Exports target of $175 billion still seems hard to achieve

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Bikky Khosla | 03 Mar, 2009
With the export target now seeming difficult to achieve, the recently announced Interim Trade policy has at least come out with certain measures that will boost sentiments in the export sector.

The reduction of customs duty under the Export Promotion Capital Goods (EPCG) Scheme from 5 percent to 3 percent, and extended the benefits under Duty Entitlement Pass Book (DEPB) Scheme are indeed good moves.

Additionally, the Rs 325 crore incentives for the leather and textile sectors which will come into effect from April 1 will indeed help exporters during the present economic slowdown considering that exports from gems & jewellery, cotton yarn, fabrics, jute, carpets, handicrafts and other sectors have been affected extensively this year.

It goes without saying that measures including provision of interest subvention of 2 percent till December 31 for these labour intensive sectors, additional funds of Rs. 1200 crore for CST/ TED/ Drawback refunds, extension of DEPB scheme up to December 31, restoration of DEPB rates for all items at rates prevailing prior to November 2008, and increase in duty drawback rates on certain items effective from September 1, 2008 will help cushion the adverse impact of declining exports.

However the most encouraging part of the Interim Trade Policy, I believe, is that the government has tried to ease certain procedural hurdles - this is very important. The recent measures of simplifying procedures and reducing transaction costs will show positive results in the days to come. However the Commerce Ministry could have done more and touched areas like a marketing development fund, exemption from service tax and fringe benefit tax, etc.

With the declaration of the dates of General elections to be held in five phases between April 16-May 13, no other incentives or stimulus packages will now be announced. And with exports shrinking by 16 percent in January, the sharpest in 10 years, the vital question is: Is the newly revised exports target of $175 billion achievable? I have real doubts.