A day after the Ministry of Commerce data revealed that India's merchandise exports slid 6.05 per cent to $26.13 billion during August 2019, the government unveiled the much-awaited package to boost the export sector. The new measures are in the form of incentives and quick refund of taxes, export finance, and are focused on making engineering and handicraft exports more competitive. A new free trade agreement is also a part of the package announced by Union Minister of Finance Nirmala Sitharaman in Delhi on Saturday.
"The measures will go a long way in enhancing the growth prospects of the sector in the short-term but will also give it a much-needed boost in the medium-term and long-term and will stimulate the overall economy," says Sharad Kumar, President, Federation of Indian Export Organisations (FIEO).
The most significant announcement is the institution of a new WTO compliant scheme of Remission of Duties or Taxes on Export Products (RoDTEP) to completely replace the existing Merchandise Exports from India Scheme (MEIS) from January 1, 2020. The scheme, estimated to cost Rs 50,000 crore, is expected to adequately incentivise the exporters more than the existing schemes, as it will neutralise all duties and levies suffered by the export products. "The three months lead time till December 31 to the existing MEIS will remove the uncertainty creeping in the minds of the exporters and will greatly help to finalise their export orders," Saraf said.
The government package also lists out measures to improve credit outflows from banks and transmission of interest rate cuts being effected by banks -- a move aimed at improving the cost and availability of credit.
The government has also expanded the scope of Export Credit Insurance Scheme (ESIC) to enable a reduction in the overall cost of export credit, including interest rates, especially for MSMEs. The FIEO also lauded the revised Priority Sector Lending (PSL) norms for export credit, as it will release an additional Rs 36,000 crore to Rs 68,000 crore as export credit along with active monitoring by an inter-ministerial working group in the Department of Commerce, through a dashboard.
The FM also announced measures like trade facilitation measures like reduced turnaround time at ports and airports through seamless digitisation process of export clearances, time-bound adoption of mandatory technical standards, setting up of testing and certification infrastructure, and holding of annual mega shopping festivals like Dubai Shopping Festival.
In August 2019, only eight out of 30 major product groups were in the positive territory, and almost all labour-intensive export sectors showed negative growth. The export community had identified a host of problems that led to the decline in exports, including sluggish global demand and rising tariff war. While these series of measures can make Indian merchandise more competitive, its success -- in terms of a major turnaround in export -- is not completely dependent on them. One can only hope that the external conditions will also improve by the time the government completes the reform process.
Copyright©2021 Living Media India Limited. For reprint rights: Syndications Today