A committee under Minister of State for Commerce D Purandeswari has been constituted to suggest ways to cut transaction cost of exporters in order to boost India’s overseas shipments, an official said.

The move assumes significance as the government is worried over the widening trade deficit and declining exports. The committee will submit its report within three months.

The committee would examine the problems faced by exporters that pushed their transactions costs, a Commerce Ministry official said. It would also comprise of officials from the Director General of Foreign Trade and industry players.

The official said high transactions cost is acting as a double whammy for exporters, who are hit hard by the global demand slowdown.

According to exporters, the quantum of transaction cost is about 7-10 per cent of the total value of Indian exports. This amounts to $15 billion.

Marking a recovery after a gap of eight months, India’s exports grew by a marginal 0.82 per cent in January, but trade deficit widened to around $20 billion, the second highest figure ever in a month. However, during April-January period, overseas shipments declined by 4.86 per cent to $239.6 billion.

The Current Account Deficit (CAD), which occurs when a country’s total imports of goods, services and transfers is more than the country’s total export of goods, services and transfers, continues to be high due to excessive dependence on oil, coal and gold imports and slowdown in exports.

The CAD had touched a record high of 5.4 per cent of GDP in the July-September quarter.

Apex exporters body FIEO suggested that complete electronic flow of all the relevant documents will help in reducing the cost substantially.

“Currently about 13 agencies are involved in exports that include DGFT, banks, RBI, customs and chambers. But the flow of document is not smooth among them. This puts additional burden on exporters. Full Electronic Data Interchange will help exporters a lot,” FIEO Director General Ajay Sahai said.

In 2011, the government had announced 21 steps like round- the-clock customs clearance at eight major ports, reduction in bank charges on foreign currency and concessional loans to cut transactions cost.

(This article was published on March 10, 2013)
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