New Delhi: Commerce and industry minister Anand Sharma on Tuesday offered export incentives to the tune of Rs500 crore to help boost the overseas sales of troubled, labour-intensive sectors and increase shipments to markets such as China and Japan with which India has a large trade deficit.
“We considered it necessary to provide further support especially to those products for which exports are still not doing well,” Sharma said. India will focus on the Chinese and the Japanese markets for exports, he said.
The incentives will cover around 2,000 additional products including electronics and chemicals, plastics, agriculture and horticulture machinery, sewing machines and parts, machine tools, transmission towers, electrical and power equipment, auto components, three-wheelers and cotton woven fabrics.
Fresh support: Anand Sharma says it is necessary to provide support, especially to those products for which exports are still not doing well.Ramesh Pathania / Mint
Makers of such products will be eligible for incentive payments ranging from 2-5% of the value of their exports under the so-called market-linked focus product scheme—which covers exports to specific markets—and the focus product scheme. Support under the market-access initiative was also promised for exporters to set up warehouse in Latin America.
Indian merchandise exports were severely hurt by the contraction in global demand, especially in developed economies, following the economic crisis. After contracting for 13 consecutive months, exports returned to growth in November and December.
Some sectors such as man-made yarn, fibre and tobacco continued to do well, but “there should not be any premature withdrawal of fiscal incentives as the recovery in demand is not strong enough as yet”, Sharma said.
Director-general of foreign trade R.S. Gujral said the additional burden of Rs450-500 crore resulting from the latest incentives would be borne by the commerce and industry ministry from the money allocated to it for this fiscal.
The ministry received Rs2,278 crore of budgetary support for 2009-10 and spent Rs1,417 crore within the first six months of the fiscal, according to a mid-year review released by the finance ministry.
Sharma said that he had spoken with finance minister Pranab Mukherjee and urged him to allow exporters reduced rate of interest for dollar credit at the London interbank offered rate (Libor) plus 100 basis points (bps) instead of Libor plus 350 bps, at present. One basis point is one-hundredth of a percentage point.
The new incentives were welcomed by A. Sakthivel, president of the Federation of Indian Export Organisations (Fieo).
“Inclusion of China and Japan in the market-linked focus product scheme will help in addressing adverse trade balance with these countries, which is becoming a cause of concern,” he said. “Opening of warehousing in Latin America will resolve logistic issues and boost Indian exports to South America.”
Last week, Sharma said his ministry would recommend additional fiscal stimulus for some exporters in the federal budget in February.
A trade ministry statement released on Tuesday said the finance ministry has yet to decide whether to offer more support to export sectors such as textiles, handicrafts, and gems and jewellery.
Reuters contributed to this story.