Ajay Sahai, director general & CEO, FIEO says that in general, 2013 could be a better year for Indian exports compared to 2012. The total export from the textile sector is close to USD 26 billion.
The textile sector has been lagging for many years now. So the new foreign trade policy which the commerce minister unveiled today provided for 2 percent interest subvention for the textile sector. However, Sahai feels that the textile sector is not likely to show positive growth but major employment opportunities exist in this sector.
"China is exiting some of their textile sector. There are news that spinning industry is moving from China to India. Major opportunity is coming our way; if we are able to exploit that opportunity then it would be better for Indian exports," said Sahai in an interview to CNBC-TV18.
Also read: FY13 exports down to $300bn, trade deficit widens to $191bn
Below is the edited transcript of his interview to CNBC-TV18.
Q: What is the most impressive part of Anand Sharma's announcement?
A: Anand Sharma made a very pragmatic announcement. He recognised the importance of exports and after looking at the global scenario he tried his level best to provide competitiveness to exports. The interest subvention scheme has been extended for textile sector and 112 items in engineering space which are important from exports perspective.
He also stressed for giving promotion to the domestic sourcing and he said that if anyone goes for domestic sourcing under EPCG scheme, 10 percent reduction of export obligation would be provided. Much emphasis has been given to manufacturing by way of encouraging domestic sourcing.
The focus is on quality in the textile and engineering sector and some sops have been extended to these sectors as these sectors have not performed well. Both these sectors roughly contribute to 1/3 rd of country's exports.
Q: Do you think that exports in the current year could do better? Are the benefits that he has announced large enough for exporters to be able to beat the other blues in terms of lower global demand?
A: No. Compared to 2012, 2013 would be a better year for Indian exports. We were expecting some major announcement on the marketing fund and we hope that the commerce minister will take up the matter with the finance minister for announcement of an export development fund which is the need of an hour.
I think the commerce minister has tried his level best with exports now lot of initiatives need to be taken by the entrepreneur also. With 20 percent of depreciation we are not competitive so something needs to be done at our level as well.
Q: Barring marketing fund, does it meet the market expectations in all other parameters or do you think something more could have been also done which was been expected by the streets. Could you outline?
A: We were expecting more announcement on transaction cost fund but the commerce minister has announced that a new company has been formed which will submit the report within six months time. He gave emphasis on the Electronic Bank Realization Certificate. (eBRC) where he mentioned that eBRC can be used to spped up the electronic refund of the Value Added Tax (VAT) also. If the new committee comes with some changes in the procedure then it will help in reducing the transaction cost to a large extent.
Q: eBRC does not exist at all now? Do you think this will cut the interface and the time taken for refunds in a big way?
A: True. In the eBRC, the tax authority will get the proof of exports directly from the Directorate General of Foreign Trade (DGFT) without asking the exporter to furnish the proof which is presently in the manual form. If that happens, then it will help in expedition costing of the VAT refundable. In many states VAT refund takes at least three to six months time.
Q: You also spoke about this policy providing thrust to the textile space. How much textiles have grown in FY13 and now with additional thrust being provided to this sector how much the growth could be? Incrementally what is the benefit if you could quantify for the textile space?
A: The total export from the textile sector is close to USD 26 billion. I don't consider that sector as a whole because the data up to March has not been provided to us. I don't think this sector will show a positive growth but major employment opportunities exist in this sector.
China is exiting some of their textile sector. There are news that spinning industry is moving from China to India. Major opportunity is coming our way; if we are able to exploit that opportunity then it would be better for Indian exports.
Q: The minister spoke about substantial progress been made in India EU trade talks. What has been your own understanding of the conditions? Do you have anything in terms of fears or hopes with India European Union (EU) Free Trade Agreement (FTA)?
A: The minister has announced that talks are progressing well and he hopes that much progress will be achieved by June. For some of the tech sectors particularly textile, EU FTA is very important because what we are producing in India is most suited to the EU market. EU market is fashion conscious and we are producing fashion garments in India. We are looking to small quantities that are also suited to EU.