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Many good initiatives in the Policy US$ 200 billion export target is realistic. But can we achieve it through higher export volume? |
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G.K. Gupta, President, FIEO |
The uncertainty over DEPB Scheme is over for the time being with its extension till May 2009. I hope the extension does not end sooner than the introduction of GST. Reduction in customs duty under EPCG Scheme from 5% to 3% will encourage modernization, though ideally the duty should have been brought down to zero. Extension of the scope of focus market scheme will help in diversifying our export market, particularly since the traditional markets like US, EU and Japan are not expected to grow by more than 1.25%. Nevertheless, a few more countries in Africa should have been roped in, especially when we are aiming to double our bilateral trade with this continent by 2012.
The incentives provided to export of fruits & vegetables are encouraging but we also need to lay down an adequate turf for exporters of these items by strengthening agricultural export infrastructure in terms of cold storage facilities, rural transportation etc., to minimize wastage which is currently estimated at over 40%. When China can export 30% of the total world requirements of fruits & vegetables, we being a predominantly agrarian economy have no reason to lag behind provided there is a proper mix of policy and entrepreneurship.
Focus product scheme also should have been extended to include high value added manufactured goods, garments, cotton textile and leather as these sectors are in the dire need of external support.
Government is committed to zero rating of exports and therefore, I am sure, a mechanism to provide rebate of state and local levies would be devised shortly. For manufacture of certain products in some states, these levies are as high as 5% of the export value. A remission or removal of these levies will compensate for our loss of competitiveness due to of rupee appreciation.
It is good that Market Development Assistance scheme has been liberalized for sports goods and toys sectors. Other labour intensive and sunrise sectors of exports also need similar treatment. Yet, an export of over Rs.6,00,000 crore cannot be supplemented with a small MDA fund of Rs.50 crore.
FIEO has been advocating for creation of "export development fund" to augment marketing efforts of MSMEs. When other countries are providing such kind of assistance to their exporters, why are we so lethargic! Creation of such fund with a corpus of say about 0.5% of total exports would be adequate to begin with.
Toys and sports goods manufacturing units mainly belong to tiny & cottage sectors. These units are under serious threats from suppliers in China and other countries. The additional duty credit of 5% will help these units in taking on their competitors in global market. Increase in exports from the two sectors will not only generate additional direct employment but also indirect employment in semi-urban and rural areas where such units are preponderantly located.
It is also high time that we encashed the goodwill generated by software export sector for promoting our hardware exports. The Policy has made a right beginning by classifying IT hardware sector as a special focus area under high technology product scheme. I personally feel we should provide more support to this sector by including them under Focus Product scheme as well.
The Policy proposes various measures to reduce transaction cost, which include dispensing with requirement of physical verification for EPCG and advance authorization scheme, treatment of all EDI ports as a single port, reduction in application fee for EPCG and IEC, etc. These are welcome measures. More importantly, however, we should establish full EDI connectivity among all the 13 agencies involved in international trading on a priority basis. This alone will substantially bring down transaction cost for exports that currently ranges between 5 to 7%.
Infrastructure will be the biggest bottleneck in realizing our objective of capturing 5% of the global trade by 2020. In this context, special economic zones are crucial as they will not only add to exports and employment but also build requisite infrastructure for exports.
Foreign Trade Policy aims at creating additional jobs, and so, we have to be seriously concerned about the loss of jobs due to currency appreciation. I hope the government announces more incentives for traditional sectors of exports to prevent any reduction of workforce by export units.
US$ 200 billion export target has been set for the current fiscal. I don’t find the target impossible because high global metal prices are expected to push export value realizations. However, I would be happier to see if we hit the target through higher export volume, which would generate additional employment.
