Band-aid for ex­porters

Trade policy re­view pro­vides tem­po­rary fixes but lacks a long-term ap­proach

The Hindu Business Line - - THINK -

As a sort of emer­gency mea­sure, the Cen­tre in its mid-term re­view of trade policy (2015-20) un­veiled a slew of re­lief mea­sures for labour in­ten­sive ex­ports which have been badly hit by GST. De­lays in re­ceipts of in­put tax cred­its have dis­rupted their op­er­a­tions — per­haps as a re­sult of which ex­ports were down by 1.1 per cent in dol­lar terms in Oc­to­ber, break­ing a ris­ing trend of over a year. The ₹8,450-crore pack­age for man­u­fac­tur­ing and ser­vices ex­ports amounts to a 33 per cent in­crease in ex­ist­ing ex­port in­cen­tives of over ₹25,000 crore. Apart from the ready­made gar­ments sec­tor, the other ben­e­fi­cia­ries are leather prod­ucts, agri­cul­ture and marine prod­ucts, car­pets, tele­com and elec­tron­ics com­po­nents, med­i­cal equip­ment, ac­coun­tancy, ar­chi­tec­ture, le­gal ed­u­ca­tion and restau­rants. Some of these sec­tors be­ing frag­mented and un­or­gan­ised, they were im­pacted by de­mon­eti­sa­tion as well. How­ever, the ex­port in­cen­tives are in force only till June and March next year for man­u­fac­tur­ing and ser­vices, re­spec­tively — and for good rea­son. Ac­cord­ing to WTO rules, a coun­try whose GNP per capita crosses $1,000 over three con­sec­u­tive years (at 1990 US dol­lar rates) can­not con­tinue with ex­port sub­si­dies. In­dia has al­ready been called out here with re­spect to its per capita lev­els be­tween 2013 and 2015. Ex­porters need to be weaned off sub­si­dies sooner than later.

The mid-term re­view does not spell out a fu­ture roadmap for as­sist­ing ex­porters. In­deed, ecosys­tem or trade fa­cil­i­ta­tion mea­sures should be stepped up as these sub­si­dies are with­drawn. The policy pa­per rightly ac­knowl­edges lo­gis­tics costs to be a daunt­ing is­sue. An added is­sue is credit at rea­son­able rates, for which a sys­tem of rat­ings and as­sess­ment needs to evolve. The state should ear­mark the funds it has set aside for sub­si­dies to­wards cre­ation of phys­i­cal and so­cial in­fra­struc­ture — not just power, trans­port, tele­com, but also in­vest­ment in ed­u­ca­tion and skills. In­deed, a shift away from ex­port sub­si­dies opens up re­sources for devel­op­ing high value ex­ports in the long run. There should be no let up in the Cen­tre’s em­pha­sis on eas­ing con­straints to do­ing business. Ac­cord­ing to the WTO, world trade in goods is ex­pected to grow at 3.6 per cent in 2017, against 1.6 per cent in 2016; there are op­por­tu­ni­ties to be tapped as the world econ­omy shows signs of re­cov­ery.

While ob­serv­ing that new prod­ucts and mar­kets need to be de­vel­oped for ex­ports, the re­view is silent on key policy con­cerns such as the con­nect be­tween ‘Make in In­dia’ and the coun­try’s tar­iff strat­egy in fo­rums such as the Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship (RCEP) and WTO. This emerged as an area of dis­quiet at the re­cently con­cluded RCEP meet in Hy­der­abad. Ex­port of IT ser­vices face a pe­riod of un­cer­tainty, thanks to tech­no­log­i­cal changes and tight im­mi­gra­tion poli­cies. Like­wise, the im­pact of e-com­merce on lo­cal trade and man­u­fac­tur­ing needs to be ar­tic­u­lated. These is­sues need to be ad­dressed at the ear­li­est by tak­ing the stake­hold­ers and peo­ple into con­fi­dence as In­dia faces up to chal­lenges at WTO and other fo­rums.

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