Business & Economy

As part of the efforts to move to full normalisation of trade relations with India, Pakistan today agreed to transition from the current Positive List approach to a Negative List by February 2012.

Prime Minister Manmohan Singh today said there were clear signs of an upturn in the Indian economy and, with a normal monsoon next year, the country hoped to achieve a growth rate of over 7 per cent.

"I am happy to say that India has been able to face the global economic downturn better than most other countries in the world," he told the India Economic Summit organised by the World Economic Forum here.

He said the Indian economy grew at a "respectable" rate of 6.7 per cent in 2008-09 despite the global economic and financial crisis. In the current financial year, it had also faced the adverse impact of an inadequate monsoon and the resultant slowdown in the agricultural economy. Still, growth is expected to be around 6.5 per cent, he said.

"This performance in highly adverse circumstances indicates the resilience of our economy. It also vindicates to a large extent, the corrective action taken by our government to manage the downturn- like other countries we resorted to a significant stimulus and we will take appropriate action next year to wind this down," he said.

Dr Singh said the Government's medium term objective continued to achieve a growth rate of 9 per cent per annum.

According to him, taking into account the fact that the country's domestic savings rate is now as high as 35 per cent of the Gross Domestic Product (GDP), this is eminently a feasible target.

He said a return to high growth required work in many directions, with world demand expected to pick up but probably only slowly.

He said India's strategy must, therefore, aim at sustaining a high rate of growth on the strength of strong domestic demand. He said the Government was seeking to achieve this through a large increase in investment in infrastructure.

The Prime Minister said the development of high quality infrastructure was an essential requirement to fulfil India’s ability and capability of rapid growth.

"We have an ambitious programme of investment in all the key infrastructure sectors: Power, roads, ports, airports, telecommunications, irrigation and urban infrastructure. Some of this investment will be through the public sector. However private investment has a large and growing role to play in achieving our target. In many areas we are following a strategy of private-public partnership," he said.

He said that, to fulfil its commitment of achieving inclusive growth, the Government would also have to expand its expenditure in critical key social sectors, especially health and education, including skill upgradation of workforce on a massive scale.

Dr Singh said environmental sustainability was also an important objective and one that had gained significance in the context of climate change. He said the Government had prepared a National Action Plan on climate change outlining its response in this critical area focusing on increased energy efficiency and greater use of clean energy technology including solar energy. Special attention would have to be paid to prevent degradation of the country's scarce land and water resources, he said.

He urged foreign investors to participate in all these efforts, saying the Government's foreign direct investment (FDI) policy had been greatly liberalised. He said FDI had been freely allowed in more and more areas under the automatic route and now covered a number of sectors in agro-processing, nearly all areas of industry and also services.

He said that the accumulation of FDI inflow amounted to over $ 120 billion since 2001-02. He admitted this was not a large enough number, given the scale of India's economy, but in recent years the country had been listed as among the most attractive locations for FDI. In addition to FDI, India also welcomed portfolio investment in equity in Indian companies by qualified institutional investors, he said.

"Our policy will be guided by the desire to make India even more attractive for foreign direct investment. We are particularly keen to rationalize and simplify procedures so as to create an investor friendly environment," he said.

The Prime Minister also mentioned that the Cabinet had recently decided the criteria on which public sector enterprises would qualify for disinvestment. He said the Government now hoped to see faster progress in sale of a portion of its shareholding in the domestic market and issue of fresh equities in respect of the selected companies in the public sector.

He said that though the global financial crisis did not affect Indian banks or financial market directly, it drew attention to the need to strengthen the country's financial system in various ways. He said there was need to ensure that the financial system can provide the finance needed for the country's development, and especially for infrastructure development. This, he said, would open up a broad agenda for reform.

He said there was need to develop long-term debt markets and to deepen corporate bond markets. This. in turn, called for a strong insurance and pension sub-sectors and some of the reforms needed, especially in insurance, involved legislative changes, he said.

Dr Singh pointed out that the Government had taken initiatives in this area and would strive to build the political consensus needed for these legislative actions to be completed. He said there was need to improve futures markets for better price discovery and regulation. He also felt there was need to remove institutional hurdles to facilitate better intermediation.

"All these issues will be addressed through gradual but steady progress in financial sector reforms to make the sector more competitive while ensuring an efficient regulatory and oversight system," he said.

"India looks to the future with confidence and with hope. We are confident of meeting the domestic and international challenges to fast and inclusive growth. We are also better placed than any time in the recent past to push the reform process forward. I believe we have a bright future if we make use of our well known strengths and the opportunities that lie ahead. In the coming months and years, I hope to see a decisive change in the pace of our progress to becoming a leading economy in the world," he said.

Dr Singh noted that today's event marked the 25th anniversary of the first India Economic Summit in 1985, which was inaugurated by then Prime Minister Rajiv Gandhi.

He recalled that Mr Gandhi had, on that occasion, outlined the vision of India as a rapidly growing dynamic and modern economy, breaking free of the shackles of persistent poverty, hunger and disease. He said the Government had delivered substantially on that promise though the task was, by no means, finished.

He said India's growth rate had accelerated from 5.6 percent in the 1980s to an average of nearly 9 percent in the 5-year period preceding the global financial crisis.

He said India was today a more open economy, open to both trade and investment and integrating successfully with the world at large. It had also seen substantial progress in reduction of persistent hunger, poverty and disease, though more needed to be done in this area.

"Our strategy today is not just to deliver rapid growth, but to deliver rapid and inclusive growth, a growth that will provide productive employment to our young population and raise living standards in rural areas across the length and breadth of our vast country," he added.

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Prime Minister Manmohan Singh today said the public sector enterprises (PSEs) were there to stay in the Indian economy and declared that his Government was committed to giving them the flexibility and autonomy they required to operate effectively in a competitive environment.

Speaking after presenting the MOU Excellence Awards and SCOPE Awards for Excellence and Outstanding Contribution to Public Sector Management here, Dr Singh said the PSEs had done quite well in recent times and were poised to grow even faster in the years to come.

He recalled that when the Government had begun the process of liberalising the economy in the early nineties, many experts were of the view that the PSEs would not be able to face local and increased global competition.

"Many years down the line, these fears and apprehensions have proved to be unfounded," he said, pointing out that in the post-reform period, 1990-91 to 2007-08, their turnover had increased nine times and their cumulative net profit had grown more than 35 times.

He said that, despite the fact that some PSEs did not do so well in this period, on the whole the Government had reasons to be confident about the ability of India's public sector to operate in an increasingly open environment and thereby face the challenge of increased competition both domestically and globally.

"There is no denying the fact that public sector enterprises are here to stay in the Indian economy. Some of them have shown sustained profitability and good consistent performance. The listed ones on the Stock Exchanges account for more than 24 per cent of the total market capitalization of the Bombay Stock Exchange (BSE). In terms of market capitalization, of the top 10 listed companies on the BSE, five are public sector enterprises," he said.

Dr Singh said more and more PSEs were entering the capital markets and striving to become active global players. Over the years, the number of PSEs making profits had steadily increased while the number of those making losses had been on the decline, he observed.

He said India had weathered the ongoing global slowdown better than most countries and India was today the second fastest growing economy in the world. He said this was a reflection, in large measure, of the strengths of the economy, one of which was a robust and reliable public sector.

He said India had become one of the few countries whic had implemented a Code of Corporate Governance for its PSEs.

He said several PSEs had got their shares listed on the stock markets and many more were eager to do so.

"This is a measure of the increased vitality of our public sector. This also shows that they are not shying away from the processes of market scrutiny and that they are ready to face new challenges in an increasingly competitive world," he remarked.

The Prime Minister said that if India were to regain its place in the comity of nations, there had to be sustained efforts on its part to improve productivity, to pay increasing attention to research and development and to operate on the frontiers of modern scientific and technological knowledge.

He said the Government had delegated more powers to the Boards of "Navratna" and "Miniratna" companies to help them improve their performance. The Government had also
implemented revised salaries for executives of PSEs and introduced innovative measures such as performance-related pay. The incentives for the employees have been linked to individual, group as well as company performance, he said.

He said the Government expected all this to lead to sound practices for the development of human resources, which are of critical importance in today’s competitive environment.

Dr Singh said the Government was encouraging the listing of PSEs on the stock exchanges as it would unlock the true value of a company, improves its corporate governance standards and also help it in raising resources for funding future expansion plans.

As far as sick and loss making organisations are concerned, he said the Government had made efforts to restructure and revive them, wherever it was possible.

He said an amount of Rs. 15250 crore had been provided by the Government in the last five years or so as cash and non-cash support to 36 such enterprises.

"We will continue to take steps to strengthen the public sector to enable it to play the role expected of it in a modern, fast growing economy," he added.

The award winners for 2006-07 were Bharat Heavy Electricals Ltd. (BHEL), Bharat Petroleum Corporation Ltd. (BPCL), Hindustan Aeronautics Ltd. (HAL), Mineral Exploration Corporation Ltd. (MECL), Manganese Ore India Ltd (MOIL), National Building Corporation of India (NBCC), National Backward Classes Finance & Development Corporation (NBCFDC) and State Trading Corporation of India Ltd (STC).

The SCOPE Excellence Awards for the year 2007-08 were presented to the Steel Authority of India (Individual Category); Coal India Limited (Institutional Category); Heavy Engineering Corporation (Special Institutional category); Electronic Corporation of India Limited (Medium PSE Category; WAPCOS (Smaller PSE Category) and NSKFDC (Commendation Certificate in Smaller PSE Category).

For the year 2006-07, the SCOPE Excellence Awards were received by the Indian Oil Corporation (Individual Category); Steel Authority of India (Institutional Category); Mazagaon Dock Limited (Special Institutional Category); Bharat Earth Movers Limited and National Building Corporation Limited (Medium PSE Category) and Rajasthan Electronics and Instruments Limited (Smaller PSE Category).

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The headline annual rate of inflation moved back into positive territory at 0.12 per cent for the week ended September 5 after staying negative for 14 straight weeks.

The inflation rate was -0.12 per cent in the previous week. It was 12.42 per cent during the corresponding week, ended September 6, 2008, of the previous year.

The inflation rate had turned negative for the first time in more than three decades when it touched -1.61 per cent for the week ended June 6 this year.

The official Wholesale Price Index (WPI) for All Commodities (Base 1993-94=100) for the week ended September 5 rose by 0.4 per cent to 242.0 (Provisional) from 241.1 (Provisional) for the previous week.

An official statement, quoting provisional data, said the build-up of inflation in the financial year 2009-10 so far was 5.86 per cent as compared to a build-up of 6.62 per cent in the corresponding period of the previous year.

The 52-week average inflation for the week ended September 5 was 3.43 per cent, the statement said.

According to the statement, the index for Primary Articles, a major category with a weight of 22.02 per cent in the WPI, rose by 1.3 per cent to 274.7 from 271.2 for the previous week.

Within this category, the index for Food Articles rose by 2.2 per cent to 279.9 from 273.8 for the previous week due to higher prices of poultry chicken (16%), fruits & vegetables (8%), pork (5%), condiments & spices (3%), bajra (2%) and rice and moong (1% each). However, the prices of jowar (2%) and maize and tea (1% each) declined.

The index for Non-Food Articles declined by 1.1 per cent to 238.7 from 241.4 for the previous week due to lower prices of logs & timber (19%) and soyabean (5%). However, the prices of raw silk, cotton seed and raw rubber (3% each), copra (2%) and sunflower, castor seed and groundnut seed (1% each) moved up.

The index for Fuel, Power, Light & Lubricants, a category that has a weight of 14.23 per cent in the WPI, rose marginally to 343.4 from 343.3 for the previous week due to higher prices of bitumen (9%), furnace oil and light diesel oil (4% each) and aviation turbine fuel (2%). However, the prices of naphtha (7%) declined.

In the case of Manufactured Products, a major category with a weight of 63.75 per cent in the WPI, the index rose by 0.1 per cent to 208.1 from 207.9 for the previous week.

Within this category, the index for Food Products rose by 0.4 per cent to 241.9 from 240.9 for the previous week due to higher prices of sugar and sooji (rawa) (4% each), khandsari and bran (all kinds) (2% each) and maida, atta and gingelly oil (1% each). However, the prices of oil cakes (4%), coconut oil (3%), rice bran oil and imported edible oil (2% each) and butter (1%) declined.

The index for Textiles rose by 0.3 per cent to 143.7 from 143.2 for the previous week due to higher prices of polyester staple fibre (5%) and hessian cloth and hessian & sacking bags (2% each).

The index for Rubber & Plastic Products declined by 0.1 per cent to 169.4 from 169.6 for the previous week due to lower prices of plastic containers (6%).

The index for Chemicals & Chemical Products declined marginally to 229.3 from 229.4 for the previous week due to lower prices of enamels (4%) and caustic soda and thinners (2% each). However, the prices of acid (all kinds) (1%) moved up.

The index for Basic Metals Alloys & Metal Products declined by 0.1 per cent to 255.2 from 255.4 for the previous week due to lower prices of basic pig iron and foundry pig iron (2% each) and steel ingots (1%). However, the prices of lead ingots (4%) and other iron steel and zinc ingots (1% each) moved up.

The index for Machinery & Machine Tools rose by 0.1 per cent to 172.4 from 172.2 for the previous week due to higher prices of material handling equipment (6%) and electrical relays (3%).

The statement said that the final WPI for the week ended July 11 stood at 238.0 as compared to 236.7 that was provisionally reported on July 23.

Accordingly, the annual rate of inflation based on the final index for the week ended July 11 stood at -0.63 per cent as compared to -1.17 per cent provisionally reported on July 23, the statement added.

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The full Planning Commission, which met here today with Prime Minister Manmohan Singh in the chair, highlighted the need to revive investment in the country, especially in infrastructure, and contain fiscal deficit within limits of prudence.

The discussions also established the challenge of resource mobilisation for the last two years of the XIth Five Year Plan (2007-12).

"We will have to give careful thought to the various suggestions made for raising additional resources and try to ensure that the momentum of planned development is maintained in the next two years and that our flagship programmes are adequately funded," Dr Singh said in his concluding remarks at the meeting.

The Prime Minister, who is the Chairman of the Commission, noted that today's discussions emphasised that, while expanding resources was important, achieving efficiency in the use of resources was equally important.

He hoped the Commission would use the Mid-Term Appraisal of the XIth Plan to give concrete suggestions for improving both the design of the system and the efficiency of implementation.

"One consequence of scarce resources is that we should fully explore the scope for Private Public Partnership (PPP). This has been attempted in the infrastructure sectors where we have had some success, although progress has been less than what we would have wanted. We are taking steps to streamline the process so that PPP projects can move faster," he said.

This was the first meeting of the full Planning Commission since the United Progressive Alliance (UPA) Government began its second five-year term in May.

The meeting had two subjects on the agenda---an assessment of the economic situation in the country and a review of the status of implementation of the Integrated Energy Policy.

"We have had a very useful discussion on the state of the economy and the pending issues in energy policy. I thank my Cabinet colleagues for their remarks. The Planning Commission will take these into account in finalising the Mid Term Appraisal," Dr Singh said in his closing remarks.

He said he was happy to note that Minister Members had broadly endorsed the assessment of the current economic situation presented by the Commission.

"The economic picture at present can be characterized by a combination of strengths built up over several years, the lingering effect of the global slowdown and the temporary effect of the drought in the current year, particularly on agricultural output and food inflation. We must build on the strengths and tackle the new challenges. We have to pay careful attention to the management of the food economy and the overall macro economy," he said.

Dr Singh said he agreed with the general approach at the meeting that while the Government must do everything necessary to tackle the drought, it should not be over-pessimistic.

"We are in a very strong position to manage the consequences of the drought. Our food stocks in particular are very high. The government is giving focussed attention to all aspects of drought management including both relief measures and efforts to protect the Kharif crop as much as possible and to ensure a normal Rabi season," he said.

According to the Prime Minister, the National Rural Employment Guarantee Scheme (NREGS) gave the Government a very important instrument for supporting incomes of those most in need.

"We must make all efforts to converge NREGS and other agricultural and rural schemes to minimise the impact of drought in 2009-10," he said.

Dr Singh said the underlying strength of the economy, which had been brought out in the paper by the Planning Commission and endorsed in the discussion, would stand the country in good stead as it sought to return to its high growth target over the next two years.

He said the integrated energy policy approved by the Union Cabinet in December last year presented a very large policy agenda.

"It is clear from the discussion that there has been some progress in important areas, but the pending policy agenda is very large. Pursuit of these issues is the responsibility of different ministries. There was a suggestion to convene a meeting of the National Development Council (NDC) to discuss issues related to climate change and energy management," he said.

The Prime Minister directed the Planning Commission to pursue these issues with the Ministries concerned and present a detailed assessment of progress on these areas at the time of the Mid Term Appraisal so that the record of achievement is much better.

"Difficult areas should be brought back to my attention," he said.

He said that a rational energy policy, with appropriate policies for renewable and non-conventional energy sources, was also important for climate change. "We need to dovetail our strategy for energy with our national action plan for climate change," he stressed.

Dr Singh asked Planning Commission Deputy Chairman Montek Singh Ahluwalia to arrange meetings of the full Planning Commission more frequently so that there was an opportunity to discuss various issues in a more holistic manner.

Earlier, in the morning, in his opening remarks, Dr Singh said an assessment of the economic situation was relevant, not only because the Government was at the start of its second term but also because the country was at exactly the mid-point of the XIth Plan.

"We have been through a difficult year because of the global economic downturn which is only now coming to an end with a slow return to normalcy in the months that lie ahead. The country has also seen a poor monsoon. I felt it would be useful for the Planning Commission to present its assessment of the overall economic situation to the Minister Members of the Commission," he said.

The Prime Minister said energy was vital for the country's economic growth and this was the area where India was a deficit economy.

He said India imported more than 70 per cent of its petroleum energy needs and was also moving to a deficit position in coal.

According to him, rational energy policies are also critical for rational responses to the threat of climate change.

"This is a new compulsion and we need to assess whether we are on track in critical aspects of our energy policy. In our situation each energy sub-sector is the domain of a different Ministry. This has often meant a non-symmetric policy stance – the principles being adopted to determine policy in one sector are not the same as in another.

"The Integrated Energy Policy document that was approved by the Cabinet in December 2008 contained a number of recommendations covering different sub-sectors. I thought it would be useful for the Planning Commission to present an assessment of how these recommendations have been implemented," he said.

Apart from Dr Ahluwalia and other full-time Members, the meeting was also attended by, among others, Finance Minister Pranab Mukherjee, Home Minister P Chidambaram, Human Resource Development Minister Kapil Sibal, New and Renewable Energy Minister Farooq Abdullah, Health Minister Ghulam Nabi Azad, Power Minister Sushil Kumar Shinde, Railway Minister Mamata Banerjee and Dr C Rangarajan, Chairman of the Prime Minister's Economic Advisory Council.

The full-time Members of the Commission are B K Chaturvedi, Saumitra Chaudhuri, Syeda Hameed, Narendra Jadhav, Abhijit Sen, K Kasturirangan, Arun Maira and Mihir Shah.

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Union Commerce and Industry Minister Anand Sharma today unveiled the Foreign Trade Policy for 2009-14 that is designed, in the immediate term, to arrest and reverse the declining trend of exports and to provide additional support, especially to those sectors which have been hit badly by recession in the developed world.

However, given the current economic climate, the policy measures outlined today are only for a two-year period, after which the government will take stock of the situation and make mid-course corrections.

The Government is hoping to achieve an annual export growth of 15 per cent over 2010-11 with an annual export target of $ 200 billion by March 2011.

"In the remaining three years of this Foreign Trade Policy, the country should be able to come back on the high export growth path of around 25 per cent per annum," Mr Sharma said.

He said the Government expected to double India's exports of goods and services by 2014. "The long-term policy objective for the Government is to double India's share in global trade by 2020."

The minister said that, in order to meet these objectives, the Government would provide a policy environment through a mix of measures, including fiscal incentives, institutional changes, procedural rationalisation, and efforts for enhanced market access across the world and diversification of export markets.

"The three pillars which would support us to achieve the targets are improvement in export-related infrastructure, lowering of transaction costs and providing full refund of all indirect taxes and levies," he said.

"We would reassure our exporters and provide them adequate confidence to maintain their market presence even in a period of stress. In this policy, we have given a special thrust to the employment-oriented sectors which have witnessed job losses in the wake of recession, especially in the field of textiles, leather, handicrafts, etc.," he said.

Mr Sharma said the Government would ensure that dollar credit needs of exporters were met in a timely manner, and a committee had been constituted with Finance Secretary, Commerce Secretary and the Chairman of the Indian Banks Association (IBA), which would meet periodically for this purpose.

He said the Government had taken a conscious decision to continue with the Duty Entitlement Passbook (DEPB) scheme upto December 2010. Also, the income tax benefits under Section 10 (A) for the Information Technology (IT) industry and under section 10 (B) for 100 % export-oriented units would continue for one additional year till March 31, 2011, he said.

The enhanced insurance coverage and exposure for exports through Export Credit Guarantee Corporation (ECGC) schemes has been ensured till March 31, 2010. The Government has also decided to continue with the interest subvention scheme for this purpose.

The minister said that, through the new policy, the Government would encourage value-addition in manufactured exports and, towards this end, it has stipulated a minimum 15 % value addition norm on imported inputs for the advance authorisation scheme.

In view of the fact that the developed countries have shown a negative growth trend in the present economic climate, the Government has taken a conscious decision to expand and diversify the country's export markets, especially in the emerging markets of Africa, Latin America, Oceania and the CIS countries.

"Therefore, we would like to offset the inherent disadvantages which our exporters face in these markets, such as credit risks and higher trade costs, through appropriate policy instruments," he said.

He said the Government had rationalised the incentive schemes, including the enhancement of incentive rates, which are based on perceived long-term competitive advantage of specified Indian products and markets. He said new emerging markets had been given a special thrust to allow competitve exports.

Mr Sharma said the Government would like to encourage production and export of "green products" through measures such as phased manufacturing programme for green vehicles, zero duty Export Promotion Capital Goods (EPCG) scheme and incentives for exports.

Similarly, exports from the North-East region will also be promoted, he said.

The Government has earmarked additional resources under the Market Development Assistance Scheme and Market Access Initiative Schemes, and leading products have been identified which would catalyse the next phase of export growth.

The minister said the Comprehensive Economic Partnership Agreement (CEPA) signed with South Korea earlier this month would enable Indian products to secure enhanced market access to the growing Korean market.

The Trade in Goods Agreement with ASEAN, which will come into force from January 1, 2010, will give enhanced market access to several items of Indian exports in this vibrant economic grouping, he said.

These agreements are also in line with India's "Look East" Policy, he pointed out.

He said the Mercosur Preferential Trade Agreement had been concluded and it would be the Government's endeavour to deepen its trade engagement with other major economic groupings in the world.

Mr Sharma said India remained committed to the successful conclusion of the Doha Development Round. "We are in favour of establishing a rule-based, fair and equitable global multilateral trading regime which has development as its core objective. However, it must respond to the aspirations of millions of people of the developing world," he said.

He said the Government would promote Brand India through at least six "Made in India" shows to be organized across the world every year.

The minister said that, in the era of global competitiveness, there was an imperative need for Indian exporters to upgrade their technology and reduce their costs, which the policy seeks to achieve.

Technological upgradation of exports is sought to be achieved by promoting imports of capital goods for certain sectors under EPCG at zero per cent duty.

Under the present Foreign Trade Policy, the Government recognizes exporters based on their export performance and they are called "status holders". For technological upgradation of the export sector, these status holders will be permitted to import capital goods duty free (through additional Duty Credit Scrips equivalent to 1% of their FOB value of export in the previous year, of specified product groups).

This will help them to upgrade their technology and reduce cost of production. These two schemes would be valid upto March 31, 2011.

For upgradation of export sector infrastructure, "Towns of Export Excellence" and units located therein would be granted additional focused support and incentives.

To enable support to Indian industry and exporters, especially the Micro, Small and Medium Enterprises (MSMEs), in availing their rights through trade remedy instruments under the WTO framework, the Government is planning to set up a Directorate of Trade Remedy Measures.

Mr Sharma said the Government would endeavour to make India an international diamond trading hub, and plans to establish more diamond bourses in the coming years.

In order to reduce the transaction cost and institutional bottlenecks, the e-trade project would be implemented in a time bound manner to bring all stake holders on a common platform. Additional ports/locations would be enabled on the Electronic Data Interchange (EDI) over the next few years.

An Inter-Ministerial Committee has been established to serve as a single window mechanism for resolution of trade-related grievances.

An updated compilation of standard input and output norms and ITC (HS) classification of export and import was also released today after five years. It is expected to bring greater transparency and facilitate easy transactions by exporters and importers.

"These are difficult times and we have set an ambitious goal for ourselves. I am sure that the industry and Government, working in tandem will be able to ensure that the Indian exports become globally competitive and that we are able to achieve the target which we have set for ourselves," the minister said.

At the outset, Mr Sharma pointed out that the new Foreign Trade Policy was being unveiled at a challenging time when the entire world was facing an unprecedented economic slowdown.

"This year we are witnessing one of the most severe global recessions in the post-war period and countries across the world have been affected in varying degrees. Major economic indicators of industrial production, trade capital flows, unemployment, per capita investment and consumption have taken a hit," he said.

He said the World Trade Organisation (WTO) estimates projected a grim forecast that the global trade this year was likely to decline by 9% in volume terms while the International Monetary Fund (IMF) had projected a decline of over 11%.

"This recessionary trend has huge social implications. A World Bank estimate suggests that 53 million more people would fall into the poverty net this year and over a billion people would go chronically hungry. Fortunately India has not been affected to the same extent as other economies of the world, but our exports have suffered a decline in the last 10 months due to contraction in demand in the traditional export markets. In this economic climate, some countries have resorted to protectionist measures posing barrier to free trade, which has aggravated the problem. Even though economists are talking of emergence of ‘green shoots’, I remain hesitant to hazard a guess on the nature and extent of this recovery and whether it is a V shape recovery or a U shape recovery," he said.

Mr Sharma said the Foreign Trade Policy at this juncture would need to take cognizance of the declining demand in the developed world.

He recalled the series of measures announced by the Finance Minister which had resulted in some signs of recovery. He cited the Index of Industrial Production for the month of July and the figures for the core sectors in this regard.

The minister said the Government had in 2004 set two objectives--to double India's percentage share of global merchandise trade within five years and use trade expansion as an effective instrument of economic growth and employment generation.

He said that in the last five years exports had witnessed a robust growth to reach a level of $ 168 billion in 2008-09 from $ 63 billion in 2003-04.

India's share of global merchandise trade was 0.83% in the year 2003 which rose to 1.45% in the year 2008 as per WTO estimates. Its share of global commercial services export was 1.4% in 2003 which rose to 2.8% in 2008. India’s total share in goods and services was 0.92% in 2003; it increased to 1.64% in 2008.

Mr Sharma said studies had suggested that nearly 14 million jobs were created directly or indirectly as a result of augmented exports in the last five years.

He said the policy of Special Economic Zones (SEZ) , which was launched in 2005, had given encouraging results. He said the Government had granted approval for setting up 577 SEZs, of which 325 had been notified. After the enactment of the SEZ Act, nearly three lakh people have gained employment in the SEZs, he said.

Of the 98 Special Economic Zones which have started operations, physical exports have increased from a level of nearly Rs. 66,000 crores in 2007-08 to Rs. 99,689 crores in 2008-09, registering a growth of 50% in a year, he said.

In the last 5 years, exports from SEZs have grown by 620%, and have attracted foreign direct investment of US$ 2.43 billion, he added.

Factbox: Highlights of Foreign Trade Policy 2009-14

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Prime Minister Manmohan Singh today said that, given the ample liquidity and low inflation, there was scope for banks to further moderate interest rates.

"Domestic credit flow for productive needs has to be definitely maintained at reasonable cost," he said at a meeting at his 7, Race Course Road residence with captains of industry to discuss short- and medium-term steps needed to tackle the effects of the global economic crisis.

The meeting took place just days ahead of the Prime Minister's visit to London to attend the G-20 Summit that will discuss an action plan to cope with the crisis.

Dr Singh said India was in a situation where, on the one hand, it was decidedly better placed than most countries in the world and, on the other, there seemed to be uncertainty on how developments abroad, positive and negative, would affect the country.

"To tackle a regime of low inflation and demand uncertainties across sub-sectors of the real economy, to ensure that the financial sector remains healthy and supportive, to husband foreign exchange reserves responsibly, to sustain a high level of expenditure bearing in mind the need for fiscal discipline, and to act continuously to improve general sentiment are challenges that we confront as a nation," he said.

He said the government and industry needed to be particularly sensitive to the impact of the slowdown on the weakest in the organized as well as the unorganized sectors.

"We must meet the challenge of job losses caused by the slowdown. These are challenges which can be understood and met only if all the stake-holders concerned continuously exchange ideas and support each other with confidence in the future, and concern for the well being of all.

"I have great faith and confidence in India’s entrepreneurs and particularly in the wisdom and experience of captains of industry assembled here today to meet the challenges confronting our economy," he said.

Dr Singh said the world today looked at India with respect and hope: respect for its calibrated reforms which have resulted in growth with justice, and hope that India would be an engine of global growth for the world economy.

"I am confident that we will all work together to fulfil these expectations, and secure the growth essential for our people," he said.

Dr Singh had held a similar meeting with the industrialists in the first week of November last year. He recalled that, at that point, India had also started experiencing the first shock waves of export demand attrition and constriction of capital inflows.

"Besides, the Indian financial sector was facing a liquidity shortage. Overall sentiment had also been dampened by the impact of the crisis on global and domestic capital markets and the consequent attrition of the savings of many individuals and corporates," he said.

He said that meeting had come up with many suggestions relating to the need to maintain adequate liquidity, problems of credit flow and credit cost on the domestic and foreign fronts, special issues of certain stressed sectors, possible fiscal and other measures, and steps to ensure that domestic industry is not adversely affected by the dumping of products by other countries.

After that meeting, the Prime Minister had constituted an Apex Group under his chairmanship to monitor the developments in the economy and take the necessary measures.

Since then, the Government and the RBI have, from time to time, come out with measures which were considered necessary and possible he said.

The RBI has steadily adjusted the policy rates downwards and has announced a number of steps in support of medium and small enterprises, non-banking financial companies, and the housing and export sectors.

Guidelines have also been issued for restructuring of loans, increasing the rates on non-resident deposits and relaxing the criteria for external commercial borrowings.

The Government has announced two stimulus packages, one in December 2008 and the other in January 2009. In these packages, and in subsequent announcements in the Interim Budget, a number of measures have been taken to provide relief to exporters; CENVAT, service tax, and duty concessions to industry; and support to infrastructure projects, and to increase Government expenditure despite an elevated level of fiscal deficit.

The Government has also been in touch with banks and has been monitoring the sectoral credit flows, especially by the public sector banks. The Cabinet Secretary has been interacting with the Chief Secretaries of States, as almost the entire additional budgeted amounts have been released to the States and their role in ensuring expenditures on ground is now crucial.

Dr Singh said that while it needed to be borne in mind that the time taken for these steps to take effect would vary across measures and sectors, there were signs of improvement in sectors like steel and cement. The auto sector after a difficult patch seems to be showing signs of recovery. Food grain production for 2008-09 is likely to be in excess of 228 million tonnes. The rural demand for goods and services appears quite robust and the outlook in the agricultural sector gives room for optimism, he said.

At the same time, he said, the government was aware of the problems that persist in certain sectors and sub-sectors, particularly where export dependence is high.

"We are monitoring these sectors. We are aware that a big push to infrastructure would have a counter-cyclical influence and have taken steps to ensure that this happens in 2009-10 and beyond," he said.

On the credit front, the figures of the Reserve Bank of India at the end of February 2009 indicate that while the credit growth of public sector banks on a year-on-year basis this year has been 23 per cent against 21.9 per cent of the corresponding period of 2007-08, the credit growth of private banks and foreign banks has been of the order of one-third to one-fourth of what it was a year ago, he said.

While public sector banks have reduced the prime lending rates in the last three months between 150 and 200 basis points, other Scheduled Commercial Banks are yet to respond in equal measure, calling for a further moderation in interest rates amnd maintenance of the flow of domestic credit flow for productive needs.

ASSOCHAM President Sajjan Jindal, who was among those who attended the meeting, said the Prime Minister should raise the issue of growing protectionism, surfacing in economies of scale, at the G-20 Summit, emphasising that such tendencies could hamper the spirit of globalisation.

If these tendencies were not curbed, they could  be counterproductive in the long run and, therefore, needed to be arrested before gaining ground to boost demand in the economy, he said.

He also suggested that India should call for joint negotiations with the Organisation of Petroleum Exporting Countries (OPEC) to fix a price band for oil to arrest speculation in oil prices.

Referring to Dr Singh's scheduled April 2 meeting with US President Barack Obama, Mr Jindal hoped the Prime Minister would urge him to lift restrictions on issuance of H1-B visa to Indians.

INT