Arguing that global recovery prospects were fragile, the pre-budget economic survey on Thursday advocated further stimulus for the exports sector including excise reduction for export oriented units.

Despite some improvement in global trade environment, the downside risks make it imperative for the government to reform policies concerning imports as well, the survey says.

The downside risks for world and the Indian trade lie in the fact that though the fall has been arrested, both output and trade recoveries are still fragile given the fact that the recovery has been pumped up by the stimulus given by different countries, including India, the survey says.

For the merchandise sector, it suggests some fundamental policy changes including further tariff reforms by lowering the peak custom duties from the present 10 per cent to 7.5 per cent, reductions of tariffs on all capital goods to a uniform 3 per cent and further reduction in excise duties to make exports and industry competitive.

The government had cut excise duty from 14 per cent to 8 per cent and the service tax from 12 per cent to 10 per cent in the wake of the global financial slowdown. India's exports, after falling for 13 consecutive months since October 2008, turned positive from November 2009. But in the April-December period, exports were down by 20.3 per cent.

The survey expresses concern over the leading economies like the U.S. resorting to protectionist measures. The high unemployment rates in some developed countries forcing even world leaders like the U.S. to resort to protectionist measures, as in the case of the recent tax breaks for companies giving jobs in the U.S., could send signal, it says.

The extraordinary financial stimulus given by different countries, including India, has contributed to the recovery. Import growth of some of India's trading partner like China, Hong Kong and Japan was encouraging in December 2009.

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