Incentive push for exports likely to boost employment

Industry players laud the mid-term review of foreign trade policy

Export associations and industry players largely lauded the mid-term review of India’s foreign trade policy released on Tuesday, saying the policy revisions would boost labour-intensive sectors.
 
Across most categories of manufactured products and services, a 2 per cent increase in incentives under the Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) would give more breathing space to exporters, increase competitiveness, and improve employment, they observed.
 
“The increase in the MEIS rates for labour-intensive sectors, such as leather, handicraft, carpets, tools, marine, medical and scientific products and services, such as accountancy, architecture, legal, education, hotel and restaurant, will provide much-needed respite to these sectors, which are facing huge competitiveness from other countries,” Ganesh Kumar Gupta, president of the Federation of Indian Exporters Organisation (FIEO), said in a press release.
 

Ajay Sahai, director general of FIEO, however, said, “This 2 per cent would provide temporary relief to exporters and boost competitiveness in the short term, but larger issues like infrastructure inadequacy, logistics, and skilling need to be addressed.”
 
As the employment to capital ratio in these sectors is high, employment stands to benefit, he added. 
 
“The increased incentives will help the leather industry, and the simplification of procedure under the GST (goods and services tax) will normalise the export situation soon,” Aqeel Ahmed, vice-chairman, Council for Leather Exports, told Business Standard.
 
Export firms were struggling due to weak global demand and disruption due to demonetisation and initial impact of the GST.
 
“The FTP will focus on exports from the labour-intensive and MSME sectors by way of increased incentives in order to increase employment opportunities,” Commerce Minister Suresh Prabhu said while releasing the review.
 
Prabhu said that while global economy was picking up, exports had not yet improved, and the revised FTP would make that possible.
 
Agriculture exports have received the biggest chunk of incentives after textiles at Rs 1,354 crore.
 
The mid-term review advocated focusing on increasing exports of value-added agriculture products in the long term as its input on the yet-to-be-framed New Agricultural Exports Policy.
 
However, experts said focusing on the export of value-added agriculture commodities might not directly benefit farmers, while promoting the export of farm products would do the same.
 
Also, just focusing on value-added products might do little to reverse the trend of declining difference between agriculture exports and imports. If the trend is not reversed, India might become a net importer of farm goods.
 
“Why only value-added products, a reasonable and stable policy for agriculture exports should be for raw farm products as well,” Ashok Gulati, chair professor for agriculture at ICRIER, told Business Standard.
 
The FTP called for a stable and open export policy for the long term, effective handling of the phytosanitary standards, and technical barriers in trade-related issues. It also called for creating cold chain and transport logistics infrastructure, promoting the export of organic products, and setting up an organic export certification authority.
 
“To capture international markets, promoting the niche organic agriculture products is a good idea, but it should be priced properly,” Gulati added.
 
While the textile sector had already started receiving improved incentives worth Rs 2,743 crore from November 1, additional incentives of about Rs 5,700 crore are set to benefit a range of other sectors.
 
But, observers of the apparel sector think this might not be enough to make apparel exports competitive in the global market.
 
“The increase in incentives under MEIS is surely welcome, but the reduction in duty drawback is making it difficult to make apparel exports competitive, and there is always a fear of losing business to countries like Vietnam or Pakistan,” H K L Magu, vice-chairman, Apparel Exports Promotion Council, said.
 
“Taxes paid on diesel as input get embedded in our costs and make our products costlier in the global market,” he added.
 
The textile sector employs 4.5 million people directly, and even more indirectly.