India on Thursday cut import duties on some textile fibres and offered to pick up a greater share of the interest burden on loans to help exporters squeezed by a jump in the value of the rupee for the better part of this year.
Finance minister Palaniappam Chidambaram told Parliament the customs duty on polyester fibres and intermediaries would be trimmed to 5%, from the current 7.5%, and that on man-made fibres to 5% from 10%.
“The sharp appreciation of the rupee over the last several months has put pressure on the export sectors, particularly those with low import intensity such as leather, textiles, handicrafts and marine products,” Chidambaram said.
There will be no change in the customs duty for nylon chips, nylon yarn, rayon grade wood pulp and acrylonitrile.
Chidambaram said the rupee had surged in value against the dollar by 15.1% since October 2006, and that reflected the strength of the Indian economy.
The Union government would also exempt storage and warehousing services, specialized cleaning services (fumigation and disinfection) and business exhibition from service tax, the minister said.
It would provide an additional interest subsidy of 2% on loans availed by exporters of leather, handicrafts, marine products and some textiles.
In July, India announced a $320 million (Rs1,274 crore) relief package for exporters, including cuts in bank lending rates for the worst-affected sectors and increased tax breaks. The government provided a subsidy to banks for lowering lending rates by 200 basis points for firms exporting textiles, ready-made garments, leather products, engineering goods, sports gear, and processed foods.
Exporters now are borrowing at 450 basis points below the benchmark prime lending rate, which ranges from 12-14% depending on the bank. On Thursday, hidambaram said the government would provide subsidy equivalent to another 200 basis points cut in lending rates.
“The government is sensitive to the pressures on these sectors, and is conscious of the need to offer support to export sectors to prevent job losses and to give time to these sectors to make a smooth adjustment to the changing economic scenario,” he said.