Boosting Exports

27 Jan 2020

Exports of a country are important for sustained economic growth. Many of the fastest growing economies of the past few decades have recorded high exports growth.

Exports have many positive effects on the domestic economy as well. Apart from increasing foreign exchange reserves, exports bring many benefits to the economy such as boosting competitiveness, promoting investments, generating linkages with the global economy, increasing employment, and also in upgrading skills.

CII, in partnership with the Government, Industry and other key stakeholders, works extensively to strengthen India’s exports status. As a part of this endeavour, CII has come up with several research reports, to facilitate a better understanding of India’s foothold in the exports segment across all key industries. It has also provided recommendations for the forthcoming Budget 2020-21 to promote the sector.

According to CII, exports are important enough to merit a national task force with representation from all line ministries as well as trade facilitation bodies. This could be led by a top Government wing such as the Prime Minister’s Office. With exports stagnant since 2011-12 and, on the other hand, many new opportunities coming up, a strong push can accelerate job creation and contribute to economic growth.

In this context, a High Level Advisory Group was formed on exports in 2019 which brought out several key strategies that India could adopt.

Promoting Existing SEZs – With the objective of attracting foreign investments and overcoming gaps in infrastructure, the Special Economic Zones (SEZs) Policy was announced in April 2000.

Currently there are 419 approved SEZs out of which 351 have been notified. As of 30 June 2019, 234 of these SEZs are operational. SEZs have attracted an investment of about INR 5 lakh crores, generating employment for more than 21 lakh persons. SEZs exported to the tune of INR 7 lakh crore in 2018-19.

In the current policy, as per the sunset clause on the Income Tax benefits to SEZ units, the units which become operational on or after 1st April 2020 will not get Income Tax benefits. The Committee suggests the extension of the sunset clause for another 5 years to boost exports.
The developer incentives and tax holidays could be extended to all SEZs approved by 31 March 2017, instead of to only those notified till 31 March 2017.
Reducing Cost of Export Credit – Government of India offers an interest rate equalisation scheme to MSMEs offering an interest rate subsidy of 5 percent on pre and post shipment credit. The buyers in the international markets do not differentiate between MSME exporters or large exporters, but go by quality, cost and credibility. Therefore, the same scheme could be extended. Also, the subsidy should be linked to global rates, instead of fixed 5 per cent.
Shipping Regulator – Exporters face hardships due to arbitrary increases in shipping freight, especially to USA, Canada and European markets. To regulate the shipping freight rates in a fair and transparent manner, the Government could consider announcing a National Shipping Regulatory Body on the lines of IRDA and TRAI.
Market & product specific targeted strategy for exports – The analysis presented in its report ‘Indian Exports – The Next Trajectory: Mapping Products and Destinations’ identifies key products that India can export to these top import destinations. The report can be accessed at along with the details of the country-wise products that India could look at for exports.

CII has come out with some specific recommendations keeping in mind the upcoming Budget:

Coastal Economic Zones (CEZ) should be accorded high priority in the proposed infrastructure spend of INR 102 lakh crores over the next 5 years.
To empower industrial clusters through building competitiveness, it is important to identify products with export potential, and strengthen industrial clusters where these goods are manufactured, along with related infrastructure and port connectivity.
Attracting FDI and integrating with Global Value Chains – The key global value chain opportunities could be identified and policies to attract investments could be looked at. The Budget could announce setting up a task force under the Department of Commerce to identify and strategize India’s participation in such global value chain opportunities in consultation with industry.
As far as market promotions go, there could be a special cell for market promotion. This could focus on the following:
Dealing with Non-Tariff Barriers
Tailored export strategies for top markets
Activities for product promotion and brand building
The government could look at announcing setting up centres in top international markets on the lines of UK Trade and Investment (UKTI), Buy USA, etc. for exports promotion.

With global trade expected to slow down, India needs to place special policy attention in the Budget to enable exports as a key engine of growth.