The government today announced a slew of incentives, for the second time in six months, to boost sagging exports which contracted for the seventh straight month in November this financial year.
Among the measures announced today was an extension of the two per cent interest subvention scheme for an additional year till March 2014, inclusion of sub-sectors of engineering goods for interest subvention and provision of incentives on incremental exports made to United States, EU and countries in Asia..
Anand Sharma, Minister for Commerce & Industry, said, “With these measures, we should be able to give a push to our exports in the last quarter of this financial year. The objective is to stabilise the situation and try and move from the negative territory to positive".
Though Sharma declined to specify an estimate of the resources being doled out by the government to implement these initiatives, he expressed hope that the measures would boost outbound shipments from the country and help in controlling the spiraling trade deficit which has increased by nearly a fifth to $ 175.5 billion between January and November this year. The trade gap had stood at $ 146.9 billion in the corresponding period last year.
As part of the incentive package, the government also announced the introduction of a pilot scheme of 2 per cent interest subvention for project exports through EXIM Bank for countries in the SAARC region, in Africa and in Myanmar. The objective of the scheme is to boost exports to these countries by providing long term concessional credit through EXIM Bank, as co-financing in infrastructure sectors such as housing, irrigation, road projects and renewable energy. "This scheme will be operational immediately for a combined worth of $ 500 million to begin with," Sharma informed.
“Providing long term concessional credit through EXIM Bank, as co-financing in infrastructure sectors s for SAARC, Africa and Myanmar will definitely increase exports to this region. South Asia region is fast becoming the world’s economic center of gravity and though India's trade with South Asian countries has increased encouragingly, from $7 billion in 2005-06 to $15 billion in 2011-12, but trade potential is below the potential”, said Sanjay Budhia, chairman, CII National Council on Exports and Imports.
Besides, a decision has been taken to grant incentive on incremental exports that would be made during January-March 2013 over the base period January-March 2012. Rafeeque Ahmed, president, Federation of Indian Export Organisations said that the scheme for incremental growth would act as stimulus for exporters looking at US, EU and Asian markets as these three accounts for close to 80 per cent of country’s exports.
Cumulatively, between April and November this year, exports registered a fall of 5.95 per cent to $ 189.22 billion, while imports recorded a decline of only 1.58 per cent at $ 318.72 billion. Consequently, trade deficit rose to $ 129.5 billion, higher than $ 122.6 billion reported in the same period last fiscal.
Earlier, imports had also contracted till August, so trade deficit was under control. However, now even trade deficit has started rising, which may aggravate current account deficit (CAD) situation in India which was projected to come down to 3.6 per cent of GDP this fiscal by the Prime Minister's Economic Advisory Council as compared to 4.2 per cent last fiscal.
While exports of engineering and gems and jewellery items – two of the largest exports’ revenue generating sectors in the country - contracted by 5.3 per cent and 10 per cent respectively, that of cotton yarn, jute, readymade garments and handicrafts shrunk by 11 per cent, 14 per cent, 8 per cent and 65 per cent respectively during April-November period this fiscal."This is a matter of serious concern to us. They are directly linked to job creation and job sustenance," he said.
Sharma, however, expressed concern over being able to meet exportarget of $ 360 billion for in the current financial year despite the incentives announced today. Sharma said that India's exports should be viewed in the backdrop of the global slowdown, particularly the development in Europe, and the contraction is directly linked to that. "Given the global slowdown and the contraction at some of the major destinations of India's exports, we are finding it difficult to meet the target."
