Ex­ports de­cline 1.1% in Oc­to­ber, trade deficit hits 35-month high

Mint ST - - POLICY - BY ASIT RAN­JAN MISHRA asit.m@livemint.com NEW DELHI

In­dia’s mer­chan­dise ex­ports de­clined for the first time in 14 months in Oc­to­ber as ex­porters strug­gled with a liq­uid­ity crunch be­cause of de­layed re­funds un­der the goods and ser­vices tax (GST) regime, lead­ing to the high­est trade deficit in 35 months.

Data re­leased by the com­merce min­istry on Tues­day showed ex­ports fell 1.1% in Oc­to­ber to $23.1 bil­lion while im­ports ex­panded at the slow­est pace in 10 months at 7.6% to $37.1 bil­lion. In­dia’s trade deficit in the month was $14 bil­lion.

The de­cline had been ex­pected be­cause ex­porters, par­tic­u­larly mi­cro, small and medium en­ter­prises (MSME), were fac­ing liq­uid­ity prob­lem af­ter pay­ing GST for four months in a row with­out get­ting any re­fund, said Ganesh Ku­mar Gupta, pres­i­dent of the Fed­er­a­tion of In­dian Ex­port Or­gan­i­sa­tions (FIEO).

Gupta said ex­ports should be kept out of the purview of GST as pay­ing the tax first and get­ting a re­fund was cum­ber­some, com­plex and com­pli­cated, af­fect­ing ex­ports.

“There is im­me­di­ate need for re­me­dial mea­sures to pre­vent fur­ther de­cline in ex­ports; oth­er­wise the sit­u­a­tion may be worse for Novem­ber. Im­ple­men­ta­tion of the mea­sures ap­proved by GST Coun­cil is not tak­ing place; as a re­sult chal­lenges faced by the ex­porters re­main the same,” he added.

Ex­porters had com­plained that the im­po­si­tion of in­te­grated GST and de­lays in re­fund of in­put tax cred­its were hurt­ing over­seas ship­ments, prompt­ing the GST Coun­cil to con­tinue two pre-gst era schemes that al­low duty-free sourc­ing of ma­te­ri­als for ex­port pro­duc­tion un­til March 2018. The move is ex­pected to im­prove the liq­uid­ity of ex­porters by pre­vent­ing work­ing cap­i­tal from get­ting locked up in tax pro­ce­dures.

The Coun­cil also in­tro­duced a 0.1% GST rate for mer­chant ex­porters, of­fer­ing re­lief from the full ap­pli­ca­ble GST rates on pro­cure­ments. Mer­chant ex­porters do not man­u­fac­ture prod­ucts them­selves, but pro­cure from oth­ers for ship­ping over­seas.

In Oc­to­ber, ex­ports of chem­i­cals (22.3%), en­gi­neer­ing goods (11.8%) and petroleum prod­ucts (3.2%) rose while ship­ments of ready-made gar­ments (-39.2%) gems and jew­ellery (-24.5%) and drugs and phar­ma­ceu­ti­cals (-8.8%) de­clined.

Growth in non-oil, non-gold mer­chan­dise im­ports eased sharply to 4.9% in Oc­to­ber, af­ter dou­ble-digit growth since March 2017, led by a sub­stan­tial de­cline in im­ports of trans­port equip­ment (48%), pre­cious stones (1.6%) and gold (16%).

Im­ports of coal (66.3%), petroleum (27.9%), chem­i­cals (30.5%), plas­tics (12.2%), iron and steel (20.7%), non-fer­rous me­tals (30.2%), ma­chin­ery (17.4%), and elec­tron­ics goods (7%) ex­panded in Oc­to­ber.

The WTO’S lat­est World Trade Out­look In­di­ca­tor (WTOI) also sug­gests that global mer­chan­dise trade growth will likely mod­er­ate in the De­cem­ber quar­ter of 2017. For 2017, WTO has pro­jected trade ex­pan­sion at 3.6% fol­low­ing stronger-than-ex­pected trade growth in the first half of the year.

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