In retrospect, 2008 wasn’t a bad year for exporters and importers.
Merchandise exports grew at a healthy rate of over 20 per cent till September. Imports also grew at over 35 per cent. It is since October that the growth rates have fallen and as the year closes, there are apprehensions that the coming days will be tougher.
The US and Europe still constitute significant destinations for our exports. With these economies in recession, exports of marine products, gems and jewellery, electronic goods, textiles, handicrafts and carpets have been particularly hit hard. Now, concerns have grown that with the dramatic fall in demand from the developed countries, China may try to dump manufactured goods into India. The commerce minister has already said that the government will protect domestic producers and it is likely that the basic customs duty rates may be raised very soon. Anti-dumping petitions may also get very favourable hearings.
Very few corporate chieftains or economists had anticipated the relentless surge in commodity prices in the first half of the year and striking collapse of prices in the later half. So, few can single out the managers of the economy in the commerce and finance ministries as culprits who did not see what was coming. Even so, the current year will go down as one in which hardly any significant pro-active step was taken to boost exports or make life easier for importers and exporters. It is notable that the duty drawback rates were cut in August and the DEPB (Duty Entitlement Passbook) rates were cut in November only to be followed by talk of a financial package to revive exports.
| 2008: MIXED BAG
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On the trade negotiations front, the commerce minister countered the intransigence of the US on contentious issues such as special safeguard mechanism, cotton subsidies, sensitive products, tariff capping, tariff simplification etc. in agriculture by rejecting an unacceptable deal on the Doha Development Round. Talks on many bilateral deals were initiated but few made much headway or go towards conclusion that would affect the trade flows in any significant way in the near term. The Prime Minister announced duty free tariff preference scheme for 49 Least Developed Countries. The efforts to integrate with Asean countries went a step forward with agreement on sensitive items.
The Special Economic Zones (SEZs) hit a roadblock during the year with the prices of commodities, steel and cement in particular, soaring to new heights in the first half. The later half saw the developers starving for funds and the entrepreneurs, who saw difficult export prospects, staying away from commitments to set up SEZ units. The much publicised SEZ of Reliance at Maharashtra had to be abandoned amidst protests from farmers and the promised SEZ at Haryana made little headway.
At this point, the government needs to assure the trade that there would be no unfair coercive measures to raise revenues and that measures such as disallowing duty/tax payment through Cenvat credit or duty credits (such as DEPB) will be avoided. The refund claims have to be processed quickly. The commerce ministry needs to cut the duty rate under EPCG (Export Promotion Capital Goods) scheme to zero. All EDI (Electronic Data Interchange) ports must be treated as single port and all export promotion schemes should be EDI-enabled, with a view to simplify procedures and reduce transaction costs.