Economic Survey 2013: Urgent attention requires on infra, taxes to boost exports

Feb 27 2013, 14:21 IST
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India's exports entered the positive zone after a gap of eight months. (Reuters) India's exports entered the positive zone after a gap of eight months. (Reuters)
SummaryIndia's exports entered the positive zone after a gap of eight months.

India needs "urgent attention" on issues related to infrastructure, trade facilitation, taxes and credit in order to boost the country's exports, said the Economic Survey 2013.

According to the survey, the recent global slowdown has thrown up new challenges for India with its export growth being continuously negative since May 2012 compared to high growth rates of even above 50 per cent in some months of the previous year.

Making a marginal recovery, India's exports entered the positive zone after a gap of eight months, recording a growth of 0.82 per cent to USD 25.58 in January.

The survey, tabled by Finance Minister P Chidambaram in Parliament today, said the government has limited fiscal space and with protectionist measures of trading partners showing signs of rising, the policy options left are more at the micro level.

"Thus there are many micro, port-specific and sector - specific issues that need urgent attention. These are related to infrastructure, trade facilitation, tax and tariffs, and

credit, and can realistically be addressed in the short and medium term.

"Addressing these issues, as is currently being done by the government, can exponentially promote India's export growth," it said.

On infrastructure related issues, it said that even the best of Indian ports do not have state-of-the-art technology as in Singapore and Shanghai.

On trade facilitation measures, the survey said there is a need to simplify the multiple documentation procedures as on an average Indian exporter is required to sign at about 130 places to complete an export transaction.

These procedures and costs need to be reduced to the barest minimum. Other procedural and documentation reforms include reducing unnecessary paper work and addressing the issue of trade litigations, it said.

It also said that time limit should be fixed for disbursal of duty drawback, service tax refunds and central excise rebate claims to the exporters as delays adversely affect the

working capital and making them less competitive.

The survey asked to review the inverted duty structure under the India-Thailand FTA as finished jewellery imports from Thailand are cheaper than primary gold (raw material) available in India.

Further, it said India needs to diversify its product basket besides repositioning itself in its traditional areas of strength like textiles and leather to overcome from the global demand slowdown.

It said many challenges are there for India on the trade front.

"While India has successfully diversified its export basket, more needs to be done on the product diversification front. It also has to reposition itself in its traditional areas of strength like textiles and leather manufactures where it has lost considerable ground," it said.

The survey called for forays into new areas to boost India's exports as the prospects for world trade and India's trade are still uncertain.

"Some green shoots seem to have appeared with the import growth rates of the world and some of India's important trading partners like the USA, China, and Hong Kong showing slight upward movement in the last two months," it said.

It also said that with multi-lateral trade negotiations stalled and regional trade agreements (RTAs) on the rise, India has to follow a strategic regional trading policy

focusing on the potential technology-intensive items.

According to the survey, India may have to bargain more in its regional trade negotiations, particularly in cases where livelihood concerns of large pockets of the population are involved.

Further it said there is a need to address the inverted duty structure in sectors like electronics, textiles, and chemicals and the artificial inverted duty structure caused by

some FTAs.

Inverted duty structure impacts the domestic industry adversely as it has to pay a higher price for raw material in terms of duty, while the finished product lands at lower duty and costs low.

On the services front, a gold mine of opportunity in sectors like tourism, including health tourism, is waiting to be tapped, it added.

On imports, it said while the US' and Japan's imports from India grew by 12.6 per cent and 1.8 per cent, respectively, in 2012 (January-November), China's and Hong Kong's imports from India fell by 19.6 per cent and 17.9 per cent, respectively, in 2012.

On gold imports, it said the rise in imports of gold is one of the factors contributing to India's high trade deficit and CAD in 2011-12, forming 30 per cent of its trade deficit.

At 10 per cent in 2011-12, India's trade deficit as a per cent of GDP is one of the highest in the world.

Trade deficit reached a peak of USD 184.6 billion in 2011-12 from USD 118.6 billion in 2010-11 with the highest growth of 55.6 per cent since 1950-51.

"Moderate export growth and high import growth, particularly in POL (oil) imports due to high prices and high gold and silver imports, led to the highest-ever trade deficit in India since 1950-51, contributing to a high current account deficit (CAD) of 4.2 per cent of GDP," it said.

The trade deficit of USD 167.2 billion for 2012-13 (April-January) was 7.9 per cent higher than the USD 154.9 billion in 2011-12 (April-January).

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