Companies achieving specified exports turnovers have been dubbed star or superstar trading houses, and provided with a battery of incentives. That has done little to lower high-cost structures. Nor has it promoted greater corporate commitment-as demonstrated by the government's abortive attempt to raise the eligibility criteria for these companies last year. More recently, the Union Commerce Ministry has been trying to identify 500 large potential mega-exporters on the basis of sales and production data, which scarcely constitute a basis for determining competitive advantage in global markets. Such flawed schemes are the direct result of a policy regime that looks at trade policy in isolation from the rest of the economy.
Trade policy has to be integrated with overall investment policy.
It makes little sense to ask corporates to compete globally while affording them greater protection at home. After Budget 98, average tariff rates have climbed to 40.2 per cent, providing a further disincentive to exports. Nor does it make sense to plead for greater involvement by large industrial houses while simultaneously reserving garment and leather goods production, which together account for 11 per cent of total exports, for the small-scale sector. A more liberal, less bureaucratic FDI policy would enable foreign investors to use India as an export platform. Unfortunately, the failure of this experiment has still not changed the basic policy thrust.