The Government has rolled out several sops, estimated at over Rs 1,200 crore, to boost sagging exports. This intervention comes at a time when merchandise exports have been hit by the demand slowdown in developed markets such as the Euro Zone and the US.
The booster dose comes on the heels of a modest 3.2 per cent annual growth in merchandise exports to $24.45 billion in April. .
EPCG scheme
The 2 per cent interest subvention has been extended by a year to March 2013 for handlooms, handicrafts, carpets and small and medium enterprises as part of the annual supplement to the Foreign Trade Policy 2009-14 announced on Tuesday.
Labour-intensive sectors, such as toys, sports-goods, processed agricultural products and ready-made garments will also now be covered under the interest rate subvention scheme.
The policy gives a thrust to employment creation, encourages domestic manufacturing, reduces dependence on imports, helps market diversification and cuts transaction costs for exporters, said the Commerce and Industry Minister, Mr Anand Sharma. However, he did not comment on the revenue implications.
The interest subvention had cost the exchequer Rs 996 crore in 2011-12. Considering that its scope is expanded now, the subvention is likely to cost the Government around Rs 1,200 crore, trade sources said.
Confident that the 20 per cent export growth will be sustained this fiscal too, Mr Sharma said the country was on course to meet the $500-billion export target by 2014. India expects exports to grow to $360 billion this fiscal, up from $303 billion last year.
Besides extending the zero-duty EPCG scheme by a year, the scope of the scheme has been enlarged.
Companies getting the benefit of TUFS (technology upgradation fund scheme) can now take advantage of the EPCG scheme. The Government also announced the introduction of a new post-export EPCG scheme.
Scrips for payment
The Centre has now allowed the use of scrips (licences for import purposes) for payment of excise duty for domestic procurement.
The scrips are issued to exporters by the Government in lieu of duty and taxes paid on exported items.
Earlier, only scrips from Served From India Scheme (SFIS) were so permitted for procurement of goods from the domestic market.
“This new measure will be an important one for import substitution and will help in saving of foreign exchange, in addition to creating additional employment,” said Mr Sharma, emphasising that the scrips provision could bring down the current account deficit (CAD), which touched 4 per cent at end December 2011.
“Petroleum prices are coming down. If it comes down below $90, we will get some relief and then there will be some curtailment in gold import,” Mr Sharma said.
The Commerce Secretary, Mr S. R. Rao, said the domestic procurement through scrips is a singular step that would help reduce the import bill.
“We need to control our commodity imports, both oil and gold, but what we are also doing is import substitution,” Mr Rao said.