NEW DELHI: The headwinds in global trade is equally reflected in the WTO forecast for 2023, released two days back, which has projected it to grow at 1% only. However, the forecast for 2022 has been improved from 3% to 3.5% primarily due to better performance in the first half of 2022. India, being a domestic demand driven economy, will not be much impacted by these developments though we will not be insulated either. While global developments will affect our exports performance particularly as commodity prices and of late crude prices have started moving in southwards directions, which will affect our raw material exports and some value added exports as well. However, at the same time, the demand for low price products will keep our exports afloat as India is gaining from China's loss. We are also looking up additional exports in Russia through Rupee Payment Mechanism and would request the Hon'ble Minister to look into extending this mechanism for exports to countries having acute forex shortage. Sanctions on Russia by the EU will provide some additional exports to India in European markets. The market access through CEPA with UAE, ECTA with Australia and FTA with UK, which we are sure that our most capable and efficient CIM will deliver by Diwali, will further push our exports in challenging times. FTAs with Canada, GCC and EU will further facilitate our exports.
Sir, the need of the hour is a concerted effort by all stakeholders to push exports as a national agenda. We request you to kindly appeal to the Hon'ble Prime Minister to address all the stakeholders including exporters, supporting institutions, Indian Missions and States so as to reiterate the proactive support required in current challenging times. The Prime Minister, in his last address, made us to believe that US$400 Bn is achievable and we achieved it. Indian Missions may also sensitise us on market opportunities for emerging products so that we may build further on them through market study/ market surveys.
1.Sir, the increase in repo rate last Friday will have its bearing on the base rate of banks and consequent to lending rates for export credit. The base rate of SBI prior to increase was 8.7% which is likely to go to 9.4% after increase in the repo rate. The base rate of many banks will be much above the base rate of SBI pushing the export credit rate in Rupee. We request you to kindly consider requesting RBI for introducing “Export Refinance Facility” to banks so that the value of credit provided to the export sector in Indian Rupee may be refinanced by the RBI to banks at which it lends to banks. Such a measure will be extremely beneficial for our small exporters as the interest rates in many competing countries are much lower than in India and the double whammy is the loss on account of exchange rate as Indian Rupee remains one of the comparatively strong currencies globally.
2. The non-extension of notification relating to GST exemption on freight for exports has caused panic and uncertainty adding to the liquidity challenges of the exporters. Sir, You are aware that overseas freights have gone up by 300-350% from pre-covid level and though there is little correction in the freight rate recently, freights are still
200-250% more than at 2019 level. Therefore, payment of GST on such high freight rates will affect the liquidity of the exporters to a large extent particularly as the interest rates have also moved northward with recent hike by the RBI. The payment of GST on export freight and subsequent refund particularly through ITC mechanism comes with a time lag of generally 2-3 months or so, though refund through IGST mechanism is faster. GST on exports freight is revenue neutral as exporters will pay the same and subsequently get a refund through a refund mechanism.
The withdrawal of exemption may augment the liquidity of the Government but at the cost of the exporters. Since the cost of credit for the exporters is very high, an exemption will help the export sector to have better liquidity, which is the need of the hour.
3.While we appreciate application of domestic regulations on imports meant for the domestic economy, the same should not apply on imports meant for exports affected through advance authorisations, EOU and other mechanisms. In many cases, buyers ask for import of a particular material from a particular supplier to be used in exports. The specified supplier, looking into the small quantities involved, is not interested in getting approval from BIS and other similar agencies. This deprives such orders to Indian exporters.
Since the inputs are meant for exports only , the exemption from domestic standards should be applicable to imports for exports purposes imported under Advance Authorisations or similar mechanism.
4. The better market access provided by the Government is to be backed by aggressive marketing strategy. Government may bring a planned scheme with the objective of taking exports to US$1 Trillion both for goods and services respectively by 2030.
The scheme should look for a corpus of Rs 1000 Cr. Besides, overseas marketing may be encouraged with 200% tax deductions so that for every dollar spent on overseas marketing (with defined components), two dollars are allowed as tax deduction.
