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One more round of incentives to boost the sagging morale of exporters

The government announced export incentives of around Rs 8,500 crore for labour-intensive sectors and services on Tuesday as it sought to blunt the impact of the goods and services tax (GST) and push shipments from the country especially textiles, leather and engineering goods amid signs of a pickup in global demand.

Incentives under the Manufacturing Exports from India Scheme (MEIS) and Service Exports from India Scheme were targeted at labour-intensive sectors such as agriculture, leather, carpets and marine products and came days before the Gujarat elections, where the launch of GST and the impact on small businesses especially gems and jewellery has emerged as a key issue.

The government has also been facing criticism from exporters over tardy refunds. A reduction in drawback rates, meant to offset the impact of taxes, and by doubling incentives to 4 per cent under MEIS the Centre is hoping to address the concerns and shield Indian businesses from the adverse impact of competition especially from Bangladesh and Vietnam.

The incentives of Rs 8,450 crore that will be applicable from November include higher benefits of Rs 2,743 crore offered to readymade garments and made-ups a few days ago. All put together, there will a 34 per cent rise in sops from the existing Rs 25,000 crore.

At the same time, there is an effort to reorient the focus with a thrust on the farm sector, where a new export policy is in the works, while encouraging Indian companies to be part of global and regional value chains at a time when multinationals such as Apple depend on inputs and expertise from across the globe to manufacture iPhones.

While unveiling the midterm review of the five year policy launched by the present government two years ago commerce minister Suresh Prabhu said the policy aims to promote exports by simplification of processes, enhancing support to high employment sectors, leveraging benefits of GST, promoting services exports, monitoring exports performance through state-of-the-art analytics.

Some of the so-called thrust areas such as product and country diversification have been on the wish list of every trade minister although the progress has been slow as the US, Europe and the UAE remain the dominant destination for Indian exports. But the government is hoping to leverage the WTO's trade facilitation agreement to make life simpler for exporters and importers, with Prabhu giving special emphasis on ease of trading borders, where India has not fared well. Along with a push to improving the logistics network, the government is hoping to address oft-repeated concerns over high cost of doing business in the country, which makes exports less competitive in the global market.

There was an emphasis on easier compliance burden as the government announced a new self-ratification scheme to allow import of duty-free inputs for export production with a view to expedite export of new pharma, chemicals, textiles, engineering and high technology goods.

 

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