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Last updated: 16 Jul, 2019  

Exports.9.Thmb.jpg Budget neglects export sector!

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Bikky Khosla | 16 Jul, 2019

Highlighting the importance of exports on a country's economy, the latest Economic Survey said rightly that when an economy is in a virtuous cycle, investment, productivity growth, job creation, demand and exports feed into each other. But unfortunately, the Budget 2019 lacks any comprehensive measures for the export sector. No doubt, several large-scale infrastructure activities proposed in the Budget will give an indirect push to exports, but lack of specific initiatives for the sector is not welcome.

According to a recent media report, exports during the first term of the Modi government grew by 12.61 percent in comparison to a whopping 69 percent during the Manmohan Singh government in its second term. Merchandise exports, against a flat growth rate under the Modi 1.0 government, had grown 75 percent under UPA-II government while services exports had grown 69 percent against 30 percent in Modi's watch. We, however, cannot ignore the fact that exports have faced rising protectionism and a global economic slowdown since the last five years.

But according to some experts, there are some other major challenges that are hindering exports growth, and the most prominent among them is high costs. Indian exporters have to deal with high costs of labour, capital, electricity, railway freight rates, air freight, corporate and income tax rates, and as a result they cannot compete with their Asian peers. The Budget 2019 reduced the corporate tax rate (CTR) from 30 percent to 25 percent for all firms with a turnover of Rs 400 crore, but according to economy watchers, CTR in many Asian countries has already fallen to 15-20 percent.

The Budget --some analysts view-- has failed to address these issues. According to them, this signals that tax holidays for the export sector may end soon, but before doing that the Centre must do the needful to create a friendlier environment for our exporters. The Economic survey clearly views that India should focus on increasing its global trade share and that the Centre should work on implementing the suggestions of the High Level Advisory Group on exports, chaired by Dr Surjit Bhalla.

I invite your opinions.

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