The second economic stimulus announced by the government is unlikely to help boost exports from the country as there was no serious effort on the part of the government to help export industries out of the financial mess they are in, according to the Federation of Indian Export Organisations (FIEO).
At least 10 million people in the export sector will be out of job by March this year, as Indian goods find fewer buyers in the international market which is battling the worst crisis since 1929, FIEO president A Sakthivel said.
India's export sector, which is highly labour intensive, employs around 150 million people and contributes about 20 per cent of the country's gross domestic product (GDP), he said.
Sakthivel demanded that the government should increase drawback rate in the DEPB scheme by 3 per cent and the interest subvention rate by another 2 per cent if the new economic stimulus plan is to have any impact on falling exports.
He also demanded a 5-year income tax holiday and a two-year moratorium on term loan repayment to save export industries along with the extension of the DEPB scheme up to 31 December 2009.
The extension of the DEPB scheme is a routine exercise for customs purposes of aligning foreign trade policy, he pointed out.
Unless the government considers the above package favourably, there will be huge job losses across the country and we will be nowhere near achieving the export target of $200 billion of exports, he said.
China, Sakthivel pointed out, has increased VAT refund from 9 per cent to 17 per cent with effect from 1 January 2009, which is the third enhancement in VAT drawback rates in the last four months. China had not increased import duties on inputs over the past few months.
He expects manufacturers of leather, handicrafts, textiles, knitwear, gem and jewellery to post negative gains in export efforts unless the government actively support export efforts.
India's exports, which posted a robust 30.9 per cent growth in the first half of the current fiscal, contracted by 12.1 per cent in October, for the first time in the last five years. In November, too, exports fell to $11.5 billion from $12.7 billion. The December data is yet to be released.
The government has targeted exports of $200 billion in the current fiscal while actual exports stood at about $160 billion so far in 2007-08.