News Highlight
For the first time since February 2021, India’s goods exports shrank this October, dropping 16.7% from last year (and 16% from September 2022) to slip below $30 billion after a 20-month-streak above that mark.
Key Takeaway
- Most sectors were hit hard, such as engineering goods, pharmaceuticals and chemicals and employment-intensive gems and jewellery, textiles and handlooms.
- Six sectors recorded an uptick, with electronics goods being the only manufacturing segment.
- Imports grew 5.7% year-on-year, expanding the country’s trade deficit by over 50% to $26.9 billion.
Reasons for low export
- External situations
- The strong external headwinds are impacting consumption worldwide, which would also affect India’s exports.
- For example, the Russia-Ukraine war.
- Interest rate hikes
- The aggressive interest rate hikes by the US and Europe to tame runaway inflation are also weighing down global demand for merchandise.
- Fewer working days
- Fewer working days in the last month also lead to an export debacle.
- Export ban
- The curbs on exports of select steel products, iron ore and non-basmati rice and the ban on wheat to ease domestic inflation have also contributed to the export decline.
- Disruption of the supply chain
- Certain export sectors, including pharmaceuticals, rely on imported inputs.
- For instance, India sources 60-70% of its bulk drug requirements from China.
- The disruption of the supply chain also led to low export.
- Recession
- The Ukraine war has threatened to push major advanced economies into recession, high volatility in currencies and geopolitical tensions.
Export promotion schemes
- Export Promotion Capital Goods Scheme
- EPCG is a zero-duty scheme which allows the import of capital goods such as machinery for preproduction, production and post-production of export items.
- Remission of Duties or Taxes on Export Product
- The new scheme will be implemented in 2020 and will replace the existing Merchandise Exports from India Scheme (MEIS) and create a fully automated route for Input Tax Credit (ITC) in the GST to help increase exports in India.
- It is expected to adequately incentivise exporters by reducing duties paid on exports and will initiate the refund of various taxes to exporters.
- Duty-Free Import Authorisation (DFIA)
- DFIA is issued to allow duty-free import of inputs, fuel, oil, energy sources, and a catalyst required to produce the export product.
- The Directorate General of Foreign Trade, an agency under the Ministry of Commerce and Industry, using Public Notice, may exclude any product(s) from the purview of DFIA.
- Trade Infrastructure for Export Scheme
- The scheme would assist in setting up and upgrading infrastructure projects with overwhelming export linkages like the Border Haats, Land customs stations, quality testing and certification labs, cold chains, trade promotion centres, dry ports, export warehousing and packaging, SEZs and ports/airports cargo terminuses.
Content Source: The Hindu