The government may announce a slew a fiscal measures for exporters battling a stronger rupee that has hit their profitability and, in some cases, even forced them to shut down businesses.
The measures could include possible reimbursement or rebate on some of the taxes incurred on production of exported goods and a cut in duty levied on import of capital goods under the Export Promotion Capital Goods scheme, an official familiar with the matter said.
Several measures are being considered and some of these could be announced in the budget, while the rest could be a part of the foreign trade policy that would be unveiled in April, the official said. The government on Tuesday also extended the abatement of service tax on three more services specifically used for export of goods.
The government is also debating a scheme to reimburse or discount even state levies such as octroi and other local levies that are currently not reimbursed,” he said. In addition, some sectors such as textiles that has been one of the worst hit could also get the benefit of duty-free import of research and development equipment up to 25 per cent of freight on board value.
The rupee has appreciated by 12 per cent in 2007 and is currently trading at less Rs 40 to a dollar leading to exports becoming costlier and less profitable. The significance of the rupee’s appreciation against the dollar is because almost 70 per cent of India’s external trade is invoiced in dollars forcing many to believe that the export target of $160 billion for this year was unlikely to be met. A recent internal government survey revealing alarming statistics on India’s eroding export competitiveness. The survey, sources said, has shown that labour intensive industries such as textiles, handicrafts and agro products have been badly hit in the last 12 months.
A commerce ministry note said textiles, garments, electronics, handicraft, machinery, bi-cycle, chemicals, processed foods, carpets, auto components and medical instruments constitute around 50 per cent of total exports.
India's exports for the April-November period of the current fiscal stood at $98.38 billion, a growth of 22.08 per cent over last year. FIEO president Ganesh Gupta said: “Exporters are not entering with fresh contracts. This is a dangerous as competitors are waiting to occupy the space vacated by us.”