Budget 2018: How rural economy will benefit

Published: February 2, 2018 4:04:28 AM

Budget 2018: Exports create massive employment opportunity, particularly in labour-intensive sectors. The fixed-term employment facility for all sectors will benefit exporters, as this has been their long-standing demand.

Budget 2018: The Budget puts its focus on rural economy and rightly so. The two key concerns have been rising unemployment and declining farmers’ income. (Reuters)Budget 2018: The Budget puts its focus on rural economy and rightly so. The two key concerns have been rising unemployment and declining farmers’ income. (Reuters)

Budget 2018: Being the first Budget in the post-GST era, the last Budget of the current government, and coming on the heel of elections, the Union Budget has evinced interest, though much sheen has been taken out with the introduction of GST. The Budget puts its focus on rural economy and rightly so. The two key concerns have been rising unemployment and declining farmers’ income. Both these can be addressed through focus on exports. Luckily for us, global trade is on a high trajectory, and since Indian exports have been above the curve, we can look for robust growth in exports. Exports create massive employment opportunity, particularly in labour-intensive sectors. The fixed-term employment facility for all sectors will benefit exporters, as this has been their long-standing demand. The doubling of corpus for Interest Equalisation Scheme would help reduce the cost of credit. The higher outlay can be used to extend the benefit to merchant exporters and services exporters, who are equally affected with high cost of credit. Rebating of embedded tax in respect of inputs, which are outside the GST net or subject to nil GST rate, was expected to impart competitiveness to exports.

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Increased allocation of Rebate on State Levies (ROSL) for textile sector will help the apparel and made-ups to get some relief from embedded taxes. Since the ROSL budget has been increased from Rs 1,555 crore to Rs 2,164 crore, some other sectors like carpets, handicrafts, fabrics, etc may also be covered for the ROSL benefit. Increasing allocation for railways, roads, shipping and coastal navigation, electronic payment facility at all toll gates, single logistics portal to meet all logistics requirement coupled with GST and E-way bill will go a long way in reducing logistics cost of exports.

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The government has fixed a challengeable export target of $100 billion from the current $30 billion. It requires a stable supportive agri-export policy based on digitalised current stock position, scientific forecasting of crop prospects, current demand coupled with fiscal support to bridge the gap between MSP and international price. Since prices of most of agri-commodities are moving northward, the support required would be a moderate one. Backward and forward linkages in agriculture through logistics and supply chain are mandated to meet such targets. Organic exports is a less exploited area with tremendous potential, and ensures highly remunerative prices to farmers. Like Sikkim, many more northeastern and other states could get themselves certified as ‘organic states’ by international agencies to get more than 50% price advantage on such products.

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The reduction in corporate tax rate from 35% to 25% would also indirectly help the exports as many US-based Indian subsidiaries and Indian companies with major markets in the US were weighing the option to move to the US in view of sharp cut in corporate rates and tax deduction on expenditure on equipment and machinery in that country. We hope the cut in corporate tax in the Union Budget would help them to revisit the issue and push their exports with greater zeal.

Ajay Sahai
Director General & CEO, FIEO

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