<b>T N C Rajagopalan:</b> Will this Budget help our trade?

He said the 'exemption raj' and complicated duty rate structure do not make it easy to do business

Finance Minister Arun Jaitley has drawn praise for aiming at a fiscal deficit of 3.2 per cent of gross domestic product, beside boosting consumption through more spending on agriculture, rural development and transport infrastructure.

He has also given some income tax relief to the middle class and to small and medium businesses. And, taken initiatives to improve tax compliance, make political funding cleaner, encourage digital transactions and promote affordable housing. These steps might lead to revival of domestic demand but a lot depends on whether export growth also picks up. The chief economic advisor, in his Economic Survey, said for achieving an annual growth rate of eight per cent, exports have to grow by 15-20 per cent. In his Budget speech, Jaitley talked of the expected rebound in the world economy and other global developments that have the potential to affect the latter. He mentioned only one measure to help exports, when he said, “we have to focus on our export infrastructure in a competitive world. A new and restructured central scheme, namely, Trade Infrastructure for Export Scheme (TIES), will be launched in 2017-18.” 

A scrutiny of his Finance Bill and the notifications reveals a 30 per cent export duty has been imposed on all goods nder tariff item 26060090, namely, ‘other aluminium ores and concentrates’. However, through an exemption notification, the effective rate of duty for ‘other aluminium ores, including laterite’ under this tariff item comes to 15 per cent. Goods other than these under this tariff item (concentrates) will continue to attract nil export duty. 

Beside, a useful clarification has been issued to address the problem faced by export-oriented units, whose inputs and final product attract nil customs and excise duty. This column had highlighted this (Why EOUs are discriminated against’) on December 19, 2016. 

On the import side, basic customs duties have been changed for some items but there was no attempt to rationalise the duty rates or the exemptions. Sukumar Mukhopadhyaya, former member of the Central Board of Excise and Customs, has dealt with this issue in detail and expressed disappointment in his column in this newspaper the day after the Budget speech.  The ‘exemption raj’ and complicated duty rate structure do not make it easy to do business. 

The minister has done well in not making any major change in customs, excise and service tax laws or duty rates, considering the impending transition to a goods and services tax regime in the next few months.  Some tweaks in these laws have been proposed in the Finance Bill. 

The Economic Survey had a separate chapter titled ‘Clothes and shoes: Can India reclaim low skill manufacturing?’ It said ‘the apparel and leather sectors meet many desirable attributes for policy attention: Bang-for-buck for creating jobs, especially for women, opportunities for exports and growth. Rising labour costs mean China is gradually vacating its dominant position in these sectors, affording India an opportunity.’  The Budget speech made a brief mention about schemes for these sectors and electronics.   The speech had many positives and hardly any negatives; so, market sentiment improved.  It would be unwise to get carried away and take growth for granted, when global uncertainties abound and the rupee remains overvalued. The adverse impact of demonetisation has not gone away.

E-mail: tncrajagopalan@gmail.com