While Finance Minister Nirmala Sitharaman in her maiden budget announced varied initiatives to incentivise MSMEs and startups, any direct reference to exports seemed amiss.
Although it is expected that announcements such as completion of rail-based projects, infrastructure projects and a focus on sectors such Khadi, Bamboo and Honey will give an indirect push to exports, exporters rue the lack of specific initiatives that can offer a forward looking vision to their trade.
Mahavir Pratap Sharma, Immediate Past Chairman of Carpet Export Promotion Council (CEPC) says that they expected foreign currency loans to be available. “We need funding; we need international interest rates and refund of State taxes that we are paying. All in all we need a level playing field that can be at par with other competing countries and will help Indian exports flourish and grow. We don’t need subsidies or incentives, just zero tax and duty and funding at international rates,” he says.
Ground reality
The Economic Survey 2019 presented on Thursday highlighted that the composition of India’s exports and import basket has almost remained unchanged in 2018-19 over 2017-18. Petroleum products, precious stones, drug formulations, gold and other precious metals are the top export items. Crude petroleum, pearl, precious, semi-precious stones and gold remain as top import items. India’s main trading partners continue to be the US, China, Hong Kong, the UAE and Saudi Arabia.
The annual growth rate of merchandise exports, the survey noted, fell from 10 per cent in 2017-18, to 8.8 per cent in 2018-19. Slower growth of merchandise exports is expected to have resulted from slower growth of world output and trade.
Exporters direct attention to the example of global peers and how India should have taken a cue from their success. “The scale of capital cost is a key issue. We can’t compete with the developed world which gets funding at -0.25 - 1 % rate of interest. For instance, Germany has a rate of -.025%. If we really want jobs to be created and manufacturing to go from negative to positive, capital cost will be crucial,” asserts Puran Dawar, Chairman (Northern India), Council for Leather Exports (CLE) and President, Agra Footwear Manufacturers and Exporters Chamber (AFMEC).
Dawar also brings forth the point that the government’s intention to increase investments and save more can only come by if exports are strengthened. “We don’t expect any subsidy. But there should be a vision plan for exports, just the way it is for other sectors,” he adds.
Silver lining
Others are a tad more optimistic of what could possibly follow. Ajay Sahai, DG & CEO, FIEO says that exports should not be seen in isolation. “Infrastructural incentives, logistic support, flow of credit, skilling, easy labour laws -- all will have a positive impact on exports. The cluster-based model for Bamboo and Khadi will also act as a good boost,” he says.
Sahai, however, feels that benefits related to corporate tax should have been extended to all corporates. The Budget announced a lower rate of 25% Corporate Tax extended to companies with an annual turnover of up to Rs 400 crore from earlier cap of upto Rs 250 crore.
Exporters are hopeful that there will be more initiatives lined up to bolster their trade in the Foreign Trade Policy (FTP) which will be up for revision in 2020.
Incidentally, The Economic Survey, from a macro-economic perspective, had noted that the deterioration of Current Account Deficit (CAD) may be contained if consumption slows down in the economy while increase in investment and exports could become the new drivers of the Indian economy.
Published On : 05-07-2019
Source : Economic Times
