The Hindu Business Line : NCAER against `rigid' EPCG policy

THE National Council of Applied Economic Research (NCAER) has argued against adopting any "rigid" export promotion capital goods (EPCG) policy since "in an open economy, a country cannot sell antiques produced by a vintage capital goods industry".

In its latest Macro Track, highlighting specific segment of the economy, it said one of the major changes in the EPCG scheme in the recent Exim Policy was that second-hand capital goods up to 10 years old might be imported.

Spares for existing plant and machinery could also be imported under the EPCG scheme subject to an export obligation equivalent to eight times of duty saved to be fulfilled over a period of eight years reckoned from the date of issuance of licence.

Stating that it is high time that the rigid EPCG policy was abolished, it said capital goods, particularly the ones that do not have a competing domestic production, should be permitted for duty-free imports. This is particularly so since as of now, reduction in basic customs duty of about 25 per cent is long overdue for reduction. It said it is the entrepreneur who should decide whether it would be worthwhile to import and use second-hand machinery.

The council said the quantum as well as growth rate of exports is a function of the efficient allocation of resources and provision of services. India is far away from achieving these prerequisites for high and rapidly growing exports, it said.

It expressed surprise that the medium-term export strategy (2002-07) and the two annual Exim Policy announcements (2002-03 and 2003-04) made a number of references to "exports of services", but barely mentioned the quantum of India's service exports under the four different mode and obvious difficulties of measuring the value in accordance with the GATs (General Agreement on Trade in Services) requirement.

Finally, the council cautioned that "it is action and not a policy statement that will make a difference and whether this will be forthcoming from the Government remains to be seen."

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