BUDGET 2018: Exporters likely to get a budget boost
The Economic Survey, 2018, pins its hopes on exports, which are expected to soar higher than 7 per cent in the coming few years. The blue-eyed boy of this economic growth story is likely to gain some benefits on job creation, in the Union Budget this year.
The Survey, meant to be a roadmap for the government ahead of the Budget, have projected a 4 per cent growth in global trade in 2018.
Enthused with optimism, Ganesh Kumar Gupta, President, Federation of Indian Exports Organisation (FIEO), said that such growth in global trade would definitely augur well for Indian exports.
“Whenever global trade has done well, Indian exports have posted many encouraging results,” said Gupta, who represents the largest trade organisation for exporters in the country.
Gupta, however, pointed out that the budget should look into the various “challenges faced by the export sector.”
These include losing competitiveness in global trade due to GST, loss of competitiveness of labour-intensive sectors, constant appreciation of Indian rupee, less than flexible labour laws, need of skilling and improvement in logistics and infrastructure, Gupta said.
The FIEO chief said that the Economic Survey has rightly recognized that embedded taxes arising from products left outside GST (petroleum and electricity) and from those, that arise from inverted duty structure with no duty on the final product, needs to be compensated.
Earlier, the government had initiated relief measures for the exporters by allowing them to refund credits. Despite these measures the government – both Union and the States – are sitting on a kitty of more than Rs 16,000 crore in terms of unclaimed inter-state GST that exporters are subject to.
Earlier, exporters were not subjected to any indirect tax to ensure competitiveness of their goods in the export market. The scenario had changed with the implementation of GST from July 1, 2017.
“The Union Budget should announce a policy decision for factoring these embedded taxes through the duty drawback route,” Gupta said.
Currently, the government is already paying a small duty drawback to exporters, any further hike in duty drawbacks would work as a suitable boost for the export sector.
During pre-budget consultations with the finance minister, the export industry have also sought a 100 per cent tax deduction on expenditure incurred by the industry on imparting skills and on overseas marketing.
“The export sector would be one of the major job creators as global trade improves,” said Sanjeev Sanyal, principal economic adviser to finance ministry. The Survey also recognised the sector as one of the twin-engine of growth that drove the Indian economy after 2000.
According to finance ministry sources, the focus of the Union Budget this time would be on job creation, including export sector, by providing fiscal support to employment-intensive export sector on priority.
The Economic Survey this year have also presented evidence from a small study saying that despite large export incentives, export of manmade fabrics (synthetics) have picked up very slowly.
Such incentives had also not contributed to improving exports of other textile items like cotton and silk, and thus disproportionately benefiting the sector, the Economic Survey said.
On the basis of this finding from the Survey, Finance Minister Arun Jaitley, is also likely to tinker with the manner in which fiscal assistance is disbursed to exporters.
The export sector is presently awaiting clearance on legal issues requiring amendment on GST Laws, including an exemption from IGST on imports and inputs required for re-exports.
The sector has also framed a comprehensive drawback scheme for MSMEs to provide a refund of GST and Customs Duty, but the procedural changes to allow GST refund need to be addressed through the Budget/Finance Bill.
Since India is a major global agro-commodity exporter, a trade that has declined in the last two years, the Union Budget is likely to focus on this sector too.
“With a view to double farmers’ income, the Budget should allocate substantial fund for backward and forward linkages in agriculture including cold chains and warehouses so that we can build on a stable agri policy, which is likely to be announced soon,” said the FIEO President.