Focus on working capital for exporters

n its mid-term review of the foreign trade policy, the government has offered incremental sops to exporters in specific sectors such as leather, textiles and agriculture and eased procedure.

Course corrections — an additional 2% incentive for labour-intensive sectors under the Merchandise Exports from India Scheme and the Services Exports from India Scheme (in the form of freely transferable duty scrips that can be used by exporters to pay customs duties), extending the validity of duty scrips to 24 months from 18 months, and self-certification of documents wherever required — to perk up exports are fine.

Anew trade analytics division for data-based policy action is also welcome. But what about exporters’ working capital shortage?

The incentives are estimated at around Rs 8,450 crore. More than sops, exports need lower transaction costs, less red tape in clearances, efficient and functional infrastructure and rational labour laws.

Also, the country’s performance in crossborder trade as per the World Bank Ease of Doing Business report is poor, calling for vast improvements in trade facilitation. Exports fell for the first time in 14 months in October, owing to delays in refunds that resulted in a working capital crunch for exporters following the adoption of the goods and services tax. With the goods and services tax network up and running, exporters must be given refunds swiftly, within a month at the most. Exporters should also encourage their vendors to file goods and services tax returns to be able to claim their refunds.

Sustained growth in exports also depends on the pace of global recovery, and the US, EU and Japan are growing. Worries of a stronger rupee hurting exports might not have a long life, as the advanced countries withdraw from a policy of extra-easy money, and some footloose capital flows out of India.

This piece appeared as an editorial opinion in the print edition of The Economic Times.
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via Focus on working capital for exporters

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