Hopes that gave us mandate to rule for 5 yrs should give us 5 yrs to implement plans: Nirmala Sitharaman
With a view to giving a concerted push to India's declining exports, the Narendra Modi government has asked states to formulate respective export promotion policies focusing on products or services of interest to supplement the Centre's efforts at boosting the country's outbound shipments.
"We have asked every state to come out with an export policy identifying product and services of interest that have significant potential in the global arena. Ultimately, it is the states who deal with land, electricity, water and value-added tax (VAT)," said a senior commerce department official.
The move was discussed with the states in the first meeting of the Council for Trade Development and Promotion chaired by Commerce and Industry Minister Nirmala Sitharaman earlier this month. The Centre and states would have to work together to improve export performance, added the official cited above.
Exports for the current financial year are expected to be below $300 billion, after being above it since 2012-13. Intense competition from China, on account of the latter's highly devalued currency, has out-priced New Delhi's exports from the global market, resulting in the 12th straight month of export decline in November 2015, with outbound shipments down 17.2 per cent in the first eight months of FY16.
The government is expected to announce the trade numbers for the first nine months of the current year on Monday.
States have also been asked to come up with a single-window mechanism for coordination of the Centre and state support for export promotion. The role of states is seen as crucial with infrastructure, VAT, land and environmental clearances, and labour, under the domain of states.
A few states, such as Jharkhand and Karnataka, already have export policies while Gujarat, Kerala, Andhra Pradesh and Punjab are in the process of formulating it. "Some states have come out with export policies and we have had a look at those. Only a very few of them are of acceptable level, while for the rest we have given our recommendations," said the official.
The commerce department has found the export strategy to be at the acceptable level for Karnataka, Assam, Arunachal Pradesh, Chhattisgarh, and Gujarat. The effort is also to make it easy to do business through a 98-point reform action plan across eight sectors. These include setting up of business, registration, compliance with tax procedures, and complying with labour regulations.
Jharkhand, in its policy announced in 2015, extended a number of fiscal incentives including electricity duty exemption, allotment of land for exporting units, and transport subsidy for shipment to ports up to Rs 10 lakh per exporter. It also extended a marketing development fund for exhibitions and fairs. Jharkhand aims to increase its share in the country's exports to two per cent by 2019 from less than one per cent now.
In the Council for Trade Development and Promotion meeting, most landlocked states asked the Centre to provide transport subsidy, which was more than the freight cost in many cases.
Karnataka has focused on export sectors including services, silk and engineering, besides others. Gujarat is in the process of finalising the export policy, targeting to increase share in the country's outbound shipments to 33 per cent in five years from 22 per cent now. It is looking at extending a set of fiscal incentives including tax exemptions for units located there, besides support in trade fairs and exhibitions.
"The Centre can only look at the macro level, while it is for the states to focus on potential goods and services in their export strategy by identifying constraints, potential markets and technical barriers to enter those markets," said Ajay Sahai, director-general and chief executive officer, Federation of Indian Exports Organisations.
The Centre unveiled its five-year foreign trade policy for 2015-20 last year, aiming to double exports (merchandise and services) to $900 billion by 2019-20. Under the foreign trade policy, the government provides tax incentives through the Merchandise Export from India Scheme and the Services Exports from India Scheme, in the form of fully transferable duty credit scrips with reward rate ranging between two per cent and five per cent. Exporters can use these scrips to offset service tax, excise duty, or customs duty.