Commerce and Industry Minister Anand Sharma is in favour of withdrawing some of the stimulus measures provided by the government to the export sectors that are now showing strong growth. At the same time, he is cautious that a sudden pullout would halt the growth of the industry as a whole.
The government had provided a number of fiscal benefits to the country’s exporters when exports were plummeting sharply since, with markets in the US, EU and Japan facing a major slowdown in demand. However, exports have started showing growth, with some sectors reflecting significant recovery, since November last year.
“In those sectors that have moved to a very robust growth level, we can consider...,” Sharma said on the sidelines of the India-Arab Summit, organised by the Federation of Indian Chambers of Commerce and Industry here today. He also said an “abrupt” end to the stimulus measures could adversely affect the growth of the Indian industry.
The government had announced a slew of measures to offset the huge losses incurred by exporters. Some of those measures were an extension of interest subvention, additional fund allocation for certain schemes, enhancing duty drawback rates on specific products and the abolition of the fringe benefit tax, among others.
Last month, additional incentives worth Rs 500 crore were also given to exporters.
According to Commerce Secretary Rahul Khullar, exporters were given enough cushioning to fight the global economic downturn. “Now they should start looking at diversifying their markets and improve productivity. Exporters cannot look at sops all the time.”
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Planning Commission Deputy Chairman Montek Singh Ahluwalia also favoured a gradual withdrawal of the benefits, as the government struggled to bring down the fiscal deficit, which had surged to 6.8 per cent of the gross domestic product (GDP), highest in the last 16 years.
Besides, the Reserve Bank of India (RBI) also increased liquidity to banks for better credit flow by reducing key policy rates, selling of foreign exchange through banks to augment supply in domestic foreign exchange markets, and enhancing the period of pre-shipment and post-shipment rupee export credit by 90 days each.
The country’s exports touched $13.2 billion (about Rs 61,000 crore) and $14.6 billion (nearly Rs 66,035 crore) in November and December 2009, respectively, up 18.2 per cent and 9.3 per cent from the same months a year ago.