FinMin to consider commerce ministry's suggestions this week
With exports showing a declining trend for six months in a row and the current account deficit situation worsening, the finance ministry has agreed to consider the commerce ministry’s proposals to help the country’s exporters.
At a high level meeting on Thursday, the ministry will dwell on the commerce ministry’s suggestions. The meeting will be attended by revenue secretary Sumit Bose, economic affairs secretary Arvind Mayaram and other senior finance ministry officials, a finance ministry official said, requesting anonymity.
At the meeting, commerce secretary S R Rao will outline the commerce ministry’s suggestions, which have been concretised through deliberations in the last few weeks. The Directorate General of Foreign Trade (DGFT) has recently concluded a detailed review of key exports sectors is necessary to mull sops to lift outbound shipments.
Contracting global demand hit exports for the sixth consecutive month in October, which declined 1.63% to $ 23.25 billion (around Rs 1.3 lakh crore). Imports, in the meantime, went up 7.37% to $44.21 billion, widening the trade deficit to a record high of $20.96 billion. Cumulatively, in the first seven months of this year, exports declined 6.18% to $ 166.92 billion from $177.92 billion in the corresponding period last year, making it difficult for the government to achieve its exports’ target of $ 360 billion in 2012-13.
Commerce minister Anand Sharma, who has already given his green signal to the proposals to be presented before the finance ministry, had earlier pressed inclusion of additional exports sectors for availing interest subvention of two% and also loans at subsidised rates for exporters.
Earlier, the finance ministry was reluctant to accept any proposal with revenue implication due to the challenges faced on the fiscal deficit front. The government’s fiscal deficit for the current financial year is expected to overshoot the revised estimate of 5.3%.
Finance ministry officials said the idea was to start the discussions now and prepare a roadmap for bringing in steps in phases including those in the budget for 2013-14.
Officials in the Ministry of Commerce and Industry confirmed that the commerce secretary is set to meet the revenue secretary this week to consider some added incentives for exporters. The meeting comes at a time when senior officials in the commerce ministry have been considering a downward revision of the exports target for the current financial year, given the current global economic scenario.
"The World Trade Organisation has revised growth projections for trade in manufactured goods to 2.5% from the earlier estimate of 3.7% for 2012. We, too, may have to revise our targets given the current macroeconomic scenario," said a senior official at the ministry.
The commerce ministry is looking at extending the incentives to certain key exports sectors like engineering products, leather, gems and jewellery, which have seen outbound shipment shrinking over the last six months.
The industry has made a slew of recommendations during consultations with DGFT over the last two weeks which range from the creation of an export development fund for small and medium enterprises to demands for capping interest rates on credit for exporters at 9%.
Reserve Bank of India today said it there is no need to explain the monetary policy and it stands by monetary policy statement.
Earlier, the committee was given a year to submit its report