India’s exports, since December, 2014, have been in negative territory. While the primary reason has been the slowdown in the global economy, declining crude oil prices coupled with low commodity prices have added to the woes of the exports sector. However, domestic challenges like slowdown in manufacturing, high logistics cost, increasing transaction cost and product profile of our exports have also contributed in no less measure. Our competitors like Vietnam and Bangladesh have shown positive exports growth in the last 6 months or so asking us to do some introspection.
The recent incentives by the government in the form of revision of MEIS benefits and its expansion, announcement of Interest Equalisation Scheme on Export Credit along with the benefits on all Industry Rates of Duty Drawback did give some cushion in such difficult times. However, Chinese slowdown and devaluation of Yuan has come as yet another jolt for the sector.
In the upcoming Union Budget, we expect that the inverted duty structure in respect of various items may be addressed as it not only affects exports but also the manufacturing sector and adversely impacts Make in India and the import substitution strategy. The exemption from service tax on export may see the light of the day.
Deemed exporters are also vying for exemption of Terminal Excise Duty (TED) on purchase of capital goods from indigenous manufacturers as the current refund process leads to blockage of working capital and increases the transaction cost. If imports of such capital goods are facilitated with exemption from Additional Customs Duty (equivalent to Excise Duty), why ask domestic producers of the same to go through cumbersome process of refund which affects their liquidity? Most importantly immediate launch of the Integrated Trade Portal by CBEC to provide for online flow of exports and import documents amongst all regulatory agencies, will also help in reducing overall transaction cost by about 1-2 per cent.
The biggest challenge affecting MSME exports is on the marketing front. The total marketing support extended by Department of Commerce under MAI and MDA is insufficient and therefore a Export Development Fund (EDF) should be created with a corpus of 0.5 per cent to 1 per cent of total export value so that sizeable money is available to promote MSME exports.
In view of current global trend, we expect country’s exports to reach $260-$270 billion in 2015-16. All exporters may also be given Interest Equalisation Benefit (IES) as cost of credit is the same across sectors. With all these happening, we expect the exports sector to see some green shoots coming out only from the second quarter of the FY 2016-17 expecting to end the financial year with an export figure of $310-15 billion .
The author is President, FIEO
