To promote exporters’ growth beyond conventional markets
India’s new Foreign Trade Policy, to be announced tomorrow, is likely to roll out incentives for labour-intensive sectors like textiles, handicrafts, leather and gems and jewellery, and promote the growth of domestic exporters beyond the conventional US and European markets.
The policy, to be unveiled at a time when the Indian and the global economy are grappling with one of the worst economic crises, will dictate the government’s action plan over the next five years for the export-import sector. The Reserve Bank of India (RBI) has projected the Indian economy to grow at its slowest pace since 2003.
Calling the new policy “forward looking”, Commerce and Industry Minister Anand Sharma today said it would “take on board the concerns of the industry, particularly the labour-intensive sectors. They will get special attention”. The policy would focus on these sectors through measures like tax exemption and cheaper credit rates, as the ongoing recession has dampened the demand for these segments from the US and European markets. The slump in overseas sales had resulted in companies cutting 500,000 jobs in 10 industries, Sharma had informed last month.
The current slowdown in the global markets had pushed the country’s export growth into the negative territory in October last year. This was followed by imports registering a decline in January.
Exports had dipped by 26 per cent in July this year at $12.5 billion, compared with $17 billion in the corresponding month last year. Cumulatively, exports fell 32 per cent in dollar terms in the four months ended July 2009, plunging to $49.25 billion from $72.5 billion in the same period last year.
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Imports, too, fell by about 36 per cent in July, continuing to slide for the seventh successive month, to $18.3 billion, against $29 billion recorded in July last year. The new policy is, however, expected to ease procedures for imports.
Sharma also urged the exporters to expand their operations beyond North American and western European markets, which together account for over 50 per cent of India’s export basket.
Earlier this month, the minister, referring to the downturn, had said: “We will surely look at market expansion, because if the diversion and expansion of market is not there, we will not be able to respond to this challenge”. The minister has asked the Indian entrepreneurs to access the markets where the demand has not declined.
The domestic industry, facing continuous decline for 10 months, expects the trade policy to announce measures to help achieve the export target of $169-billion in the current financial year.
The Federation of Indian Export Organisations (FIEO), the apex body of export industries, has asked for extension of the Duty Entitlement Pass Book (DEPB), the popular tax refund scheme, for the next five years.
Among a host of other recommendations, it has also suggested scaling up the incentives under promotional schemes like the focus market scheme (FMS) and zero duty on import of capital goods and rebate state taxes under the dual Goods and Services Tax (GST) regime. The government aims to introduce the GST from April 1, 2010.
“Exporters are reluctant to avail promotional schemes like FMS due to very low benefits under them. The export benefit under all these schemes should be a minimum of 3.75 per cent,” said FIEO President A Sakthivel. The FTP provides incentives through promotional schemes like FMS and FPS, where benefits currently range between 1.25 per cent and 5 per cent.
Industry body Federation of Indian Chambers of Commerce and Industry, or Ficci, has also suggested measures for the government’s considerations in the FTP. “Our exports have been suffering, as demand in the US and the EU markets has shrunk. We need some incentives, at least till these markets revamp,” said Ficci President Harshpati Singhania.