With India’s exports declining for a sixth consecutive month, exporters have made a slew of recommendations ranging from creation of an export development fund for small and medium enterprises, tax exemptions for units functioning in special economic zones (SEZs) to interest subvention on credit and enhancement of duty drawback rates for the industry to lift outbound shipments.
India’s exports shrunk 1.6 per cent to $23.25 billion in October, mainly due to contracting global demand.
The recommendations by exporters come ahead of the Directorate General of Foreign Trade (DGFT) completing a detailed sectoral review tommorow on incentives to boost exports. “The review would be concluded in the next two days. We will then see if there is a need to fine-tune this year’s foreign trade policy (FTP) or whether specific steps need to be taken to improve export performance,” said Commerce Secretary S R Rao.
The commerce department is likely to provide incentives to exporters from the Budget allocation of Rs 1,673 crore for the current financial year.
Sanjay Budhia, chairman, CII National Committee on Exports and Imports, said, “The contraction in demand in the developed world has hit exports. The government should include markets like the US under the focus market scheme to offset high freight costs and other externalities to make our products more competitive overseas. The ministry also needs to provide support to micro and small enterprises through the creation of an export development fund, which will help them gain access to unexplored markets.”
Among the sops recommended by the industry is the demand to cap interest rates on credit for exporters at nine per cent, abolition of minimum alternate tax and dividend distribution tax for units operating out of SEZs and enhancement of duty drawback rates to five-six per cent from the current two-three per cent.
“Nearly 30 per cent of exports take place out of SEZs. As much as Rs 2 lakh crore has been invested by developers in these zones, but the current policy is not favourable for unit holders. The government needs to revamp the existing guidelines and extend tax exemptions to boost activity in SEZs,” said Budhia.
Ajay Sahai, director-general, Federation of Indian Export Organisations, said, “Exports have not been encouraging in October as well. The issue is that some of the concessions, which were announced in the FTP in June have not been implemented by the finance ministry."
Sahai said the FTP stated that the scope of the zero duty EPCG (export promotion capital goods) scheme would be enlarged and exports via e-commerce would be given FTP benefits. These have not happened. "The second sectoral review may offer some respite”, he said. While exports declined for the sixth month running, imports into the country went up by 7.4 per cent to $44.21 billion, widening the trade deficit to a record high of $20.96 billion. Cumulatively, in the first seven months of this year, exports declined by 6.18 per cent to $167 billion from $178 billion in the same period last year, making it difficult for the government to achieve its exports target of $360 billion in 2012-13.