can be sold to a third party who can use them for the stated purpose of paying duties/taxes. In this way, th...

India's current account deficit(CAD) is hovering at uncomfortable levels, despite an improvement shown in data released last week . The merchandise trade deficit is around the range of 200 Billion USD annually, which contributes major portion to the CAD. The gap is managed by capital flows and trade in services.  At such times, it is common to hear ideas to control trade deficit, and in turn, CAD.  I totally endorse those ideas that talk about deeper reforms and focus on issues such as infrastructure (power, ports, roads etc) and capacity building of institutions (financial, executive, judicial, regulatory etc). I also agree with ideas on measures that control inflation and talk about fiscal prudence and tax reforms. Lack of deeper reforms, irresponsible fiscal policies and inflation is at the heart of today's CAD. In this post, I am going to talk about ideas other than these. Most of such 'other' ideas aim at import control, directly or indirectly. Such suggestio...

I had given the introduction to Foreign Trade Policy (FTP) of India, here . This post will concentrate on third chapter of FTP. The third chapter concentrates on the promotional measures in order to increase India's international trade. It focuses mainly on export promotion.  Promotional measures are divided into two parts. First part pertains to those measures that are directly implemented by the Department of Commerce . The second part pertains to the incentive schemes implemented by Directorate General of Foreign Trade ( DGFT ).  Promotional measures under Department of Commerce One of the important promotional measures include assistance to states for infrastructure development related to exports, known by the name ASIDE . The objective of this measure reads thus: The objective of ASIDE scheme is to establish a mechanism for involving the State Governments to participate in funding of infrastructure critical for growth of exports by providing expo...