Seize the export opportunity

The Government of India has set an ambitious target of reaching $ 400 billion in exports for the current year. With India achieving nearly a third of its annual target in the first four months of 2021-22, $ 400 billion seems to be within the reach.
Seize the export opportunity
 The Government of India has set an ambitious target of reaching $ 400 billion in exports for the current year. With India achieving nearly a third of its annual target in the first four months of 2021-22, $ 400 billion seems to be within the reach. 

At present, global value chains are in flux and India can seize the opportunity by adopting multifold strategies to promote exports. Government's efforts to boost manufacturing, focus on new and existing overseas markets, and simplify procedures have enhanced the competitiveness of Indian industries. According to Cushman & Wakefield’s 2021 Global Manufacturing Risk Index (which assessed the most advantageous locations for global manufacturing among 47 countries), India has overtaken the US to become the second-most sought-after manufacturing destination globally, driven mainly by cost competitiveness. This augurs well for exports. 

To bolster exports, the Government of India has announced the rates of rebate under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme. RoDTEP aims to reimburse local taxes, coal cess, mandi tax, electricity duties and tax on fuel used for transportation incurred by exporters, which are not exempted or refunded under any other existing scheme. Though RoDTEP rates are significantly lower compared with the earlier Merchandise Exports from India Scheme (MEIS) for majority of the products/sectors, the notification of RoDTEP rates (which remained in limbo for long) at least gives clarity to the stakeholders to adequately price their products in the export markets. 

Through the RoDTEP, the government has largely tried to cover employment-oriented sectors such as textile, agriculture, automobile, plastics, electrical/electronics, machinery, etc. However, industries such as pharmaceutical and steel have been excluded from the scheme. Experts believe that by keeping iron and steel – the primary inputs of engineering goods – out of the purview of RoDTEP, the efficacy of the scheme has been reduced. EEPC India has already requested the Centre to relook at the rates to give a full rebate on the taxes.

At present, India’s export-to-GDP ratio is mere 17 per cent, which is too low compared to competing countries like Thailand (at 66 per cent), South Africa (at 27 per cent), etc. Nearly 80 per cent of India’s exports are from only 21 chapters of the Harmonised System (HS) of codes for classifying goods. The remaining 78 of 99 HS chapters lie underused. For export-to-GDP ratio to rise, India will have to increase its product range in the export kitty. RoDTEP can be a tool to do this, as it expands the export promotion coverage to include around 8,500 tariff items as against inclusion of only around 4,900 tariff items under MEIS.

Already economy seems to be on a path of revival. Engineering exports hit all time high at $ 9.14 billion in July 2021, led by strong demand from the US, Europe and the UAE. With the world economy literally booming, it is an opportune time for India to increase its share of manufactured exports in the world from 1.5 per cent to 3 per cent.

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