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Contrary to general perception, the depreciating rupee is hurting exporters and the government should consider both fiscal and non-fiscal incentives to provide some relief, Federation of Indian Export Organisations said during a presentation to commerce and industry minister Piyush Goyal.

The exporters’ body argued that this time round the depreciating rupee is eroding Indian exporters’ price competitiveness in overseas markets given that the other currencies have depreciated far more against the US dollar.

In its presentation reviewed by Mint, FIEO said the British pound, Euro, Swiss Franc, Japanese yen, Swedish Krona and the Canadian dollar depreciated 11.6% against the greenback, but the rupee is the second best performing currency in Asian declining just 7%.

Goyal had called the meeting of export promotion councils and industry bodies to lay out a road map for increasing trade and exports. India’s merchandise exports shrank for the first time in 20 months in July by 0.76%, to the highest ever trade deficit in a month at $31.02 billion.

The commerce department is firming up the foreign trade policy, and is likely to present it by 30 September. “Foreign trade policy is expected to be announced by the end of next month, according to the government. We hope the Centre will consider exporters’ concerns amid global headwinds. We are not getting the benefit of rupee depreciation, as other currencies have depreciated more," said an exporter, seeking anonymity.

“While the Indian rupee has depreciated against the dollar, it has seen serious appreciation against other currencies such as the euro and the yen. Indian exporters are benefitting from exports to the US or other countries having their currency pegged to US, which are few in terms of tea exports. We are seriously in negative in our exports to those countries where the currency is far weaker such as EU and Japan," Anshuman Kanoria, chairman of the Indian Tea Exporters Association, said.

With interest burden rising for micro, small and medium enterprises amid RBI's monetary policy tightening, FIEO said interest equalization benefits of 5% to MSME manufacturers should be restored from the current 3%, while 410 tariff lines should be increased to 3% from 2%. The government had reduced the interest equalization benefit for MSMEs for the last two years as interest rate was low and MSMEs could avail loan at 7-7.5%. However exporters argued that with the rising interest rates MSMEs are having to borrow at 10% or more, or higher than pre-covid levels. “Interest rates are expected to rise further. The subvention for the interest equalization scheme was reduced as rates were down. However, with a complete change in the situation, there is an urgent need to restore the benefit of 5% to manufacturer MSMEs and 3% to 410 tariff lines," said the exporters’ body.

The RBI- led monetary policy committee hiked repo rate by 50 basis points for the third time in a row, taking it to pre-pandemic levels of 5.4%.

Emailed queries to the ministry of commerce and industry on Tuesday did not elicit a response till press time.

Key export sectors, such as engineering, gems and jewellery, petroleum, pharmaceuticals, cotton yarn and ready-made garments, recorded a decline in July as recessionary fears in the West dampened demand. Other factors include export restrictions by India on wheat, steel, iron and petroleum products.

The exporters also urged the minister to provide support for services exports along the lines of the erstwhile services exports from India Scheme amid headwinds “clearly visible in merchandise trade".

SEIS scheme, which offered duty credit scrips to exporters at 5% or 7% of the net foreign exchange earned was discontinued in 2020-21. The freely transferable scrips were valid for 24 months from the date of issue and could be used to pay basic customs duty levied on import of input goods, as well as excise duty and other central duties. In fact, the scheme was discontinued following the WTO ruling in 2019 against export promotion schemes by India, as they were conceived as providing direct subsidies to the industry, which is prohibited under WTO rules.

dilasha.seth@livemint.com

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