Even while domestic exporters wait for global downturn in commodities to pass, many feel the government could have announced more steps in the recent Budget to stem the continuous slide in exports.
India's merchandise exports fell for the 14th consecutive month in January with major foreign exchange earners like petroleum products and engineering products continuing to contract, due to softening prices and subdued demands globally. Trade experts warn against optimism for February as well since China has not been able to pick up services or manufacturing growth.
While the recent Budget by finance minister Arun Jaitley scored high on socio-economic and infrastructure spending aimed at long term economic growth and ease in doing business, industry bodies like the Federation of Indian Exports Organization are disappointed over the lack of immediate relief measures.
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It observed that only the decision to widen the scope of duty drawback and the promise to continue supporting exporters through earlier declared incentives like interest subvention and the Merchandise Exports from India scheme (MEIS) was not enough for the Budget.
Trade experts have called for more specific sectoral policies which address specific concerns. Engineering exports, which accounted for nearly 23% of merchandise export by the latest figures from January 2016 have recorded falling amount of exports to 19 of the 25 top countries India exports such goods to. Of the 33 broad engineering products, 22 recorded contraction.
The Engineering Exports Promotion Council (EEPC) President TS Bhasin said while the government is betting high on improving domestic demand and consumption, exporters needed it to focus urgently on specific reforms involving the cost of doing business.
In its pre-Budget consultative meeting with the finance minister, the apex body for engineering exporters had proposed the corporate tax rate be brought down to the current rate at which minimum alternative tax is charged, at 18%. The government wants corporate tax to be reduced to 25% while other tax benefits are cleaved.
Alternatively, EEPC had also suggested the income from exports be taxed at the level of MAT.
The issue of providing income tax exemptions on profits derived from transfer of incentive scrips like MEIS allowed under India's Foreign Trade Policy, an issue raised by EEPC along with other major sectoral bodies is yet to be taken up by the government for consideration.
However, EEPC has welcomed the proposed changes to the Customs Act which allows deferred payment of customs duties for importers and exporters with proven track record. Customs Single Window Project to be implemented at major ports and airports starting from the next financial year have also been welcomed.
The engineering sector had also demanded an integrated fund worth Rs. 1000 crore from the government for increasing operational efficiency and improving business infrastructure along the lines of the Technology Upgradation Fund Scheme (TUFS) announced for the textile sector.
Incidentally, in spite of the TUFS and measures like continuing duty free import of input goods being announced in the Budget, textile exporters are miffed. And it's not only because of the finance minister not mentioning the industry even once in his speech.
Although in a better shape than most other export oriented sectors, textile exporters have repeatedly warned of Indian goods losing competitiveness in the global market as compared to those from nations like Bangladesh, Pakistan, Cambodia, South Korea and Vietnam.
The Cotton Textile Export Promotion Council (TEXPROCIL) president R, K Dalmia said, "Preferential trade access being given to competing nations by major importers like the
EU and US besides discriminatory import duties on Indian goods in important markets like China and Canada are severely affecting the industry".
The fast tracking of talks relating to Free Trade Agreements with the EU, Australia and Canada to remove trade barriers are moving at a slow pace at the most.
Textile exports account for approximately 11% of India's merchandise exports and is the second largest employer in the country after agriculture.
Jaitley had announced an addition of 1% FOB value of exports in custom duty free for specified fabrics which garment exporters estimate would enable additional exports of around Rs 7,500 crore.
