Concerns notwithstanding, exporters hope for a sunny 2008

EXIM MATTERS

So, how was the year 2007?," I asked Atul, an industrialist. "Not the greatest of years, but I suppose after a run of four good years, a tough year helps you consolidate, revisit basic strategies, review the processes and build the resilience and confidence that you can take on such years and look forward with optimism," said Atul.

"Did the strong rupee affect you?", I probed. "Every one knows it is there. We need to cope with it. So, we go ahead and do so. There is no point complaining," said Atul.

I called up Aspy, who runs a consultancy on managing foreign exchange risks. "Except for some sectors like textiles, other exporters seem to be managing OK. After all, they cannot afford to lose customers.

Moreover, it is not that rupee alone has appreciated against the US dollar. All other currencies have too, except probably the currencies of our neighbors. The positive development is that the exporters now realise that they have to sell not only the goods but also their foreign exchange. They are now paying more attention to how they can get a better price for their goods as well as foreign exchange," said Aspy.

"You mean, the government need not much bother about it?", I asked. "Certainly, it must. Everything must be done to reduce transaction costs. When the principle is conceded that we must export goods and not taxes, there must be no hesitation in granting necessary exemptions. The policy of asking exporters to claim refund of service tax on export related services must give way to exemptions," he said. Arun, a researcher on trade issues, was emphatic that Indian exporters need not subsidise the foreign buyers any more.

"It is easy to pontificate for someone who does not have to run a business", countered, Kirit, who runs an export oriented unit (EOU). "With falling margins, we are not building enough capital to invest in newer technologies. The government must extend income tax benefits to EOU beyond 2009," he said.

"We are a medium-scale unit. We want to move to a Special Economic Zone (SEZ) and take the income tax benefit. But, we do not have enough money to invest in new machines. Why don't they allow tax benefits, even if we move used indigenous machines to SEZ, say within an investment limit of Rs 10 crores?' asked Subhash.

"The private SEZ developers are willing to lease only large plots in processing areas. When the government grants approvals for SEZs, it can mandate that say 10 per cent of the processing area should be leased to small entrepreneurs," said Surendra, an entrepreneur.

"So, how do you look at the coming year?" I asked, Rajesh, a manufacturer. "We have invested. So, we have to fight it out. But, if the rupee continues to appreciate further, we will have a tougher time. The Duty Entitlement Passbook scheme must continue. The import duty rates need not be cut further this year, except for capital goods to make investment easier," he said.

So, that sums up the mood of the exporters at the dawn of the New Year. A bit of concern, but a lot of optimism and expectations of responsive government.

tncr@sify.com