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Year end review of 2006 - Department of Commerce

New Delhi
December 27, 2006
(Press Information Bureau)



The year 2006 witnessed unprecedented growth in India’s merchandise exports which crossed the landmark figure of US $ 100 billion and reached US $ 103 billion during the year, recording a growth rate of 24%. At 24 per cent growth in 2005-06 and 27 per cent growth in 2004-05, exports are currently growing three times faster than GDP growth. Exports as a share of GDP is more than 13% currently compared with a share of only 6% in 1990-91.

The high rate of growth during 2006 will ensure that the export target of US $ 125 billion for this fiscal (2006-07) will be reached, Shri Kamal Nath, Union Minister of Commerce and Industry, has said, while indicating that exports during April-November 2006 have already reached US $ 80 billion, with a record growth rate of about 39%.

India has also improved its rank in the world market as an exporter.

Employment generation in the export sector is being accorded the highest priority and accordingly, Annual Supplement of the Foreign Trade Policy announced by Shri Kamal Nath in April 2006 sought to achieve the objective of employment generation by identifying special focus areas in labour intensive sectors which would generate additional employment opportunities.

Major initiatives taken in 2006 for the promotion of labour intensive exports were as follows:

(a) TWIN SCHEMES OF FOCUS PRODUCT AND FOCUS MARKET introduced to give additional impetus to penetration of strategic markets in labour intensive sectors such as fish and leather products, stationery items, fireworks, sports goods and toys, and handloom & handicraft items. The Focus Product and Focus Market Scheme, allows duty credit facility at 2.5% of the FOB value of exports of specific products and notified countries.

(b) VISHESH KRISHI UPAJ YOJANA EXPANDED TO INCLUDE VILLAGE AND COTTAGE INDUSTRIES – renamed s the Vishi Krishi Upaj Aur Gram Udyog Yojana – to incentivise export of village and cottage industry products by awarding a duty-free scrip at the rate of 5% of FOB value of exports under the expanded scheme. 

(c) MASSIVE THRUST ON MAKING INDIA GEMS & JEWELLERY AND AUTOMOTIVE HUB by facilitating easier product movement across the borders and allowing import of precious metal scrap for refining. 

According to a study by RIS (Research & Information Systems for Developing Countries) commissioned by Ministry of Commerce & Industry in 2006, the export sector generated incremental direct employment of 14.85 lakh (i.e., 1.4 million) over the previous year, bringing the total employment generated by the export sector to 90.06 lakh (i.e. 9 billion). India has set itself a target of exports of US $ 150 billion by 2008-09 and achievement of this export target is likely to generate 136 lakh (i.e., 13.6 million) new jobs in the economy.

In pursuance of the Special Economic Zones Act 2005, SEZ Rules were notified in February 2006 in order to fulfil the objectives of the scheme viz., generation of additional economic activity; development of infrastructure facilities; creation of employment opportunities; promotion of investment from domestic and foreign sources; and promotion of exports of goods and services. 237 SEZs have been formally approved and 51 SEZs were notified during 2006. 

The SEZ scheme has generated tremendous response amongst the investors, both in India and abroad. Among the SEZ success stories of 2006 are: Nokia SEZ in Tamil Nadu which commenced commercial production with an investment of US$ 100 Million, providing direct employment to 2,800 persons and indirect employment to around 10,000 persons; Apache SEZ (Adidas Group) in Andhra Pradesh which commenced construction activities with an investment US $ 50 million, providing employment to 25,000 persons; Flextronics SEZ in Tamil Nadu; Quark City SEZ in Chandigarh, expected to have FDI of around US $ 0.5 billion, providing employment to 35,000 persons; and Motorola and Foxconn setting up electronic hardware manufacturing units in the SIPCOT SEZ with an investment of over US $ 200 Million. 

Continuing its proactive role as a major player in the Doha Round of negotiations in the World Trade Organisation (WTO), Shri Kamal Nath stood firm on India’s position especially in agriculture and participated in the WTO meetings in Geneva in 2006, which saw the suspension of the negotiations. India effectively articulated concerns of the developing countries at these meetings. As Shri Kamal Nath said: “Our farm activists and organizations initially opposed our participation in WTO talks. That is because they thought India might accept the demands of developed countries. But I did not accept those demands. Their fears and concerns – that farm produce from developed countries would enter India, and Indian farmers would be ruined – were genuine. But we did not accept those demands of developed countries. India not only stood firm, but also led the entire developing world”.

On the bilateral front, at the 7th India-European Union Summit held in Helsinki in October 2006, India and the EU agreed to launch negotiations for a broad-based Bilateral Trade and Investment Agreement.

During the year, initiatives were also taken in the area of Regional Trade Agreements (RTAs) which included implementation of agreement on South Asian Free Trade Area (SAFTA) with effect from July 1, 2006; implementation of an expanded list of preferential goods under the Bangkok Agreement with effect from September 1, 2006; initiation of the process of working out a Comprehensive Economic Partnership Agreement (CEPA) with Korea etc

The trade between India and China through Nathu La Pass in Sikkim resumed in July 2006 with import of 15 items allowed from China and export of 29 items from India. Since the opening of the trade route good worth Rs.8.86 lakh have been exported and goods worth Rs.10.61 lakhs were imported through Nathu La route from July-September 2006.