EXECUTIVE SUMMARY

The basic role of the Department of Commerce is to facilitate and create an enabling environment and infrastructure for accelerated growth of Indias international trade. In consonance with the Governments vision of making India a major player in world trade, the Foreign Trade Policy (FTP) is announced every five years. It provides the basic policy framework of translating this vision into specific strategies, goals and targets. Keeping in line with the cherished goal of the economy to grow at a double digit rate over the next decade, the aspiration of the Department, has been outlined in the Strategic Plan to achieve an average annual growth of exports of 25% over the next six years.

The

Outcome

Budget

is

technique

of

presenting

the

budget

of

the

Ministry/Department in terms of functions, programmes, and activities. The Outcome Budget 2011-12 of the Department of Commerce highlights the various programmes and activities undertaken/envisaged to be undertaken by the Department in furtherance of the core objective of strengthening Indias foreign trade performance in the context of the related targets and achievements for 2009-10 and first nine months of 2010-11 and targets set for 2011-12 in terms of financial outlays, physical outputs/quantifiable deliverables and outcomes. The present document is divided into six chapters viz:

Chapter I brings out a brief introductory note on the goals, objectives and functions; the organizational set up; its mandate and the list of major programmes/ schemes implemented by the Department.

The Department is headed by a Secretary who is assisted by an Additional Secretary & Financial Adviser, three Additional Secretaries and thirteen Joint Secretaries and Joint Secretary level officers and a number of other senior officers. The Department is functionally organized into the eight Divisions viz - Administration and General Division, Finance Division, Economic Division, Trade Policy Division, Foreign Trade Territorial

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Division, State Trading & Infrastructure Division, Supply Division and Plantation Division. The various offices/ organizations under the administrative control of the Department are: (A) three Attached Offices, (B) eleven Subordinate Offices, (C) ten Autonomous Bodies, (D) five Public Sector Undertakings, (E) Advisory Bodies, (F) fourteen Export Promotion Councils and (G) other Organizations. Chapter II presents the vertical compression and horizontal expansion of Statement of Budget Estimates. The main objective is to establish a one to one correspondence between (financial) Budget 2011-12 and Outcome Budget 2011-12. The details comprise of the financial outlays, projected physical outputs and projected/ budgeted outcomes.

For the year 2010-11, an outlay of Rs.3,980.05 crore was approved for the various Plan and Non-Plan schemes of the Department. Out of this, Plan outlay was Rs.1,680 crore. The provisional Plan Expenditure (upto 31.12.2010) for the year 2010-11 is estimated at Rs. 1,275.73 crore. As against this, an outlay of Rs 6,516.08 crore has been approved for the year 2011-12; consisting of Plan outlay of Rs.2,000 crore and Non-Plan outlay of Rs. 4,516.08 crore. As export promotion and market development is the core of the activities of the Department, assistance in the form of export subsidy, grants and interest subsidy to banks at Rs. 1,000.00 crore constitutes the bulk of the Non-Plan expenditure. On the Plan side, the Centrally-sponsored scheme of Assistance to States for the Development of Export Related Infrastructure and Allied Activities (ASIDE) constitutes the single most important activity accounting for an outlay of Rs. 850.96 crore.

Chapter III highlights the details of reforms measures and policy initiatives undertaken by the Department and how these relate to the intermediate outputs and final outcomes in areas such as public private partnership, delivery mechanisms, social and gender empowerment processes, greater decentralization, transparency etc.

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After a period of unprecedented growth of GDP as well as foreign trade during 2003-04 to 2007-08, Indias output and exports were adversely affected by the deepening global economic slowdown from the second half of the fiscal 2008-09. India`s exports increased nearly three times during 2003-04 to 2008-09 and declined by 3.6% in 200910.

Against the backdrop of a global economic crisis and faltering exports the current Foreign Trade Policy (FTP), 2009-14 was unveiled by the Government on 27th August, 2009. The new Policy clearly spells out both the short term and the long term objectives of the Government. The short term objective of FTP (2009-14) is 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. The FTP (200914) envisages three basic pillars for supporting Indias exports. These are (i)

Strengthening of infrastructure related to exports, (ii) bringing down transaction costs, and (iii) providing full refund of all indirect taxes and levies. The only option available with the Department of Commerce towards attainment of these objectives is to achieve further acceleration in exports growth. Keeping in line with the cherished goal of the economy to grow at a double digit rate over the next decade, the aspiration of the Department, as outlined in the Strategic Plan, is to achieve an average annual growth of exports of 25% over the next six years.

It is against this backdrop of a global economic crisis and faltering exports that the new Foreign Trade Policy (FTP), 2009-14 was unveiled by the Government on 27th August, 2009. The new Policy clearly spells out both the short term and the long term objectives of the Government. The short term objective of FTP (2009-14) is 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. The Policy, with clearly enunciated objectives and strategies and necessary initiatives taken by the Government during the last five years, has been very effective in putting Indias exports on a higher growth trajectory. The Indian exports grew from US$ 83.5 billion in 2004-05 to US$ 185.3 billion in 2008-09, registering an average annual growth rate of about
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24%. As far as giving special thrust to employment generation is concerned, sectors with significant export potential, coupled with employment generation in semi-urban and rural areas, were identified and specific sectoral strategies were prepared.

Subsequent to announcements made in FTP (2009-14), short term sectoral performance review of the exporting sectors was carried out and additional measures were extended for higher support for market and product diversification undertaken in the Annual Supplement, 2010-11as under:

Additional benefit of 2% bonus, over and above the existing benefits of 5% / 2% under Focus Product Scheme, allowed for about 135 existing products, which have suffered due to recession in exports. Major sectors include all Handicrafts items, silk carpets, toys and sports goods (all of which were earlier eligible for 5% benefits); leather products and leather footwear, handloom products and engineering Items including bicycle parts and grinding media balls (all of which were earlier eligible for 2% benefit).

256 new products added under FPS (at 8 digit level), which shall be entitled for benefits @ 2% of FOB value of exports to all markets. Major sectors/product groups are engineering, electronics, rubber & rubber products, other oil meals, finished leather, packaged coconut water and coconut shell worked items.

Instant Tea and CSNL Cardinol included for benefits under VKGUY @ 5% of FOB value of exports.

Nearly 300 products (at 8 digit level) from the readymade garment sector incentivised under MLFPS for further 6 months from October, 2010 to March, 2011 for exports to 27 EU countries.

Since October 2009, exports have resumed their uptrend and recovery has been maintained since then. Exports during the first nine months of the current fiscal i.e.
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AprilDecember, 2010-11, are estimated at US $164.7 billion recording a growth rate of 29.5% over the same period last year.

Chapter IV reviews the scheme-wise past performance of the various programmes and activities undertaken by the Department during 2009-10 and 2010-11 targets already set. in terms of

The Plan Schemes being implemented by the Department are aimed at creating an enabling environment for promotion of Indian exports.

The scheme-wise performance in respect of major schemes being implemented by the Department is given below:-

Assistance to States for Development of Export Infrastructure and Allied Activities (ASIDE) Scheme: The basic objective of the scheme is to involve the States/UTs in export efforts by providing incentive-linked assistance to concerned Governments and to create appropriate infrastructure for development and growth of exports. It has been possible to achieve this in spite of various constraints as is evident from active participation of States/UTs in sponsoring a large number of export related projects for assistance from the ASIDE Scheme.

During 2009-10, total number of projects approved by State Governments under ASIDE scheme were, 122 worth Rs. 1147.68 crore. Out of this Rs. 554.89 crore only has been proposed by state govt./UTs to be met from the ASIDE funds, and the balance of Rs. 592.79 crore have been/are being leveraged from the resources of State Govt/UTs and other sources identified by the State Govt./UTs. Similarly in the central component a total of 40 projects worth Rs. 187.99 crore have been approved so far and out of this Rs. 139.07 crore only has been/ is to be funded from the central component of ASIDE scheme. Balance Rs. 48.92 crore has been/is being leveraged from other sources including states, private partnership and agencies of states.

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Development of Special Economic Zones (SEZs) is a major initiative of the Government. This is aimed at generation of additional economic activity; promotion of exports of goods and services; promotion of investment from domestic and foreign sources; creation of employment opportunities and development of infrastructure facilities. In the short span of about five years since the SEZs Act and Rules were notified in February, 2006, formal approvals have been granted for setting up of 580 SEZs out of which 374 have been notified. Out of the total employment provided to 6,44,073 persons in SEZs as a whole, incremental employment of 5,09,369 persons was generated after February, 2006 when the SEZ Act came into force. This is apart from millions of man days of employment created by the developer for infrastructure activities. Physical exports from the SEZs has increased from Rs. 99,689 crore in 200809 to Rs. 2,20,711.39 crore in 2009-10, registering a growth of 121%. There has been overall growth of export of 1493% over past seven years (2003-04 to 2009-10). The total physical exports from SEZs as on 31st December, 2010 i.e. in the first three quarters of the current financial year, has been to the tune of Rs. 2,23,132.31 crore approximately registering a growth of 46.70% over the exports of corresponding period of the previous financial year. The total investment in SEZs till 31st December, 2010 is Rs. 1,95,348.16 crore approximately, including Rs. 1,91,312.65 crore in the newly notified zones. 100% FDI is allowed in SEZs through automatic route. A total of 130 SEZs are currently doing exports.

Other important schemes implemented by the department relate to plantation crops.

Tea production in India during the year 2009-10 has been estimated at 991.18 million kgs as against 972.77 million kgs achieved in 2008-09. The production had increased by 18.41 million kgs when compared to previous year due to improved weather conditions. During the period April-October, 2010-11, tea production is estimated at 719.67 million kgs against 748.48 million kgs achieved during corresponding period of last year showing a decline of 28.81 million kgs.

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Exports of tea from India during 2009-10 stood at 213.43 million kgs valued at US$ 637.80 million with a unit price realization of US$ 2.99 per kg as against 190.64 million kgs valued at US$ 518.04 million with a unit price of US$ 2.72 per kg in 2008-09. During the period April - October, 2010-11 exports of tea have been estimated at 109.14 million kgs valued at US$ 311.59 million with a unit price of US$ 2.86 per kg against 119.18 million kgs valued at US$ 356.25 million with a unit price of US$ 2.99 per kg during the corresponding period of last year showing a decline of 10.04 million kgs in quantum and a decline of US$ 44.66 million in value.

For coffee the post monsoon crop estimates for 2009-10 season was 2,89,600 tonnes comprising of 94,600 tonnes of Arabica and 1,95,000 tonnes of Robusta. As against the targeted production of 3,00,000 tonnes comprising of 1,00,000 tonnes of Arabica and 2,00,000 tonnes of Robusta for 2010-11 season. Considering the impact of

weather, rainfall and pests & diseases during the South West monsoon, the post monsoon crop estimates has been placed at 2,99,000 tonnes consisting 95,000 tonnes of Arabica and 2,04,000 tonnes of Robusta which is better than the previous years. The Arabica coffee accounts to around 32% and the contribution of Robusta coffee is 68% of the total production. The crop estimates projected for 2011-12 season is 3,20,000 tonnes.

A total quantity of 1,94,677 tonnes of coffee was exported from India valued at Rs.2057.87 crore during the year 2009-10. The provisional figures for export during April-December, 2010 is 2,21,409 tonnes valued at Rs.2,269.80 crores, as against the export target of 2,25,000 tonnes for 2010-11. The export target for the year 2011-12 is placed at 2,20,000 tonnes.

Export of Natural Rubber (NR) in 2009-10 was 25,090 tonnes as against the target of 50,000 tonnes. Import of NR in 2009-10 amounted to 176,756 tonnes. There was substantial import of NR during April-November, 2010 amounting to 146,108 tonnes. Export of NR during the same period amounted only to 4,795 tonnes. The increase in import and decrease in export during the current fiscal were mainly due to the domestic
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rubber prices, which had been ruling above the international prices from the second week of June to mid-November 2010.

The target for NR export should not be considered rigid, as the objective of export promotion has to be appreciated. Export of NR is perceived as a strategy to adjust demand-supply balance in the domestic market so as to keep the domestic rubber prices close to those in the international market. Export and import of NR would

primarily depend on the difference between the prevailing NR prices in the domestic and international markets. The target of export of NR in 2011-12 is 50,000 tonnes

Flue Cured Tobacco (FCV) is the major variety exported accounting for 76% of the total exports by volume and major type utilized upto 90% of total usage by the domestic cigarette industry. The FCV tobacco is grown principally in the states of Andhra Pradesh (63%), Karnataka (36%), Maharashtra and Orissa (below 1%). The crop size target fixed for Karnataka for the year 2009-10 is 270 million kgs and the quantity of tobacco marked during 2009-10 was 323.25 million kgs valued at Rs. 2944.48 crores as against the targeted quantity of 270 million kgs.

During the year 2009-10, a quantity of 2,59,566 tons of unmanufactured tobacco and tobacco products valued at Rs. 4,402.29 crore (928.37US $) was exported as compared to 2,24,867 tonnes valued at Rs. 3,388.43 crores (738.06 US$) exported during 200809. Overall exports of tobacco and tobacco products increased by 15% in quantity terms, over the corresponding period of last year.

During 2009-10 export of marine products have crossed 2 billion US dollars. Exports aggregated to 6,78,436 tonnes valued at Rs. 10,048.53 crore and US dollar 2,132.84 million. Compared to the previous year, this recorded a growth of 12.54 % in quantity, 16.74 % in rupee earning and 11.75 % growth in US$ earnings.

Chapter V deals with financial review covering overall trends in expenditure vis--vis Budget Estimates/Revised Estimates in recent years, including the current year i.e.
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2010-11 (scheme-wise, object head wise, and institution wise in the case of autonomous institutions), and the position of outstanding utilization certificates and unspent balances with States and implementation agencies.

The Budget Estimate for the year 2010-11 was Rs.3,980.05 crore which was revised to Rs. 6,674.12 crore. As against this, the total expenditure up to December, 2010 was Rs. 3,493.23 crore.

Revenue Section

Plan:

During 2009-10, the Plan expenditure was Rs. 885.54 crore as against

Rs.857.76 crore during 2008-2009. The provision for the year 2010-11 was Rs. 997.01 crore and Revised Estimate was Rs. 997.01 crore.

Non-Plan:

During 2009-10, the Non-Plan expenditure was Rs.2,295.61 crore as

against Rs.3,448.79 crore during 2008-2009. The provision for the year 2010-11 was Rs.2,304.55 crore and the Revised Estimate was Rs.4,997.94 crore.

Capital Section

Plan: During the year 2009-2010, the Plan expenditure was Rs.610.50 crore as against Rs.584.25 crore during the year 2008-09. The provision for the year 2010-2011 was Rs.682.99 crore for Budget Estimates and Revised Estimates.

Chapter VI reviews the performance of the Statutory and Autonomous Bodies under the administrative control of the Department.

The Export Inspection Agencies (EIA) under the Export Inspection Council of India (EIC) certified export items valued at Rs 10,667.80 crore during the year 2009-10. During April-November 2010, the value of exports certified by the EIAs was Rs 5,609.09 crore.

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The total revenue generated in 2009-10 by the organization was to the tune of Rs.49.47 crores. The revenue realized between April-November 2010 is Rs 21.14 crores.

The Indian Institute of Packaging (IIP), Mumbai, received Rs. 2.00 crore during 200910, as plan grant from the Department of Commerce which was utilized towards infrastructure development, library publication, IT resources, etc. During 2010-11, an amount of Rs.1.75 crore has been sanctioned which is planned to be utilized for ongoing schemes and for food laboratory at Delhi and residential and hostel accommodation under the new schemes.

During 2009-10, the State Trading Corporation (STC) achieved a turnover of Rs 21,509 crore thereby reflecting a growth of 9% over previous year. The growth in turnover was mainly attributable to high import turnover contributed by items such as bullion, hydrocarbons, minerals & metals, petrochemicals, etc. Total exports during 2009-10 amounted to Rs 1,504 crore.

The National Centre for Trade Information (NCTI): The Centre provides value added information in the field of electronic trading opportunities, live trade leads from World Trade Point Federation (WTPF), trade data analysis and organized export

awareness seminars and updating/uploading information on its website. It has uploaded on its website 52 issues of Trade Point-India containing approximately 250 Trade Leads each week.

Studies undertaken by the centre are: ASEAN FTA/PTA Work, GCC FTA/PTA, IndoChile FTA/PTA, Trade data analysis for WTO Division, India-MERCOSUR FTA/PTA, India-New Zealand FTA/PTA, Study under Duty Free Tariff Preference (DFTP)

Scheme, Trade Data Analysis of Agriculture Items For APEDA, Trade data support for AEPC.

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ITPOs total income during 2010-11, is estimated at Rs.268.00 crore (provisional) as compared to Rs.238.72 crore in 2009-10 while the total expenditure is anticipated at Rs.212.00 crore (provisional) as against Rs.161.15 crore incurred during the previous year. ITPO is anticipating a surplus of Rs.56.00 crore (provisional) during the year 201011 as compared to actual surplus of Rs.77.57 crore in the previous year.

The Export Credit Guarantee Corporation of India Ltd. (ECGC) Mumbai has the primary objective of supporting the countrys exports by extending insurance and guarantee facilities to the Indian exporters and the commercial banks. The paid up capital at the end of 2010-11 is Rs. 900.00 crores.

The total premium income of ECGC during 2009-10 amounted to Rs.812.99 crore as compared to Rs. 744.68 crore in previous year. This premium income of ECGC mainly comprises of Short Term ECIB Business, accounting for 59.91% of the total premium income, followed by Short Term Policy sector including factoring, which contributed 35.59%. The income from medium and long term sector accounted for just 4.50% (Rs. 36.79 crore) of the total premium income. During the year ECGC achieved a growth of 9.17% under premium income.

Mechanism and the Public Information System to monitor the physical and financial progress

Each Administrative Division is provided the Guidelines for release of budget to the implementing agencies. The implementing agencies put in place their own mechanism for providing assistance to the ultimate beneficiaries to ensure compliance and monitor the implementation and outcomes. The Department also monitors execution of the scheme and its impact towards achieving the desired objectives. Each Administrative Head monitors and reviews the physical and financial progress of schemes under their charge on a quarterly basis, which is further supervised and overseen by the Financial Advisor and the Secretary as and when required.

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The Government is committed to facilitate efficiency, transparency and decentralization of decision making process through intensive use of Information and Communication Technologies (ICT) based tools. To facilitate quick appraisal of inter-ministerial and inter-agency trade related matters, an Executive Video Conference System (EVCS) has been installed in the Department, connecting Secretaries to Government of India and all Chief Secretaries/Administrators of States/UTs over NIC network (NICNET). For bilateral and multilateral international negotiations, a Video Conferencing Studio has been setup in the Ministry of Commerce & Industry. The Department's web site

(http://commerce.nic.in) is the major source of information dissemination and provides Government-to-Citizen (G2C) and Government-to-Business (G2B) interface for electronic delivery of services, trade facilitation and monitoring various applications. The access to various e-governance and office automation systems/applications and databases is available to the user in the Department through an Intranet Portal.

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