The government announced export incentives of around Rs 8,500 crore for labor-intensive sectors and services on Tuesday as it sought to blunt the impact of the goods and services tax (GST) and push shipments from the country amid signs of a pickup in global demand.
Incentives under the Manufacturing Exports from India Scheme (MEIS) and Service Exports from India Scheme were targeted at labor-intensive sectors such as agriculture, leather, carpets and marine products and came days before the Gujarat elections, where the launch of GST and the impact on small businesses has emerged as a key issue.
The government has also been facing criticism from exporters over tardy refunds and a reduction in drawback rates, meant to offset the impact of taxes, and by doubling incentives to 4 percent under MEIS the Centre is hoping to address the concerns and shield Indian businesses from the adverse impact of competition.
The incentives of Rs 8,450 crore that will be applicable from November include higher benefits of Rs 2,743 crore offered to readymade garments and made-ups a few days ago. All put together, there will a 34 percent rise in sops from the existing Rs 25,000 crore.
At the same time, there is an effort to reorient the focus with a thrust on the farm sector, where a new export policy is in the works, while encouraging Indian companies to be part of global and regional value chains at a time when multinationals such as Apple depend on inputs and expertise from across the globe to manufacture iPhones.
“The policy aims to promote exports by simplification of processes, enhancing support to high employment sectors, leveraging benefits of GST, promoting services exports, monitoring exports performance through state-of-the-art analytics,” commerce & industry minister Suresh Prabhu said while unveiling the mid-term review of the five-year policy that was launched in April 2015.
Some of the so-called thrust areas — such as product and country diversification — have been on the wish list of every trade minister although the progress has been slow as the US, Europe, and the UAE remain the dominant destination for Indian exports. But the government is hoping to leverage the WTO’s trade facilitation agreement to make life simpler for exporters and importers, with Prabhu giving special emphasis on ease of trading borders, where India has not fared well. Along with a push to improving the logistics network, the government is hoping to address oft-repeated concerns over the high cost of doing business in the country, which makes exports less competitive in the global market.
There was an emphasis on easier compliance burden as the government announced a new self-ratification scheme to allow import of duty-free inputs for export production with a view to expediting export of new pharma, chemicals, textiles, engineering and high technology goods.
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