More operational flexibility for SEZs too
By R. Chandrasekaran
The Indian government had no alternative but to take some concrete steps to arrest the falling exports even as the imports were increasing, to put pressure on trade imbalance. This has resulted in the government extending some of the concessions to the exporters besides offering additional sops to improve the sluggish exports. This is part of the initiatives to bring down the current account deficit also.
Exports from India have dropped 1.76 percent to $300.6 billion in the financial year ended March 2013, thus resulting in a trade deficit of $190.91 billion. The export number was significantly lower than the government targeted figure of $360 billion on top of $307 billion achieved in the last year. Export growth is badly needed for a country faced with a deteriorating current account deficit.
The economy is already facing lot of issues for growth including higher interest rates resulting in poor auto sales and lower than expected consumption. India’s current account deficit could threaten a potential downgrade from the rating agencies such as S&P and Moody’s. The International Monetary Fund has recently cut its economy forecast for India only a couple days ago.
This has obviously made Anand Sharma, India’s Commerce and Industry Minister, to come out with incentive to stimulate exports. One of the most attractive export incentives is extending of Export Promotion Capital Goods or EPCG scheme beyond March 2013. This offers zero duty on import of capital goods cutting across the sectors. Besides this, the scheme offers enlarging the subvention idea for the textile and engineering sectors, permission to transfer the status holder incentive, and use duty credit scrip past duty free imports.
The minister also allowed more operational flexibility to the Special Economic Zones or SEZs set up around the country. The revised flexibility allows requirement areas for all SEZs to half and does away with the requirement of minimum area for IT.
Commenting on the policy, Anand Sharma disclosed, “We have announced this policy after extensive consultation with industry and exporters. We will carry out a review in the month of October and announce more measures if required.”
The Reserve Bank of India’s meeting in May first week will also hold key for exporters to improve their performance. The central bank is likely to reduce interest rates to stimulate growth. The reduced interest rates could allow exporters to get cheap money. The minister’s comment that the government is ready to offer more sops if required is viewed positively.
To contact the author, e-mail: rchandrasekaran@americanbazaaronline.com