With merchandise exports growth in negative territory since December last year, the government will soon come out with a package to boost shipments, commerce and industry minister Nirmala Sitharaman said on Thursday.
Speaking at the Indian Express group’s Idea Exchange programme, the minister said the package would include extension of the existing interest subvention scheme to many more sectors.
“The finance ministry has given us an outlay for interest subvention. We (commerce ministry) have laid out rules by which different sectors would be given this benefit. These will soon go the the Cabinet (for a decision),” Sitharaman said. Although the minister declined to name the sectors that would be brought under the scheme (under which banks would give 3% interest relief on export credit and get compensated), official sources told FE that these might include chemicals, pharmaceuticals and electronics, given the fall in export realisations in these sectors.
The minister stressed the need to push exports, but said that the Merchandise Export for India Scheme for rewarding export performance will be looked at afresh only at the time of a mid-term review of the Foreign Trade Policy 2015-20, which is slated for September-October 2017.
Turning to other major steps the government is contemplating to stimulate investments, the minister said that ranks of states on the ease of doing business would be revealed “within this week or early next week”.
With the Modi government’s focus on cooperative federalism giving states higher stakes in the development process and red tape still an impediment at the state level while project clearances have been fast-tracked at the Centre, the industry is awaiting the state-wise rankings. Making public the relative performance of states in business facilitation could also induce healthy competition among them, it is felt.
On foreign investment in retail e-commerce (business-to-consumer), the minister said some states were yet to give their responses on the issue. “Once we get the responses from a majority of the states, we will take a decision,” she said. However, she added that the government was not considering allowing foreign investment in multi-brand retail, neither had it received any applications from companies in this regard.
In Budget FY16, the finance ministry had allocated Rs 1,650 crore for the interest subvention scheme for exporters. This amount would likely be raised significantly now. The rate of export credit in India is 11-12% compared with 5.5% in China, 6.2% in Malaysia, 4.6% in Thailand, 2.6% in Taiwan and 2-3% in the euro area (except Greece).
On the issue of protecting steel makers from cheap imports, Sitharaman said her ministry had receive several representations from SMEs, which are users of steel, asking not to hike import taxes or impose dumping duties. She said the SMEs — which are mainly from labour-intensive sectors — have warned that higher duties would lead to job losses, adding that her ministry strongly raised this during inter-ministerial consultations. Sitharaman said her ministry was of the view that steel producers, having gained earlier when prices for the alloy were ruling high, should now reduce prices and take on competition from overseas by making their production processes more efficient. On the Directorate General-Safeguards proposal to impose a provisional 20% safeguard duty on steel imports, she said the relevant board would take a call on this, keeping in view all issues including the sudden surge in imports in recent months.
In order to have better coordination with the industry on trade and economic related issues, the government will soon revive the Prime Minister’s Trade and Economic Relations Committee, the minister said. She said in a recent meeting with the PM, industry raised concerns on high input costs, fall in exports, dumping from China and state-level obstructions in ease of doing business. The minister said the industry also demanded more legislative reforms.
She said the government, with the help of ECGC and Exim Bank, is trying to boost project exports, mainly in Africa and Latin America, besides Southeast Asia. However, she added that the government was not planning to tweak any existing bilateral free trade pacts as of now.
On the issue of the free trade agreement talks with the European Union being deferred, she said India was still awaiting a response from the EU on why they chose to act against the country’s pharmaceutical sector, which is world-renowned as suppliers of authentic but cheaper generic medicines. “We did not get any response from (EU authorities) though the Prime Minister and I had taken up this issue with them,” she said.