Last week, the commerce ministry reported that exports had fallen by 14.6% in July as compared to last year. Anand Sharma, the commerce minister who had a meeting with representatives from industry and export promotion councils (EPC), expressed serious concern and said that the Government would bring down transaction costs so that things would take a turn for the better in the third quarter of this fiscal year.
The authenticity of figures being put out by the Government on industrial production, growth rates, exports, inflation have all been questioned by many analysts but fact remains that the fall in export growth in July, a three -year low, was the third consecutive monthly decline reported this fiscal. This dip comes even after a significant fall in the value of rupee and a fresh round of sops for exporters announced in the first week of June this year.
As expected, the exporters have responded with calls for more help. The Federation of Indian Export Organisations (FIEO) said that the Government must lower the cost of credit which is adversely impacting both exports as well as manufacturing.
Rafeeq Ahmed, president, FIEO asked for an export development fund with a corpus of 0.5 per cent of FOB value to enable exporters to aggressively enter the unexplored markets. Chief of an EPC asked for introduction of a Gold Card scheme, under which the card holders would be allowed to buy duty-free oil from domestic oil companies for their factory use for power generation through generators and captive power plants.
Given the fiscal constraints, it is doubtful if the finance ministry will loosen its purse strings for the exporters.
Moreover, whether more sops will help is also far from certain. A recent survey by International Chamber of Commerce (ICC) says that the world economic climate indicator fell to 85.1 in Q3, 2012, after two successive increases. These results are significantly below the long-term average of 96.7 (1996-2011). The findings imply a setback in the recovery of the world economy due to unfavourable assessments of the current economic climate and a less positive six-month outlook than in previous quarters, particularly in Europe, says the ICC. Our own Commerce Secretary, S R Rao said, “the world trade contraction is getting worse. The appetite for Indian goods has come down substantially in the U.S.”
Given the tough economic environment, Sharma seems to be on the right track in trying to find ways to cut transaction costs. He can start by looking at how the Regional Offices of the Director General of Foreign Trade (DGFT) can get out of the way in delivering the benefits of various export promotion schemes. The technology enables exporters to maintain an electronic account with the Customs, where the duty credits can be given immediately after exports, debits permitted when utilisation is sought and transfer effected through suitable passwords backed by necessary security disciplines. Such accounts can be maintained the way bank accounts are maintained. Making such a facility may mean keeping exporters away from the Regional Offices of the DGFT but that may not be such a bad idea considering how much money and time exporters can save. Sharma can also ask an expert group to look at reforming the soft infrastructure of laws that affect exporters, an exercise that may cost little but give large benefits.
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