Despite exporters still waiting for a massive Rs. 20,000 crore of tax refunds under the Goods and Services Tax (GST) regime and labour intensive sectors showing contraction, the apex exporters body in the country has pegged India's exports at $ 350 Billion in the current financial year up from last year's $ 300 billion.
"We expect a growth of 15-20 per cent over last year. The upward movement in petroleum and commodity prices could also add to export growth. The recent depreciation in the Indian Rupee is also helping exports, although its impact varies from sector to sector." Federation of Indian Exports Organizations (FIEO) President Ganesh Kumar Gupta said on Tuesday.
India's exports managed to cross the $300-billion target for the first time in two years in 2017-18. But major labour-intensive sectors such as sectors gems and jewellery, leather, apparel and handicrafts has continued to see decline till April. As a result, job creation has been dented. According to a rough estimate, every $ 1 million worth of exports creates 100 jobs. Therefore, additional exports of $ 2.7 billion should have created 2.7 million jobs in exports.
GS refunds still out of reach
A severe lack of liquidity rising from the introduction of the now 10-month of GST regime has now is behind the slowdown in these sectors. "As per our estimate, refund over Rs.20,000 crore are pending on account of Integrated GST and Input Tax Credit (ITC). Also, many exporters have not been able to file the refund of ITC due to technical glitches as input tax credit and exports happened in different months." Gupta said.
He pointed out that refunds had flown smoothly till March 31, after which the pace has considerably slackened. While claims over Rs.7000 crore were cleared during March, the amount in April has fell to a little over Rs.1000 crore.
FIEO Director General Ajay Sahai pointed out that of the total figure, ITCs constituted about Rs.13,000 crore while the rest was IGST. Refunds for exports made through non EDI ports, which constitutes about 15 per cent of India's outbound trade, are yet to start, Sahai added.
Getting states to pay up their share of the levy has also remained difficult. States such as Andhra Pradesh, Uttar Pradesh, Bihar and Chhatisgarh have said they are out of funds to pay exporters, Fieo said.
Procedural issues galore
The majority of the problems relates to ITC refund which have to be done by the States as well, Fieo has pointed out. The manual intervention in the refund process has added to the transaction time & cost of exporters.
Also, much stricter lending norms by banks in the wake of the Nirav Modi diamond scam has also reduced access to credit for exporters. Withdrawal of letter of offer and letter of comfort has added to the cost of the exporters raising it from 1 to 3 per cent. While the government had told the banks that 12 per cent of banking finance should go to exporters, no major public sector bank is currently providing more than 3 per cent, Gupta said.
The government has also been slow to move on the e-wallet mechanism, Fieo said, after it had been cleared by the GST council back in October, 2017.