Finance Minister Nirmala Sitharaman (Image- PTI)
In a bid to arrest the current economic slowdown, Finance Nirmala Sitharaman on September 14 announced further relief measures with a focus on reviving the housing and export sector.
In her previous two press conferences, Sitharaman took stock of the slowdown in auto sector, the cash strapped NBFCs and also announced the mega bank merger as well as upfront recapitalisation.
After nationwide consultations, Sitharaman in her September 14 presser announced several measures w.r.t to exports industry including raising of interest equalisation scheme for MSMEs and exporters to 5 percent, replacing Scheme for Remission of Duties or Taxes on Export over MEIS for exports, higher insurance cover, implementation of fully electronic GST refund system, Rs 1,700 crore for export guarantee among others.
"The finance minister's announcement that an additional Rs 36,000 crore to Rs 68,000 crore will be made available as export credit under the priority sector is definitely good news. The government's plans to boost exports by leveraging technology is also a good step. We would have liked to see some attention given to up-skilling workers in export-oriented MSMEs," Pushkar Mukewar, Co-Founder and Co-CEO of Drip Capital told Moneycontrol.
According to Mukewar, the finance minister's announcement reconfirms government's focus on reviving the economy by focusing on exports.
Speaking on the housing sector, Sitharaman said ECB guidelines would be relaxed for affordable housing under Pradhan Mantri Awas Yojana (PMAY). She further announced a special window worth Rs 10,000 crore for last-mile funding of non-NPA and non-NCLT housing projects.
This will provide relief to homebuyers stuck in incomplete projects totaling nearly 3.5 lakh units across the country.
Here are key takeaways from FM's third press conference:
To boost exports (incentive and taxation)
1) Extend the scheme of reimbursement of taxes and duties for export promotion
-Existing dispension in textiles of MEIS + old ROSL will continue up to December 31, 2019.
-Scheme for Remission of Duties or Taxes on Export Product (RoDTEP) will replace MEIS.
-Textiles and all other sectors which currently enjoy incentives up to 2 percent over MEIS will transit into RODTEP from January 1, 2020.
-In effect, RODTEP will more than adequately incentivise exporters than existing schemes put together.
-Revenue forgone projected at up to Rs 50,000 crore.
-It is more for labour intensive textile sector.
2) Fully automated electronic refund route for input tax credits (ITC) in GST
-Fully electronic refund module (form GSAT RFD-01) for quick and automated refund of ITC nearing completion and will be implemented by end of September 2019.
-This is expected to monitor and speed up ITC refunds.
3) Expanding scope of export credit insurance Scheme ECIS by ECGC
-Export Credit Guarantee Corporation will expand the scope of ECIS.
-Will offer higher insurance cover to banks lending working capital for exports.
-Premium incidence for MSMEs will be monitored suitably.
-It is expected that the initiative will cost about Rs 1,700 crore per annum.
-This will enable reduction in overall cost of export credit including interest rates especially for MSMEs.
4) Revised priority sector lending (PSL) norms for export credit
(after extensive discussion with RBI)
-Priority sector lending norms for export credit have been examined and enabling guidelines are under consideration of RBI.
-This will release an additional Rs 36,000 crore to Rs 68,000 crore as export credit under priority sector.
5) Effective monitoring of export financing by Department of Commerce
-Data on export finance is regularly published by RBI.
-Export Finance will be actively monitored by an inter-ministerial working group in Department of Commerce, tracked through a dashboard, reviewed with institutions and active intervention carried out.
6) Leverage technology to reduce time to export for turnaround time
-Technology will be further leveraged by timely completion of ongoing initiatives to further reduce time to export through seamless process digitisation of all export clearances (port/airport/customs etc) and elimination of offline/manual services.
-An action plan to reduce time to export/turnaround time in airports and ports benchmarked to international standards will be implemented by December 2019.
-Actual turnaround times will be published by real time for each port and airport to push them to improve performance.
7) Annual mega shopping festivals
-Annual mega shopping festivals in India will be organised in 4 places across March 2020 in 4 themes (Gems & Jewellery, Handicrafts, Yoga, Tourism, Textile and Leather).
8) Special FTA utilisation mission
-FTA utilisation mission headed by senior officer in Department of Commerce will be setup.
-To work exclusively with FIEO and export houses to utilise concessional tariffs in each FTA.
-Enhance awareness of preferential duty benefits among MSMEs, disseminate and facilitate compliance requirements (Rule of origin/Certificate of Origin etc) under FTAs for importers and exporters.
-Set goals for FTA utilisation and put in place an effective FTA monitoring system.
9) Online Origin Management System
-An online Origin Management System for exporters to enable them to obtain certificates of origin - COC (under Rules of origin) will be launched in the next few weeks by DGFT in collaboration with Exports Inspection Council.
-This is expected to significantly improve the ease of doing business for exporters.
10) Timebound adoption of mandatory technical standards
-Timebound adoption by industry of all necessary mandatory technical standards and their effective enforcement to elevate and quality and performance ecosystem, enhance competitiveness and address the issue of sub-standard imports.
-A working group on standards will be set up in Department of Commerce to work with industry to lay down a roadmap for adoption of standards, timelines and enforcement.
-This is expected to big boost in enabling Indian products overcome non-tariff barriers in exports.
11) Affordable testing and certification infrastructure
-Affordable testing and certification infrastructure will be adequately expanded and developed in PPP mode to enable exporters to get all internationally.
12) Enable handicrafts industry to effectively harness e-commerce for exports
-Special dispension for facilitating and on boarding handicrafts artisans and handicraft cooperatives directly on e-commerce portal and enable seamless exports.
-Mass enrolment of artisans across India with the help of Ministry of Textiles.
Measures to Housing Sector
1) Relaxation of ECB guidelines for affordable housing
-ECB guidelines will be relaxed to facilitate financing of home buyers who are eligible under the PMAY in consultation with RBI.
2) House building advance
-The interest on house building advance shall be lowered and linked with 10-year G-Sec bond yield.
3) Special window for affordable and middle income housing
-Window to provide last mile funding for housing projects which are non-NPA and non-NCLT projects and are not worth positive in affordable and middle income category to be set up.
-The objective is to focus on construction of unfinished units.
-Government on the lines of NIIF can contribute to the fund while rest of investors would be LIC and other institutions and private capital from banks/sovereign funds/DFIs etc.
-Fund shall be set up as a category - II AIF trust and would professionally run with experts from housing and banking sector.-Fund size Rs 10,000 crore to be contributed by government and roughly same amount from outside investors.