The commerce ministry will start reviewing the performance of key export sectors on Tuesday to evaluate whether they need additional incentives to stem sagging overseas sales.
India’s merchandise exports have contracted 6.8% to $143.7 billion in the six months since April on waning demand from the traditional markets such as the US and Europe. Exports have been shrinking for five consecutive months.
Although the finance ministry may not be able to provide additional support for exporters given the difficult fiscal situation, the commerce ministry hopes to provide some incentives through its budget allocation of Rs.1,673 crore for the fiscal to March.
“We will take the view of the finance ministry on the matter after we complete the sectoral review,” a commerce ministry official said, requesting anonymity. “We will try to give some incentives to exporters within our own budget.”
The review will begin on 30 October in consultation with the Federation of Indian Export Organizations (FIEO) and will continue till 29 November. This is the first such review after trade minister Anand Sharma announced a host of measures in June to boost exports.
No country can sustain its exports only on the basis of incentives, said Abhijit Das, head of Centre for World Trade Organization (WTO) studies at the Indian Institute of Foreign Trade, and such incentives should be given to neutralize the disadvantages that erode export competitiveness such as state-level input taxes.
Das said WTO rules allow a country to provide export subsidies to a particular sector if the country does not have more than 3.25% share in global trade in that sector. “We have to be careful while giving export subsidies,” he said, adding that India has already crossed that threshold in textiles.
India has often been criticized by developed countries for its allegedly non-transparent subsidy regime. On 23 October, in the committee on subsidies and countervailing measures, the US and Turkey urged India to start phasing out its export subsidies to its textile and clothing industry, which the WTO secretariat had found to be export competitive from 2007, a WTO notification said.
FIEO will demand expanding the interest subsidy scheme to sectors like engineering, leather, gems and jewellery and some textiles products, as these sectors have seen sharp fall in exports, director general Ajay Sahai said. Under the scheme, credit is made available to labour-intensive sectors at a discount of two percentage points. The scope of the scheme was expanded to include more sectors in June this year.
Incentives could be helpful in current circumstances to boost exports, Sahai said, giving China’s example. “China has been able to achieve positive exports growth over a high base,” he said. “It had recently increased rebate on exports and has stopped frequent inspections which increases delay in exports.”
China’s exports grew 9.9% to $186.35 billion in September and by 7.4% in the January-September period to $1.5 trillion.
However, Sahai said the commerce ministry’s target of $360 billion exports cannot be achieved under current circumstances. “My personal view is we should be happy if we achieve $325-330 billion exports this (financial) year,” he said.
India’s exports stood at $300 billion in 2011-12.