While the impact of the global economic crisis may have been arrested, the Economic Survey 2009-10 warns that the recovery in exports is ?still fragile.? Exporters, it argued, need a further boost as the recent upswing in output and trade has been on the back of the stimulus released by various countries including India, ?the effects of which could dry up if the natural recovery doesn?t follow.?
The Survey has recommended a further boost for the sector with steps like further reducing the excise duty and several policy changes for the merchandise sector. The country?s exports shrank by 38.6%, as the global crisis deepened in the first quarter of 2009-10 ? a far cry from the high growth seen from April to August 2008 (40%-63%).
The Survey notes that the recovery seen since the third quarter of 2009-10 is due to a low-base effect, with absolute numbers still nowhere close to the pre-crisis levels. Since developed economies are resorting to protectionist measures, the Survey makes a strong case for India to lead from the front and ?force the wavering leaders of liberalisation and globalisation not to backtrack.? To do that, the Survey calls for bold policy measures like the ones pushed through in 1991.
Proposing a slew of measures to boost exports, the Survey noted that ?the time is possibly ripe for another reduction of import duties for all capital goods preferably to the 3% duty fixed under the general EPCG with a simultaneous withdrawal of EPCG scheme.? The move will help in avoiding revenue leakages and serve as a major step forward in rationalising the export promotion schemes besides giving an upfront push to the import of capital goods.
?Substantial revenue is foregone on account of the different export promotion schemes. In 2009-10, revenue foregone could continue to be significant at more than Rs 50,000 crore due to enlargement of the scope of schemes in the Foreign Trade Policy 2009-14 and improvement in the export promotion rates in the DEPB, coupled with the bottoming out of the export fall,? it said. It therefore, recommended weeding out unnecessary customs duty exemptions and streamlining export promotion schemes to reduce duty foregone which could include reduction of tariffs on all capital goods to a uniform 3% while simultaneously withdrawing the EPCG Scheme.
The Survey argued for tariff reforms for the merchandise sector, along with strengthening the export infrastructure and rationalisation of port service charges and altering the tax structure in accordance with specific duty levels in trading partner countries. It said a conducive environment be created by liberalising FDI in health insurance & rural banking.
