Eco Survey for more stimulus to export sector

Recovery prospects in global markets are still fragile, it argues

PTI | February 25, 2010

The pre-budget Economic Survey, presented in parliament on Thursday, favoured providing further stimulus for the exports sector, arguing that the recovery prospects in global markets are still fragile.

It said that despite some improvement in global trade environment, the downside risks makes it imperative for the government to reform policies concerning imports as well.

"The downside risks for world and the Indian trade lie in the fact that though the fall has been arrested, both output and trade recoveries are still fragile given the fact that the recovery has been pumped up by the stimulus given by different countries, including India," the Survey said.

Amid the debate on withdrawal of the stimulus, including speculation of a possible across-the-board roll back of cuts in excise duty and service tax, the document suggested further reduction in excise for export oriented industries.

For the merchandise sector, some fundamental policy changes are needed "...these include further tariff reforms by lowering the peak duties (custom) from the present 10 percent to 7.5 percent, reductions of tariffs on all capital goods to a uniform 3 per cent and further reduction in excise duties to make exports and industry competitive."

The government had cut excise duty from 14 per cent to eight per cent and service tax from 12 percent to 10 percent in the wake of the global financial slowdown.

India's exports, after falling for 13 consecutive months since October 2008, turned positive from November 2009. But in April-December period, exports were down by 20.3 percent.

However, the Survey pointed out that the early signs of pick-up are due to low base and the export value is even lower than the absolute value of the pre-crisis period.

It also expressed concerns over the leading economies like the US resorting to protectionist measures.

"The high employment rates in some developed countries forcing even world leaders like the US to resort to protectionist measures, as in the case of the recent tax breaks for companies giving jobs in the US, could give wrong signal," it said.

The Survey further said that the extraordinary financial stimulus given by different countries, including India, have contributed to the recovery.

Imports growth of some of India's trading partner like China, Hong Kong and Japan were encouraging in December 2009.

While China's imports from India grew by 71 percent in December 2009, Japan imports went up by 3 percent. Growth in Hong Kong imports from India turned highly positive at 58.5 percent.

"Even in case of the US, which is still registering negative import growth, the extent of negative growth has become less, with imports from India growing at (-) 10 percent in November 2009," it said.



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