Commerce ministry seeks higher budgetary support for exports

27 Dec 2016


The union commerce ministry has sought an increase in budget provisioning for export incentives in the coming financial year as the country's exports continue to stagnate, hurting both business and employment.

The ministry is seeking help in the form of more incentives, especially for labour-intensive sectors such as engineering products, leather, textiles and chemicals. However, much will depend on the finance ministry's response to the commerce ministry's request for providing more funds in Budget 2017-18.

''We have asked for a substantial increase in allocation, but don't know how much the finance ministry can spare. Once the allocation is made in the Budget, we can work on expanding the scheme,'' a Hindu BusinessLine report quoted a commerce ministry official as saying.

The commerce ministry's list of demand includes enhanced annual allocations that could be pumped into the merchandise export incentive scheme (MEIS).

The MEIS, applicable for exports of specific products and to identified markets, are eligible for direct sops in the form of duty-free scrips.

The scheme, started in April 2015, with an annual budget of Rs18,000 crore, which was subsequently increased in phases to Rs23,000 crore.

The scheme now covers 7,103 items against the initial 5,012.

According to the commerce ministry, while shipments in recent months have seen minor increases, exporters are continuing to struggle with the added woes that demonetisation has brought about.

The sectors most affected by the demonetisation also are labour-intensive ones, which has led to instability in exports of several items, they say adding that there is definitely a need for more incentives, and this can be given through MEIS.

The duty-free scrips equivalent to 2 per cent, 3 per cent or 5 per cent of the value of exports can be used for duty-free import of inputs. The scrips can also be sold to other importers if the exporter earning them does not intend to import.

India's exports declined 15.85 per cent to $261 billion in 2015-16 and stayed flat in the April-November 2016-17 at $174.92 billion.

Against this, world trade grew 1.7 per cent in 2016 and is expected to expand between 1.8 per cent and 3.1 per cent in 2017 against the earlier predictions of a 3.6 per cent growth, according to the latest WTO projections.

Commerce and industry minister Nirmala Sitharaman will chair the meeting of 70-member Board of Trade next month to discuss ways of boosting exports, which has been largely languishing in the negative zone.

The second meeting of the reconstituted Board of Trade (BoT) assumes significance as exports have started showing positive growth since September this year. It grew 2.29 per cent in November.

The objective of the BoT is to have continuous discussion and consultation with trade and industry.

BoT, a top advisory body on trade, advises the government on policy measures relating to foreign trade policy in order to achieve the objective of boosting India's

At the Board's previous meeting held in April this year, the ministry had said that it would focus on six areas, including reviving SEZs and according priority sector status to export credit, in order to boost overseas shipments.

Since December 2014, exports fell for 18 consecutive months till May 2016. Shipments witnessed growth only in June this year, but again slipped in July and August. Exports started recording positive growth only from September.

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