India's exports fell for the eleventh consecutive month in October, and it finally prompted the government to announce some incentives for the sector. Last week, duty refund rates were increased on a host of items, including iron, steel, garments and marine products. In addition, the Cabinet also approved the Interest Equalisation Scheme on pre and post shipment rupee export credit for five years. These steps are encouraging. The export sector, which has long been reeling under dampened global demand, will get a much-needed relief with the latest measures.
Under the duty drawback scheme exporters are given refunds of duties on imported inputs for export items. Now, the rates have been enhanced on a range of items. In addition, several new items have been included. Also, for the first time wheat exporters are allowed to function under the Brand Rate mechanism. Another positive step is the raise in rates for certain engineering items. This will help the sector mitigate the impact of import duty hike in steel. It is also good to see a hike in composite rates for several items, including ready-made garments, select leather goods, frozen shrimps/prawns, etc.
The Interest Equalisation Scheme, earlier called Interest Subvention Scheme, has been approved for five years, starting April 1, 2015. The previous scheme expired on March 31 last year and its non-availability, combined with high costs of credit and policy uncertainty over the scheme's renewal, was a demotivating factor for the SME exporters. Now, the relaunch of the scheme, which covers as many as 416 tariff lines by small and medium-sized enterprises, will certainly give a boost to SME exports from the country, bringing down costs of credit for the sector.
The pace at which the Centre has moved over recently to arrest the decline in exports is praiseworthy, although I think the measures could have been taken much earlier. In addition, I don't think that only policy interventions — which are a must to address the immediate issues — are enough. We require structural reforms. Increase in the share of manufacturing in the export basket, export diversification to new markets, such as Latin America, Africa, East and South Asia, ASEAN, China and Eastern Europe, and trade infrastructure development — I think these are some major areas where we need to work upon.
I invite your opinions. What further steps do you think the Centre needs to take to boost exports? |
