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Deficit-battling government not to offer more sops to exporters

The government is unlikely to offer more incentives to exporters in its annual trade policy review.

Commerce ministry officials said government finances were under stress because of the rising fiscal deficit so a weaker rupee should act as a sufficient incentive for the moment.

"There won't be many more incentives simply because there is no money," commerce secretary Rahul Khullar told ET. Moreover, with fiscal deficit going off-track, the finance ministry is expected to tighten its purse strings in the coming fiscal.

Some officials said the annual review of the Foreign Trade Policy, expected in April, would most likely focus on simplifying procedures and cutting transaction time and costs.

There are chances some of the sops that are to expire at fiscal end will not be extended, another official said. For instance, the duty credit of 2% on apparel exports to the US and the EU and a six-month special bonus benefit scheme for some 50 products. "Such benefits may just run out once their term expires," the official said.

The steady depreciation of the rupee against the dollar since August last year has given the government reasons to hope that exports would get more competitive and hence rise in the last quarter. Exports rose sharply in the first four months of the fiscal but declined month on month till November.

Khullar had earlier this week attributed the rise in exports in December to the depreciating rupee. But exporters said they require support as the global market is still unstable and demand shaky.

"We definitely need more incentives. In fact, we could have got more had the government not erroneously showed higher export figures for the first seven months of the fiscal which wrongly painted a rosy picture," said S P Agarwal, president, Delhi Exporters Association.

The country's exports were adjusted downwards by $9 billion for the April-October 2011 period. The commerce department is still hopeful of achieving the $300 billion export target in 2011-12 as $217.6 billion in exports has already been realized in the first three quarters.

"I think, even if incentives are not enhanced, it should be okay if at least they continue. Exporters also know that it is difficult to get more incentives this year," said K T Chacko, director, Indian Institute of Foreign Trade. With rising cost of credit, it is important that the 2% interest rate subvention announced for just a handful of sectors should be expanded to more sectors, Chacko said.