India’s exporters could face challenges with continued appreciation of the rupee, Ajay Sahai

The Dollar Business

The industry body FIEO forecast challenges for the exporters if the rupee continued appreciating in the future. Global trade is expected to grow at 2.4% in 2017, and there is likelihood of extreme instability in currencies. Though the rupee has gained against the dollar, and since competing currencies of other countries could depreciate further, rupee’s appreciation could hurt India’s competitiveness in its labour intensive business units especially sectors such as agro-products industries, handloom, leather, textiles and marine products. The government should support these sectors based on their forex returns so that those companies handling large imports, which will be benefitted with the appreciation are provided less support than those having little or no support.

Speaking at a press meet called on Thursday at Delhi, FIEO President GK Gupta and Director General Ajay Sahai welcomed the GST and also pointed out several challenges that exporters could face with its implementation.

Terming the government’s projection of meeting the export target of $900 billion by 2020, as unrealistic, they suggested that the government could prune the target to $700 bn given the current global scenario that reflected in India’s dismal exports in the last couple of years. "If we are looking at an export of USD 900 billion which was initially in the foreign trade policy, we record a compounded annual growth rate of around 27 per cent and this is definitely a very challenging figure so I am pretty sure that when the mid-term foreign trade policy review is done, the government may revisit the export target also and looking into the global factors they may reduce the export target too. Instead they could be looking at an achievable target of shipments growing at a CAGR of 15% which will lead to exports clocking $700-750 bn by 2020,” FIEO Director General Ajay Sahai told reporters in Delhi.

The Commerce Ministry has agreed to the trade body’s suggestion to announce the mid-term review of the FTP coinciding with the roll out of the Goods and Services Tax slated from July 1.

Addressing the refund mechanism concerns under GST, they said under the present mechanism the government issues an acknowledgement within 3 days of the exporter filing the claim and releasing 90% of the claim amount within 7 days, however this could be delayed as under the refund rules, the interest on delayed payment would be due only after 60 days. Gupta said they had suggested that the government should provide interest on the delayed refund after 10 days instead of 60.

Similarly under GST, the refund mechanism, payment of GST has to be done first and its refund would be done subsequently and not exempting exporters from duties and taxes straightaway. Gupta said, this could lead to the exporters putting up with 2% worth of losses on the export value if the present exemption is not brought forward in the GST. The export sector would be losing competitiveness by about 2% and the same needs to be taken care by the government.  

The FIEO had listed export items that figured in the top 200 of global imports and said that the government could provide additional support to them so that India’s global exports share could increase by 0.5% adding over $80 billion to the exchequer.