Short-term package to bail out exporters soon
The Financial Express, February 06, 2009, Page 3
Even as it is hoped that the recently announced stimulus packages would help revive the economy from June onwards, the government on Thursday, while expressing concern over job losses in the exports sector, said a short-term package for exporters hit by the demand slowdown in major markets in the West, would be announced soon.
“Something will come, but it is going to be ad hoc,” a senior official said, adding the package for exporters is likely to be announced before the month end or before the Election Commission’s code of conduct sets in before the general elections expected in April.
On the cards are increasing drawback rates for employment-intensive sectors (like textiles, leather and marine products), making available foreign currency loans to the import-dependent gems and jewellery sector, refunding service tax and extending export obligation period under various schemes (like the export oriented unit scheme, advance licensing scheme and export promotion capital goods scheme), official sources told FE. But what would finally be given to exporters will be a “political call”, they added.
According to commerce ministry estimates, around 15 lakh workers in export units are likely to lose their jobs by March this year. The government is considering proposals to increase the duty drawback rates by an average of 3%. Currently, the weighted average of drawback rates is 6-7%.
Exports in January had shrunk by 22% in dollar terms over last year, the worst showing in this fiscal so far. The downward trend is expected to continue and total exports for 2009-10 are likely to shrink by 5.88% to $160 billion from the $170 billion, likely to be achieved in 2008-09. The initial exports target for 2008-09 was $200 billion.
Meanwhile, the government forecast that the positive impact of the two stimulus packages (announced in December 2008 and January 2009) on the economy would begin to show from June onwards. “By June we will have turned the corner and start to grow. We may not grow at the same pace as we did between 2004 and 2008 but there will be a definite improvement,” commerce secretary GK Pillai said here at a CII function.
The GDP growth rate for this fiscal is pegged at 7% less owing to the global financial crisis, a sharp fall in the country’s exports and weakening domestic demand. The economy had grown at 9% or more during the last three years.
Pillai said the focus of the stimulus packages on infrastructure, housing and automobile sectors was now slowly beginning to show. He said the first indication of improvement in growth would be seen in the housing sector. “We have seen almost overwhelming response to that and people are now slowly starting to invest,” he said.
In the stimulus packages, the government had cut excise duty across the board by 4% and said it would pump in Rs 20,000 crore as additional non-plan expenditure to boost the economy. In the package, tax refunds to exporters through schemes like duty drawback were increased.
Pillai said the farm sector, which accounts for almost a fifth of the GDP, would be the driving force behind the revival of the economy. He said the agriculture sector might grow by over 4% due to the good monsoon this year and the higher remuneration that the farmers are getting now.
“We have about one lakh tobacco farmers in Karnataka and Andhra Pradesh. The prices which they have got for this year is Rs 1,000 crore more than what they have got last year. Similar situation prevails over whether it’s rice farmers, wheat farmers (as they are also getting) same level of additional income,” he said.
The government has hiked the minimum support price for wheat by 8% to Rs 1,080 a quintal and rice to Rs 900 a quintal for the common variety (including bonus) from Rs 745 from last year.
While the Prime Minster’s Economic Advisory Council expects the farm sector to grow only a 2%, the agriculture ministry had in November estimated the sector would register an over 4% growth rate in 2008-09. In 2007-08, the farm sector had grown at a decent 4.5% after growing at a poor 2.5% during the 10th Plan period (2002-07).
•Around 15 lakh workers in export units are likely to lose their jobs by March this year
• Exports in January had shrunk by 22% in dollar terms over last year, the worst showing in this fiscal so far
• The downward trend is expected to continue and total exports for 2009-10 are likely to shrink by 5.88% to $160 billion from the $170 billion, likely to be achieved in 2008-09
• The govt is considering proposals to increase the duty drawback rates by an average of 3%.
• The govt forecast that the positive impact of the two stimulus packages, announced in December 2008 and January 2009, on the economy will begin to show from June onwards
The Financial Express, February 06, 2009, Page 3
Even as it is hoped that the recently announced stimulus packages would help revive the economy from June onwards, the government on Thursday, while expressing concern over job losses in the exports sector, said a short-term package for exporters hit by the demand slowdown in major markets in the West, would be announced soon.
“Something will come, but it is going to be ad hoc,” a senior official said, adding the package for exporters is likely to be announced before the month end or before the Election Commission’s code of conduct sets in before the general elections expected in April.
On the cards are increasing drawback rates for employment-intensive sectors (like textiles, leather and marine products), making available foreign currency loans to the import-dependent gems and jewellery sector, refunding service tax and extending export obligation period under various schemes (like the export oriented unit scheme, advance licensing scheme and export promotion capital goods scheme), official sources told FE. But what would finally be given to exporters will be a “political call”, they added.
According to commerce ministry estimates, around 15 lakh workers in export units are likely to lose their jobs by March this year. The government is considering proposals to increase the duty drawback rates by an average of 3%. Currently, the weighted average of drawback rates is 6-7%.
Exports in January had shrunk by 22% in dollar terms over last year, the worst showing in this fiscal so far. The downward trend is expected to continue and total exports for 2009-10 are likely to shrink by 5.88% to $160 billion from the $170 billion, likely to be achieved in 2008-09. The initial exports target for 2008-09 was $200 billion.
Meanwhile, the government forecast that the positive impact of the two stimulus packages (announced in December 2008 and January 2009) on the economy would begin to show from June onwards. “By June we will have turned the corner and start to grow. We may not grow at the same pace as we did between 2004 and 2008 but there will be a definite improvement,” commerce secretary GK Pillai said here at a CII function.
The GDP growth rate for this fiscal is pegged at 7% less owing to the global financial crisis, a sharp fall in the country’s exports and weakening domestic demand. The economy had grown at 9% or more during the last three years.
Pillai said the focus of the stimulus packages on infrastructure, housing and automobile sectors was now slowly beginning to show. He said the first indication of improvement in growth would be seen in the housing sector. “We have seen almost overwhelming response to that and people are now slowly starting to invest,” he said.
In the stimulus packages, the government had cut excise duty across the board by 4% and said it would pump in Rs 20,000 crore as additional non-plan expenditure to boost the economy. In the package, tax refunds to exporters through schemes like duty drawback were increased.
Pillai said the farm sector, which accounts for almost a fifth of the GDP, would be the driving force behind the revival of the economy. He said the agriculture sector might grow by over 4% due to the good monsoon this year and the higher remuneration that the farmers are getting now.
“We have about one lakh tobacco farmers in Karnataka and Andhra Pradesh. The prices which they have got for this year is Rs 1,000 crore more than what they have got last year. Similar situation prevails over whether it’s rice farmers, wheat farmers (as they are also getting) same level of additional income,” he said.
The government has hiked the minimum support price for wheat by 8% to Rs 1,080 a quintal and rice to Rs 900 a quintal for the common variety (including bonus) from Rs 745 from last year.
While the Prime Minster’s Economic Advisory Council expects the farm sector to grow only a 2%, the agriculture ministry had in November estimated the sector would register an over 4% growth rate in 2008-09. In 2007-08, the farm sector had grown at a decent 4.5% after growing at a poor 2.5% during the 10th Plan period (2002-07).
•Around 15 lakh workers in export units are likely to lose their jobs by March this year
• Exports in January had shrunk by 22% in dollar terms over last year, the worst showing in this fiscal so far
• The downward trend is expected to continue and total exports for 2009-10 are likely to shrink by 5.88% to $160 billion from the $170 billion, likely to be achieved in 2008-09
• The govt is considering proposals to increase the duty drawback rates by an average of 3%.
• The govt forecast that the positive impact of the two stimulus packages, announced in December 2008 and January 2009, on the economy will begin to show from June onwards
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