Financial Daily from THE HINDU group of publications
Friday, Jan 30, 2004
Industry & Economy
Enhancing export competitiveness
New Delhi , Jan. 29
THOUGH the Commerce and Industry Minister, Mr Arun Jaitley, denied having spelt out any policy initiatives, the policy refinements unveiled on Wednesday are by no stretch only patches or changes of peripheral nature.
That the exporting community is exercised over not only the high cost of the economy in general and more so over the high transaction cost is a widely known proposition. So any move to minimise the interface of the exporters with the officialdom is desirable and the latest advent of digital signature and electronic fund transfers to be ensued by the interchange of message among community partners such as Customs, DGFT, banks and exporters through the electronic data network might probably be construed as a trade facilitation step that would enhance the country's export competitiveness.
What is particularly noteworthy is the leeway accorded to discharge of export obligation imposed on concessional capital goods imports under the Export Promotion Capital Goods (EPCG) scheme. A similar sop pertains to permission for EPCG importers to export any item instead of the earlier pre-specified products, as also import of alternate products and services made by group companies for the purpose of discharge of export obligation.
Exporters to whom Business Line spoke are of the view that this is a positive feature in that the Government has understood the market dynamics and competitive pressure under which exporters are operating and accordingly provided them the requisite flexibility in the use of imported inputs. In fact, the attractiveness of the EPCG scheme itself would get diminished progressively as the peak customs duty is being brought down.
However, the permission granted to import of gold and silver without canalising agency such as MMTC and designated nationalised banks might turn out to be a misstep at a time when gold and silver imports in the country are shooting up. Available figures suggest gold and silver import went up by a whopping 62 per cent during the first half of the current fiscal, even as they account for almost nine per cent in total imports into the country.
As inflation is also creeping up, the appetite for storing gold and silver would only go up making such investment as a sunk cost to the economy when several productive sectors remain famished for want of credit at cheaper and affordable rates.
It is also pointed out that whereas import of pearls, precious and semi-precious stones gobbled up as much as $3026.41 million during the first half of the current fiscal, the export of gems and jewellery amounted to $4785.90 million, reflecting some chinks in the value addition exercise for re-exports.
As exporters now operate on a wafer thin margin in the face of hardening of rupee against US dollar in which a major part of export proceeds are denominated, the exporters still need tax break on export profit even as this facility has been under a structured phase-out. The merger of the duty entitlement passbook scheme with the duty drawback scheme is another demand the exporters are looking forward to since these sops alone could stand them for the time being till their transaction cost is tangibly brought down.
Moreover, as the country's export competitiveness in merchandise goods is getting honed in the face of challenges and new forms of protectionism abroad including non-tariff barriers and repeat anti-dumping investigations on certain specific textile products such as cotton bed linen, the Commerce Ministry should stay in touch with Indian missions abroad to take up these issues in the countries themselves swiftly so that the cost calculations of exporter-manufacturers going awry and the uncertainty about shipment of export cargo and receipt of export proceeds could be reasonably overcome.
Finally, exporters also deserve better infrastructure facilities where the role of the Government both at the Centre and the States either through stepped-up public investment or through public-private partnership to leverage available resources is too important to be ignored. The exporters, however, today appear to be a happier lot with the Government of the day doing most of the procedural simplifications and the latest batch of amendments announced by way of additions to this year's Exim Policy by Mr Jaitley promises to meet their expectations fully, though a lot remains to be provided to make export a profitable exercise not only for the exporters but also to the exchequer over the long haul.
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