From priority lending for exports to e-commerce, Finance Minister Nirmala Sitharaman introduced a slew of measures in a bid to boost exports. According to traders, this is a welcome move and ease the concerns of exporters.
Export scene
The announcement is made to boost India's export sector that has reportedly declined. According to the CEIC Data, exports from India has seen a decline in 2019 compared to the last year. After growing at 19.075 percent in August 2018 year-on-year, exports declined 7.8 percent year-on-year in June 2019, the data reveals.
A major challenge that has affected the exporters in recent times is lack of liquidity for working capital due to delay in receiving GST refunds under input tax credit. This has lead to a delay in getting clearances at ports.
Few concerns regarding the quality of exported products and lack of sufficient incentives from the government were also raised.
Export measures
In her press briefing today, Sitharaman addressed few of the previously raised concerns.
The new measures include priority lending for exporters to address the liquidity crunch. The Reserve Bank of India will release additional funds of Rs 36,000 crore to Rs 68,000 crore as export credit under priority sector for the same.
Export Credit Insurance Scheme has been expanded to provide higher insurance cover to bank lending working capital for exports. An allocation of Rs 1,700 crore per annum has been made for the same. This is expected to reduce the overall cost of export credit including interest rates, especially to MSMEs.
According to Sitharaman, it will reduce 8 percent if the lending is in rupee terms and 4 percent in dollar terms.
One of the key concerns of GST refunds was addressed. Sitharaman said that the GST refund for input tax credit has been fully automated for exporters to speed up refunds. It will be implemented by the end of September 2019.
An inter-ministerial working group will be set up to monitor export finance actively, even weekly if necessary, the finance minister added. This is to let the committee make active intervention as and when necessary.
Sitharaman had said that existing Merchandise Exports from India (MEIS) will be replaced by the new Remission of Duties or Taxes on Export Product (RODTEP) to incentivise exporters from January 1, 2020.
Among the most interesting announcements was an annual mega shopping festival that FM Sitharaman said, will be hosted by India in four cities on the lines of the Dubai Shopping Festival.
Other measures include using technology to reduce the time taken for clearances in ports, annual shopping festivals.
What traders think?
Confederation of Indian Industry said in a statement that, "The new scheme to compensate exporters for all duties is going to help considerably."
"The expanded priority sector lending cover is also a huge booster for the sector which has been struggling. These are decisive measures which are greatly welcome by CII and industry," CII added.
Praveen Khandelwal, Secretary-General, Confederation of All India Traders (CAIT), a traders’ association, said in a statement that, "The best part of the announcements is the creation of various inter-ministerial working groups to monitor strict implementation of the announcements in a time-bound manner."
National president of CAIT, BC Bhartia, said in the statement that "the introduction of RODTEP that will replace existing MEIS will remove the ambiguity of the exporters." He further explained that the new scheme guarantees the benefits of exports which is much needed to remain in a competitive market.
The trader organisation said that increasing the priority sector lending will benefit MSME and small exporters as they will be able to contribute more in exports now.
Announcement regarding observing specified standards not only for exports but for imports will guarantee quality products.
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