Will exports look up?

Rahul Mazumdar | Updated on September 17, 2019 Published on September 17, 2019

The hits and misses in the latest booster pack

Soon after India’s exports touching a 41-month low was announced, the government made the right move by ticking all the boxes of industry requirements; the details, however, would be in the fine-print.

Enhancement of export credit insurance is a welcome step and would have an immediate bearing on exporters. The priority sector lending norm for export credit is another interesting step, and will have a significant impact in making credit available to exporters.

However, most of the other structural steps announced are work-in-progress and will not help in boosting exports immediately. Amidst these are a few aspects which require attention.

The much-disputed MEIS (Merchandise Exports from India Scheme), considered incompatible by the WTO, will get replaced next year with the widely-agreed proposal to provide rebates on inputs. However, there could be many a slip between the cup and the lip, as industries would be waiting to see which sectors would receive the most concessions.

Export dynamics

Carefully crafting the proposed Remission of Duties or Taxes on Exports (RoDTEP) could essentially change the export dynamics of the country. Almost 52 per cent of India’s exports are resource based. This incongruity could be addressed by incentivising, apart from labour-intensive sectors, technology-oriented industries to get into the export fold and contribute to the value chain.

The government’s intent to set up a Working Group on Standards has been long overdue. Globally, the impact of tariffs on an average has decreased from 10 per cent in 1997 to 4 per cent in 2015, whereas non-tariff measures grew from 22 per cent in 1997 to 51 per cent in 2015.

India needs to produce goods which are in sync with global standards (even for domestic consumption) so as to find acceptability abroad and for joining mega-trade agreements like RCEP. While the government comes up with a final report on this, the export promotion councils could serve as conduits towards educating exporters on the non-tariff and sanitary and phytosanitary measures.

Contrary to the government’s claims about the Trade Infrastructure for Export Scheme (TIES), the allocation to it is abysmal. In 2016, India announced replacing the Assistance to States for Development of Export Infrastructure and Allied Activities (ASIDE) scheme, launched in 2002, with TIES with an annual budget of ₹200 crore from 2017 till 2020.

Government data show that the cumulative budget of TIES was just a third ASIDE’s one-year budget. For FY20, the budgetary allocation is just ₹50 crore — almost 12 times less than what was last allotted to the ASIDE scheme. Given that the share of the States in exports is highly skewed with the top five contributing to more than 60 per cent of the exports, TIES needs to make States export-ready.

For achieving the ambitious $5 trillion economy goal, at least 20 per cent contribution from exports is necessary. Coincidentally, as the government announces financial and structural measures, it would be introducing the new Foreign Trade Policy in the next few months.

With the world trade dynamics changing, policymakers should attempt to make India more export-ready globally so as to take advantage of the ‘new normal’ milieu.

The author is Senior Economist with EXIM Bank, India. The views are personal

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Published on September 17, 2019
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