History of the Commerce Ministry: A Journey of Economic Reforms

*Sameer Pushp

In 1991 then Finance Minister Dr. Manmohan Singh presented his budget with the thrust on devaluation and de-licensing, just 20 years ago we embarked upon the journey with the reforms. In these two decades, India has completely transformed. The moving force changed not only our perception about the world, but world changed altogether for all of us. In 1991, the country was close to bankruptcy and had mortgaged its gold to pay for loan installments. India’s fiscal deficit in 1991 was close to 8.5 per cent of GDP and the balance of payments deficit was huge. The Government had to choose between continuing with its populist socialist economic structure or pursuing reforms at the cost of public anger. The then Prime Minister PV Narasimha Rao and Finance Minister, Dr. Manmohan Singh chose the second route. It’s been 20 years since Dr.Manmohan Singh opened up Indian economy and freed up Indian entrepreneurship.

Now in 2011, India’s Foreign Exchange Reserve stands at US $ 315.72 billion, but 20 years ago, in 1991, the foreign exchange reserves were barely a billion dollars and FDI was almost non-existent.  Manmohan Singh quoted Victor Hugo stating that the idea of India as a country that is ready to take off has come. That set the tone of the economic reforms in India.

It affected the working of the Commerce & Industry Ministry in content and context. The mandate of the Ministry of Commerce & Industry changed from regulation to facilitation.  There are two departments: Department of Commerce and Department of Industrial Policy & Promotions. Both the departments now facilitate the creation of an enabling environment   & infrastructure for accelerating economic growth in the country.

TRENDS IN INDIA’S FOREIGN TRADE

TRADE PERFORMANCE:

India’s merchandise exports were of a level US $ 126.3 billion during the year 2006-07

registering a growth of 22.5 per cent over the previous year. The Indian exports have witnessed

a sustained high growth rate of more than 20 per cent during the Tenth Plan period. The

performance has been very encouraging during the last three years wherein exports grew at

and average annual rate of 25.6 per cent in dollar terms. The growth of exports, so far, has

been in line with the targets set out in the Foreign Trade Policy 2004-09.

Source: Department of Commerce (Targets) DGCI&S (Actual Performance)

The vision and the roadmap provided by the Foreign Trade Policy (2004-09) for a five year period with

clearly enunciated objectives and strategies has been instrumental in putting exports on a higher growth

trajectory. The growth performance of exports has been an outcome of a conscious and concerted effort

on the part of the Government to bring down transaction costs and facilitate trade.

The export target for 2004-05 at US $ 75 billion was sought to be doubled to US $ 150 billion by the

terminal year of the Foreign Trade Policy, i.e. 2008-09. With the current trend in export performance, this

is likely to be achieved in 2007-08 itself, i.e. one year in advance. An export target of US $ 160 billion has

been set for 2007-08. As against this, the exports during April-December 2007 have reached a level of

US $ 111 billion.

The export growth in India in the recent years is partly on account of a favorable international

environment resulting from a sustained growth in average world real GDP by more than 5 per cent and

world trade by more than 9 per cent since 2004. This has led to booming trade volumes in the world

market. However, this alone does not entirely explain India’s unprecedented export growth. In the recent

years, Government has made a conscious and concerted effort to reduce trade barriers, bring down

transaction costs and facilitate trade. Exports from India have also responded to these domestic reform

measures and policy initiatives.

There has been, however, a deceleration in the growth of exports during the current year i.e. 2007-08. As

against a target of US $ 160 billion for the year 2007-08, exports reached a level of US $ 111.1 billion

during April–December 2007 registering a growth of 21.8 per cent over the corresponding period of the

previous year. Indian rupee has been appreciating against major convertible currencies particularly US

dollar since September 2006. Between December 2006 and December 2007, the rupee has appreciated

by 13.17 per cent against US dollar. The recent rupee appreciation has been a major source of slow

down in the growth of exports particularly of products with low import intensity and high employment

content. Quick estimates available for the month of December 2007 show negative export growth for

important items such as Ready Made Garments (RMG); Cotton Yarn, Fabric, Made-ups, etc.; Iron Ore;

Leather and Leather manufactures, Plastic & Linoleum; Man-made Yarn/fabrics, Marine Products; Carpet;

Cashew; Handicrafts etc.

Imports, however, have maintained its tempo registering a growth of 26.0 per cent in US dollar terms to

reach a level of US $ 168.9 billion during April-December 2007. Trade deficit during the period was

estimated as US $ 57.8 billion. The aggregate foreign trade data in US dollar and rupee terms during

2003-04 to 2006-07 and for April-December 2007 are given in Table

As per the latest international trade statistics 2011 released by, the World Trade Organisation (WTO).

India’s ranking in world merchandise trade- leading exporters and importers for 2009 has improved from

27th rank in 2008 to 15th position in 2009 in respect of exports and from 16th to 8th in respect of imports for

the same period. In commercial service trade; India ranks 12th in both exports and imports in 2009. India’s

share in world exports is 1.3 percent (2009).

TURN AROUND IN EXPORTS

As a result of the multi-prolonged Strategy adopted in Error! Hyperlink reference not valid. and annual

supplement 2010-14; the exports in the year 2010-11 recorded an unprecedented growth rate of 37.5%

over the previous year. The export target of US $ 200 billion for 2010-11 has been far exceeded and

export of US $ 245.86 billion has been achieved. For the first time the figures have reached the US $ 200

billion mark which was a target set for the last financial year. Imports for the same period stood at US$

350.3 billion. Therefore, the total trade has reached the figure of approximately US $ 600 billion. This has

been possible because of the stable policy regime, conscious market and product diversification plan,

additional support to sectors hit badly by global recession, encouraging technological up gradation of

exports sectors and undertakings simplification of procedures to reduce transaction cost. The Ministry has

prepared a draft strategy paper for doubling India’s exports to US $ 500 billion by 2014. This strategy

would accelerate the growth of exports and keep the trade deficit within manageable limits.

The recent figures suggest India’s exports for the month of April- September 2011 have registered a

growth of 52%, at US $ 160 billion. During the period April-September 2011, the imports were US $ 233.5

billion with a growth of 32.4% and a Balance of Trade stood at US $ (-)73.5 billion, during the same

period. Shri Rahul Khullar, the Commerce Secretary also informed that India’s imports in September 2011

were US $ 34.6 billion and export stood at US$ 24.6 billion Balance of trade for the month of September

2011 stood at (-) 9.8 billion US $. And both Minister and Commerce Secretary reiterated that the trade

target of US $ 500 billion by 2014 is achievable target, if we can sustain the current growth.

MULTILATERAL TRADE ISSUES AND INITIATIVES

The Doha Round of trade negotiations at the World Trade Organisation (WTO) has been underway since

2001. The negotiating mandate of the Round as agreed to by all the members of the WTO is contained in

the Doha Ministerial Declaration of 14 November 2001,further elaborated and complemented by the

General Council Decision of 1 August 2004 and the Hong Kong Ministerial Declaration of 18 December

2005.

The negotiations cover several areas such as agriculture, market access for non-agricultural products,

service, trade-related intellectual property rights, rules (covering anti-dumping and subsidies), trade

facilitation etc. The conduct, conclusion and entry into force of the outcome of the negotiations are parts

of a single undertaking, i.e. “nothing is agreed until everything is agreed”.

Chronology of important events in Doha Round of WTO talks

• • The years 2007 and 2008 saw intensive discussions and considerable progress on many

elements of the Agriculture and Non-Agricultural Market Access (NAMA) modalities, but the

Round could not be concluded.

• • A mini-Ministerial meeting of WTO Members held in July 2008 ended without any agreement

on some key issues such as the special safeguard mechanism (SSM) in agriculture and

sectoral initiatives in NAMA (non agricultural market access).

• • The Chairs of the WTO negotiating Groups on Agriculture and NAMA brought out revised

modalities texts on 6 December 2008 which are still under discussion in the WTO.

• • India took the initiative to organise an informal Ministerial conference of about 30 Ministers on

in September, 2009 in order to re-energise the multilateral process. The stalled negotiations

resumed in Geneva thereafter.

• • A regular Ministerial Conference of the WTO took place from 30 November to 2 December

2009. The general theme for discussion was “The WTO, the Multilateral Trading System and

the Current Global Economic Environment”.

• • This was the first full Ministerial meeting of the WTO in the aftermath of the global economic

meltdown. The Conference provided Members with an opportunity to collectively discuss the

world economic scenario, challenges faced by the multilateral trading system and to review

the working of the WTO. While the Conference was not intended as a negotiating forum, it

provided a platform for different groups and caucuses to assess the direction of the

negotiations. India and her coalition partners reiterated their commitment to uphold the

development dimension, the centrality of the multilateral process and the need to safeguard

livelihood concerns, particularly of the poor, subsistence farmers in their countries. The

Conference also provided a useful opportunity for bilateral discussions with several Member

countries, which would feed into the multilateral process leading to greater clarity of

approaches and interests.

CURRENT NEGOTIATIONS IN WTO

Discussions in various Negotiating Groups are ongoing. Simultaneously, groups have been constituted on

specific issues at the level of Ambassadors to discuss the process of taking the Doha Round negotiations

forward.

India’s stand in the WTO negotiations is unequivocal: the protection of the poor, subsistence farmers of

developing countries and vulnerable industries is a priority. There is no question of compromising on

these issues. If anything, it is the developed countries which have to muster the political will to

compromise on some of the generous carve-outs that they are seeking in this Round. In order to complete

the Doha Round, WTO Members have to agree on the modalities for Agriculture and NAMA and also

complete negotiations in all the areas covered under the Doha Work Programme