The commerce minister’s New Year gift for exporters includes extension of the interest subvention scheme, a scheme for promoting project exports, inclusion of more countries in the Focus Market Scheme, a scheme for rewarding incremental growth which could stimulate exports to America, the European Union and Asian markets, and an assurance to tweak the Special Economic Zone scheme by next month. This package, his ministry hopes, will help turn the negative export growth rate figure to a positive one, and help achieve at least $400 billion of export by 2013-14.
The interest subvention scheme already in place covers select labour-intensive sectors and is available till end-March. It now gets extended for another year and also covers select segments of the engineering sector.
The benefit of interest subvention, to be made available through Exim Bank for project exports, is for contracts in select countries in South Asia, Myanmar and Africa. Extension of the Focus Market Scheme is for export to New Zealand, Latvia, Bulgaria, Cayman Islands and Lithuania. The details for rewarding incremental exports to select countries are awaited.
The latest set of incentives help some sections of exporters but might not help revive export growth across the board. The fact is that abolition of the Duty Entitlement Passbook (DEPB) scheme and reduction in duty drawback rates, at a time when the global trading environment was far from robust, have hit exporters hard across the board. Also, while stubborn inflation and high interest rates have pushed up costs, it is only recently that the rupee has depreciated somewhat to compensate.
Grant of more duty credit scrips and the zero-duty Export Promotion Capital Goods scheme have not adequately compensated for the loss of DEPB, the adverse effects of inflation or the slowing in the global economy.
The task of reviving exports, therefore, calls for a more earnest attempt to remove the procedural and infrastructure bottlenecks. The commerce minister can try to meet more exporters in various parts and hear what they have to say about their problems. Presently, the perception is that international trade negotiations, both bilateral and multilateral, take up more time and attention of the ministry than the problems exporters face. And, that the policies help imports more than they help exports.
As a dismal year for exporters winds down, it is somewhat comforting to note that 2013 promises to be a better year. America and Europe appear to have gone through their worst days and with some luck, could see better days ahead. At home, since the advent of P Chidambaram as finance minister, the government has taken many hard decisions, despite stiff opposition, and seems more resolute. The confidence of global investors in the Indian economy has returned somewhat, as foreign institutional investor inflows in stock markets show.
The prospects of the government pushing through large infrastructure projects look better now than at the beginning or the earlier part of the year. The rupee’s depreciation to around Rs 55 to a dollar should moderate imports and help exports, helping contain the ballooning current account deficit. On that somewhat promising note, let us welcome the new year.