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Under stress, govt unlikely to give exporters fresh sops

The customary annual review of foreign trade policy (FTP), which is slated for next month, is expected to be a non-event this time around. The fiscally-stressed government is unlikely to unveil any fresh sops for exporters and would be content with certain easing of procedures, sources said.

Last year, the government had announced an Rs 1,700-crore relief package for the exporters to maintain a steady growth in the export numbers. However, the popular duty entitlement pass book (DEPB) scheme was scrapped.

Sources said the government was not in a position to provide any additional fiscal succour to the exporters even though 2012-13 is expected to be tough for exporters, given the demand slump in key export markets. It is increasingly clear that reaching the export target of $500 billion for 2013-14 would be impossible, at a time the World Trade Organization has pegged the world trade to grow at around 6% a year.

Recently, commerce secretary Rahul Khullar said that the FTP will focus on addressing India's trade deficit, which ballooned to $185 billion in 2011-12, exerting pressure on the current account deficit (CAD). “The expectations are that 2012-13 would be difficult. But, there is a way of dealing with even difficult circumstances, so please leave that to be packaged, to be put together as part of the FTP supplement that will be announced next month,” Khullar added. Given that the government has already taken measures to curb gold imports, further curbs on certain imports might be what the government is looking at, feel analysts.

The country's exports have crossed $300 billion in FY12, with imports growing 38% to $485 billion.

Commerce and industry minister Anand Sharma had also said that his ministry would devise a strategy in the upcoming FTP to regulate and address the growing trade gap.

The country's CAD nearly doubled to $19.6 billion or 4.3% of the gross domestic product (GDP) during the October-December quarter of FY12.

Besides, the government is expected to come out with some more market-diversification efforts and reducing the compliance costs for the exporters this year.

However, the exporters are demanding interest rate cuts as an immediate relief. FIEO president M Rafeeque Ahmed said that given the poor industrial growth, currency fluctuation and increasing trade deficit along with transatlantic economies losing their dynamism post 2008, rate cuts are what we have been waiting for.

“We must realise that a third of the $15-trillion world trade takes place between emerging and developing economies of Latin America/Asia/Africa/Middle East the legendary 'southern silk route' needs to be bolstered to balance of the demand slump in the US and Europe and would be possible only through liberal low cost financing,” Ahmed added.

In last year's FTP, the government had announced a special incentive package for exporters facing tough times in the western markets with two new duty credit schemes. To promote market diversification, exports to 41 countries were given 4% duty credit — as opposed to 3% — under a new Special Focus Market scheme. The government had also unveiled another scheme covering 50 products in the areas of engineering, pharmaceuticals and chemicals and provided the exporters of these products an additional 1% duty credit.