For agriculture, the Policy contains a number of measures. Quantitative restrictions have been lifted on exports of all commodities except onion and jute. There is provision for a transport subsidy for exports of fresh and processed fruits, vegetables, floriculture, poultry, dairy products and products of wheat and rice. Registration requirements, which were earlier necessary for farm exports, have been removed. The minimum export price condition has been lifted. While these will obviously reduce bureaucratic delays and assist more exports, there are questions about how small cultivators facing large and often monopsonistic distributors would able to manage in the new scenario in which they are to face these forces without any element of mediation.
 
The Commerce Ministry obviously wants to assist the Food Ministry in getting rid of the embarassingly large public stocks of foodgrains through more exports. It is quite happy to assist in a process which will deprive millions of poor hungry people within India of access to such grain, in order to push this grain out as (implictly) subsidised exports. Of course, this attempt may come up against WTO regulations, so the Exim Policy proposes an internal transport subsidy on movement of foodgrain from FCI godowns to the nearest port, which it believes will bypass the WTO restrictions.
 
In addition to all this, twenty agri-export zones (AEZs) have been sanctioned, covering mainly horticultural products. Mr. Maran is clearly a keen promoter of such zones : past Exim Policies have witnessed the declaration of various Special Economic Zones. The 13 existing SEZs are also to be allowed to open overseas banking units, which are effectively offshore banks free from domestic restrictions such as those on Cash-Reserve ratio and Statutory Liquidity Ratio. In addition, they have been promised tax concessions as well.
 
This over-emphasis on agricultural exports can have very deleterious consequences for domestic consumption patterns. Already in the past decade, the rate of growth of foodgrain production has fallen below the rate of growth of population, for the first time since Independence. It is not clear that diversion of cropped area to cash crops will benefit the poor of the country or ensure long-term food security of the country. In fact, the experience of export-oriented agriculture in Sub-Saharan Africa and its consequences is anything but inspiring.
 
Among the other proposals, "cluster towns" such as Tirupur, Ludhiana and Panipat are also to be provided with similar status, in the form of various fiscal incentives. Thus far, of course, such incentives have not made much difference to the actual export performance of these areas or sectors, although they imply quite a lot of tax revenue foregone in the interests of providing export incentives.
 
The other main plank of the new Exim Policy is the provision of a range of fiscal concessions and tax sops to exporters under various schemes. Mr. Maran has probably extracted more fiscal sops for exporters than any previous Commerce Minister, even though export performance has not displayed any greater dynamism as a result. Already over the fiscal year just concluded, the revenue loss from the various export promotion schemes is estimated to have been as high as Rs. 23,000 crore or more. In 2002-03, rough calculations suggest that revenue outgo could amount to more than Rs. 27,000 crore, or 60 per cent of budgeted customs duty collection !

It is interesting that this has been allowed by the same Finance Ministry that has prevented increased allocation for public employment schemes that would have increased rural employment, provided rural infrastructure and helped dispose of the excess food stocks. Since revenue foregone is in budgetary terms analogous to increased expenditure, this also means that nearly Rs. 30,000 crore which could have been spent on improving infrastructure conditions even for exporters, has instead been diverted to lining the pockets of some exporters. The past experience with such sops suggests that this would not necessarily lead to increased exports either.

A salutary example is that of gems and jewellery, an export sector that has been a major recipient of fiscal and trade policy sops especially since 1995-96. The import of pearls and semi-precious stones has been liberalised essentially to aid exporters in this sector, who have also received a range of other incentives. Nevertheless, the export performance has not been impressive. As Chart 12 shows, while gross exports have increased, net exports have actually fallen between 1995-96 and 2000-01. In fact, if imports of gold and silver are included, then over the past two years this sector has actually shown a substantial trade deficit in excess of $2 billion annually.

Chart 12 >> Click to Enlarge

There are many possible objections to the basic philosophy underlying the current Exim Policy, not least because it privileges export growth as the main objective of trade strategy and as the engine of Indian development. But even within this dubious aim, the approach adopted by the Commerce Minister is unlikely to deliver in terms of improved export performance, given past experience. Meanwhile the Policy will mean the wastage of thousands of crores from the public exchequer that could be used for more productive purposes, including for developing a really effective and strategic export promotion policy.