Foreign trade policy tackles impact of stronger rupee

MIXED SIGNALS FOR THE ECONOMY

Commerce and Industry Minister Kamal Nath today said popular export benefit schemes would be extended by a year, relief on export obligation would be given to exporters groaning under the rising rupee and incentives on cement and steel exports would be withdrawn to curb inflation.

He announced these measures in the annual supplement to Foreign Trade Policy (2004-09) after it was cleared by the Union Cabinet in the morning. The sops will cost the exchequer Rs 13,150 crore this year.

The minister has set the export target for 2008-09 at $200 billion, almost 30 per cent higher than last year's $155 billion. In spite of the 12 per cent rise in the rupee vis-à-vis the dollar in 2007-08, exports were 97 per cent of the target of $160 billion and almost 30 per cent higher than $120 billion in 2006-07.

A recent survey by the Confederation of Indian Industry too had said exports of $200 billion would be achieved in the current year.

Nath announced fiscal incentives for the export of some types of fruit, vegetable and flowers, though the government has banned the export of wheat, edible oil, rice other than basmati and pulses to check rising food prices.

He also said incentives would be handed out to exporters of information technology hardware, sports goods and toys and announced the setting up of the Telecom Export Promotion Council to beef up the institutional framework for telecom exports.

For the first time, the Foreign Trade Policy has also tried to cool inflation by withdrawing export incentives under the Focus Market Scheme for cement and primary steel.

NATH'S PRESCRIPTION

DEPB scheme extended till May 2009

Reduced interest rates for rupee-hit and small exporters extended by a year

Average export obligation under EPCG scheme lowered, large exporters can cut commitments

Income tax exemption for 100 per cent EOUs extended by a year

Additional duty-free scrip of 2.5 per cent for select fruit, vegetable and flowers

Additional 5 per cent credit for toy and sports goods exports

IT hardware brought under special focus