Expect some vanishing of export concessions

The prospect of achieving $350 bn during the current year (FY19) look brighter but much will depend on how the commerce ministry negotiates with US govt the issue of phasing out of export subsidies

India’s merchandise export rose to $309 billion in 2017-18 from $280 bn in 2016-17, says the Reserve Bank of India. Just over 10 per cent, which is not bad,considering the liquidity constraints exporters faced last year. Even if part of the increase could be attributed to better prices.

The prospect of achieving $350 bn during the current year (FY19) look brighter but much will depend on how the  commerce ministry negotiates with the United States government the issue of phasing out of export subsidies and continued preferential duties for Indian-origin goods under the General System of Preferences (GSP). 
 

The hope of a 15-20 per cent rise in FY19 arise from prospects of better global trade growth and the rupee’s depreciation. In its annual report, issued on May 31, the World Trade Organization (WTO) says trade growth in 2017 was the strongest since 2011. Its director-general said “with continued robust growth forecast for this year and the next, we are seeing trade playing its part in supporting the global economic recovery -– supporting GDP growth, development and job creation around the world”.

So, exporters could look forward to better demand and prices in international markets. However, if  fiscal incentives and GSP concessions are taken away, exporters they would find it difficult to cash on the opportunities.  

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The US has sought remedial measures under Article 3 of the Agreement on Subsidies and Countervailing Measures at the WTO. This prohibits member-nations from granting or maintaining certain subsidies. The US says India cannot continue to be considered a Least Developed Country, since its per capita income has crossed $1,000 per annum in the past three successive years. So, the Indian government must withdraw its subsidies through the export oriented units scheme, as also sector-specific ones.

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Such as the electronics hardware technology parks scheme, the merchandise exports from India scheme (MEIS), the export promotion capital goods (EPCG) scheme, the special economic zones scheme, and exemptions granted to exporters in textiles, handicrafts, leather and other sectors in notification 50/2017-Customs dated June 30, 2017.  Of these, the least likely to survive is MEIS. 

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The Trump administration has also launched a GSP eligibility review of India. The move is based on concerns related to its compliance with the GSP market-access criterion. It has accepted two petitions, from the US dairy industry and the US medical device industry, alleging Indian trade barriers affect US export in those sectors. Suresh Prabhu, our commerce minister, recently visited the US to sort these problems but it was only agreed that senior Indian and US officials would meet at at an early date to discuss various issues of interest to both sides. And, carry forward the discussions in a ‘positive, constructive and result-oriented’ manner.  

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So, exporters must get ready for possible withdrawal of the MEIS and GSP concessions. On its part, the government must consider removing hurdles in the grant of refund of taxes paid on export goods and inputs used in manufacture of export goods, the unwarranted restrictions on grant of exemptions for import under advance authorisation and EPCG authorisation, and allow exemption of all duties and taxes on import under duty credit scrips.  

E-mail: tncrajagopalan@gmail.com