The commerce minister Kamal Nath is apprehensive that the global meltdown in financial markets will impact demand in the developed countries for Indian exports and that the export target of $200 billion for the current financial year may be missed. He has talked of a package of fiscal measures to sustain export growth.
The talk of sops for exporters comes barely two weeks after his ministry cut the DEPB (Duty Entitlement Passbook) rates for many export products.
In August this year, the finance ministry cut the duty drawback rates on most items, including items in the labour intensive sectors such as textiles and textile articles, leather and leather articles, metals and articles of metals and bicycle and bicycle parts. The extra concessions in export credit interest rates for specific sectors were withdrawn in September. These moves were a response to weakening of the rupee (now about Rs 50 per US$) and fall in inputs costs, prices of commodities, inflation rate, duty rates and ocean freight rates.
Last year, the exports were $162.9 billion (revised figures). The major drivers of exports during the period were engineering goods (27.34 per cent), petroleum products (51.97 per cent), gems & jewellery (23.27 per cent), agriculture & allied products (55.51 per cent) and ores & minerals (30.34 per cent).
Exports of textiles, handicrafts and sports goods, which were badly hit during 2006-07 due to appreciation of the rupee vis-à-vis the US dollar since September 2006, showed improvement in their performance during 2007-08. This year, till September 2008, the exports were $ 94.973 billion as against $ 72.556 billion during the corresponding April-September half year 2007, registering a growth of 30.9 per cent in dollar terms. However, worries have surfaced of late with initial indications of negative growth during October 2008 and prospects of further slowdown in the remaining months that might impact employment.
Exporters complain of weak order book, customers requests to hold further shipments against orders contracted earlier, delayed payment or non-payment by customers, withdrawal of specific shipment cover and reluctance to give fresh cover to new customers by Export Credit Guarantee Corporation, severe price cuts by competitors in the competing countries, fall in prices reducing the value of their inventories causing drop in drawing power under sanctioned credit limits, increased risk aversion of banks, non-availability of export credit in foreign currency due to drying up of FCNR-B deposits, increased cost of credit due to hike in prime lending rates of banks, pervading mood of gloom and uncertainty in the financial markets and so on.
| MAJOR EXPORT COMMODITIES | ||||
| 2007-2008 | 2006-2007 | 2005-2006 | 2004-2005 | |
| Petroleum (crude & products) | 114,191.68 | 84,520.15 | 51,532.80 | 31,404.15 |
| Gems & Jewellery | 79,227.74 | 72,295.17 | 68,752.59 | 61,833.71 |
| Machinery and instruments | 36,750.05 | 30,420.34 | 29,015.48 | 16,711.62 |
| Drugs, Pharma & fine Chemicals | 30,759.64 | 26,895.18 | 22,115.72 | 17,857.80 |
| Rmg cotton Incl accessories | 30,335.79 | 31,289.51 | 29,015.48 | 22,663.09 |
| Total | 655,863.5 | 571,779.25 | 456,417.88 | 375,339.5 |
| Data Source: DGCIS, Kolkata Value in Rs crore | ||||
Obviously, the government cannot solve all the problems. Even if fiscal sops are given, there is no way to make the buyers in developed countries to place orders or accept shipments or make prompt payments. But, some steps can be taken quickly. Under the EPCG (Export Promotion Capital goods) scheme, duty rates can be brought down from 3 per cent to zero, instalation certificates can be accepted from Chartered Engineer for past and future cases and group company exports can be accepted up to 100 per cent.
Automatic extension in export obligation period can be given under duty exemption scheme. Excise and customs refunds and drawback can be sanctioned faster. Deemed exports benefits can be disbursed sooner and unutilised credit on account of deemed exports can be refunded. DFRC scheme can be re-introduced. Such measures may not cost much money but may bring great relief to exporters.
