NEW DELHI: The slowdown in economic growth coupled with recession hitting major economies like the United States and Europe has badly impacted India’s exports, which continue to grow in the negative territory for the last eight months with little sign of recovery in the near future. The sharp decline in exports has led to closure of businesses and job losses running into lakhs.
India’s exports, which had clocked a healthy growth of over 30 per cent in the first half of 2008-09, suddenly felt the heat of global recession and entered the negative zone from October 2008. Exports managed to clock a meagre growth of 3.4 per cent in 2008-09 aggregating $168 billion against the original target of $200 billion and revised target of $170 billion. The crisis is real and big in the exports sector and the very fact that despite deprecation of the rupee against the dollar, exports in rupee terms have clocked a negative growth of 15 per cent in March and 16.4 in April 2009. The decline in exports has badly hit the manufacturing sector as well as industrial production as shrinking exports markets of the U.S. and Europe showing no signs of revival of demand.
Keeping all these developments in mind and the socio-economic impact of this downturn, the budget has to focus on measures that are aimed at improving the competitiveness of Indian exporters and give thrust to growth. The focus for both Finance Minister Pranab Mukherjee and Union Commerce and Industry Minister Anand Sharma would be to put in place policies that reduce transaction costs and improves productivity of exporters to ensure sustained export growth even during adverse conditions.
Mr. Sharma has already met Mr. Mukherjee with the wish-list asking for sops to revive exports. The exporters as well as the Commerce and Industry Ministry, have sought extending of interest rate subsidy of 2 percentage points that some exporters are eligible for. The interest subsidy scheme is to end on September 30 and extending it will help exporters’ access cheap credit and remain competitive.
The Federation of Indian Export Organisations (FIEO) has asked for extension of the scheme till March 31, 2012. But the Ministry has recommended that it be extended till September 30, 2010. The FIEO is of the view that actual interest rate for exporters in India is still very high compared with Europe and South-East Asia where credit is available, at lower than 5 per cent.
“We have asked the government to provide credit to exporters at 7 per cent. In case, it is not possible then the Government could provide export credit at 400 basis points below PLR instead of 250 basis points at present,” Ajay Sahai, Director-General, FIEO, said. There also a strong case for inclusion of exporters businesses such as plantations, engineering and pharmaceuticals in the interest subsidy scheme as these sectors have also been badly impacted by the slowdown.
Tackling job losses
However, the budget would have to give priority to labour-intensive sectors like textiles, handicrafts, carpets, leather, gems and jewellery, marine products as well as small and medium enterprises in the scheme of things. Although, the government is confident that exports would once again return to the positive growth side by September-October, but steps need to be taken to prevent further job losses and resorting confidence.
The Engineering Export Promotion Council (EEPC) is also making a strong pitch for a big push to engineering exports. India’s exports of this front have dipped in April by 33.2 per cent to $10.74 billion over the same month of 2008. It has sought review of export promotion capital goods (EPCG) scheme by way of reducing the custom duty to nil rate and reducing the export obligation of 8 times of duty saved to 5 times of duty saved with continuance of fulfilling period 8 years.
There is also demand to provide an option to importers to pay CVD portion and facilitate availing of Cenvat credit, thereby reducing the export obligation burden.
Infrastructure
According to Dun & Bradstreet COO, Kaushal Sampat, given the losses that the export sector has suffered, the budget must set up an agenda for relief for that sector. “Infrastructure ought to be a major focus area of the budget, not just towards increasing the competitiveness the export sector, but also because it will give a much needed impetus to the flagging economy while also filling the large gap in infrastructure in the country,” he said.
Source : The Hindu