To make the role of exports effective in the economy, many things have to be taken care of.
In order to make the role of exports effective in the economy, many things have to be taken care of. There is a need to reduce the cost of electricity for industries and remove other hurdles including labor laws. It is also necessary that the government should finalize the negotiations of free trade agreements with countries like the European Union, Australia, Britain and the United Arab Emirates at the earliest.
There have been signs of increasing exports in the recent past. This is a matter of relief in terms of improving the economy. But two major challenges remain on the export front. Firstly, to achieve the export target of 400 billion dollars in the financial year 2021-22 and secondly, to increase India’s share in global exports. Significantly, according to the report of the World Trade Organization (WTO), India’s position in global exports remains weak. India’s share in total global exports is less than two percent.
Global reports on exports have repeatedly stated that India’s export scenario remains lacking in quality and global standard domestic manufacturing. Transportation and supply related problems also remain. There is a lack of coordination between the central and state governments for exporters. There is a problem of expansion of the international market for Indian products. There is lack of effective implementation of Emergency Credit Facility Guarantee Scheme and Production Based Incentive Scheme. There is also a problem of identification of new and modern products of export. Amidst these various export challenges, there is an important need to mobilize exports from the country.
According to the data released by the Ministry of Commerce and Industry, exports of products from India stood at $ 33.14 billion in August this year, which is 45.17 percent higher than the same period last year (2020). India’s exports during April-August in the current financial year (2021-22) stood at $163.67 billion, an increase of 66.92 per cent over the same period a year ago and 22.93 per cent higher than the same period of 2019. The increase in exports for five consecutive months is not only indicating a better economy, but it is also a sign of stability in exports. High demand in petroleum products, engineering goods, pharmaceuticals and gems and jewelery has led to a major boost in exports.
It is worth noting that to promote the ‘Make in India’ campaign, the production based incentive (PLI) scheme has started increasing exports. For example, a year ago the country used to import mobile phones worth $8 billion. Now exporting mobile phones worth three billion dollars. If we look at the current export scenario, we find that exports to various developed and developing countries of the world including America, Europe, United Arab Emirates are increasing rapidly.
It is also no small matter that during the Corona period, when many food exporting countries of the world fell behind in exporting agricultural commodities due to the disruption of the epidemic, then India took this opportunity to increase agricultural exports. There is no doubt that the possibilities of export of various products are increasing due to the stimulus packages given in different countries of the world during the Corona period and the fast track of the markets in the world. Various stimulus packages given in America have become equal to twenty seven percent of its gross domestic product (GDP). The World Bank estimates that the world economy will grow at a rate of 5.6 percent in 2021. According to Morgan Stanley, the world economy can grow at the rate of 6.4 percent, the US economy at 5.9 percent, the euro economy by five percent and the UK economy at 5.3 percent. This will also increase the speed of exports from India.
There are many other reasons for the boom in exports from India. Production did not come to a standstill as the manufacturing sector was kept out of lockdown amid the second wave of infections. Corporate tax rates have been reduced in the country. In many key sectors, PLI schemes have, for the first time, promoted production rather than raw materials. Labor laws have been simplified. The definition of MSME has been reformed so that many medium sized units also get the benefit of MSME. These steps helped in increasing the size of the domestic industry and also increased exports. The liberalization of foreign direct investment (FDI) norms for foreign companies helped them to start operations in India and increase exports from here to other countries. Improvements in infrastructure helped India to connect to the global value chain and made it easier for exporters making goods in India to reach remote parts of the country in search of cheap labor. This also strengthened the perception around the world that India is a good destination for product exports.
In order to make the role of exports effective in the economy, many things have to be taken care of. There is a need to reduce the cost of electricity for industries and remove other hurdles including labor laws. It is also necessary that the government should soon finalize the negotiations of Free Trade Agreements (FTAs) with countries like European Union, Australia, UK and United Arab Emirates. This will lead to a rapid increase in the country’s exports. It is also necessary to improve the regulatory and business environment in the country for export competitiveness. Speed up GST refund. Increase the scope of GST. Along with this, the tax system should also be simplified and integrated. Just as new schemes are being implemented for export of products, similarly a new scheme should be introduced for export of services in which non-refundable taxes and duties related to export of services should be ensured. Such a scheme will increase the competition among the service exporters of the country, service exports will get a boost and employment opportunities will also increase.
It is also necessary that special efforts should be made to increase exports from export units operating in Special Economic Zones (SEZs), Export Oriented Units (EOUs), industrial towns and rural areas. Arrangements should be ensured to provide loans to exporters at affordable rates and on time. The government has to strategically deal with export difficulties like non-tariff barriers of other countries, currency fluctuations, difficulty in dealing with customs officials and service tax. It is also necessary to improve the regulatory and business environment in the country for export competitiveness. Speed up GST refund. Increase the scope of GST. At the same time, the tax system should also be simplified and integrated.
Recently, the speedy implementation of two important schemes announced by the government to encourage exporters can give a boost to exports. One of these schemes is the ‘Urte Stars’ scheme to encourage export potential micro, small and medium industries (MSMEs) and the other scheme is the Remission of Duties and Taxes on Export Products (RODTEP) scheme. Under this, the exporters who manufacture eight and a half thousand products for the next three years by the government will be given refund of the tax paid to the central, state government and local bodies. The special thing is that the tax exemptions given under RoDTEP are in accordance with the rules of the World Trade Organization and no objection can be raised on them.