Exports: Govt must pave the way in 2017

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Bikky Khosla | 03 Jan, 2017
Well, another year has come and gone. When the Indian export sector started the year 2016, it was going through one of the toughest phases in terms of growth. Overseas shipments had been in decline since December 2014. A recovery was eagerly awaited like never before, but the downward spiral continued for the first five months of the calendar year. It was finally in June that our exports growth returned to a positive territory, for the first time in one-and-a-half years. Compared to that, we are today in a far better shape. The worst is left behind and it seems we are on the verge of a new beginning.

A lot will depend, however, on how much effort the government puts to build on this recovery trend. For quite some time it seems that export is not at the top agenda of the government. Time and again, the Centre has pointed out that low global demand is the culprit behind India's dull export performance, which although true to some extent does not reflect the whole truth. Several recent studies show that our export competitiveness can be increased significantly by addressing the domestic challenges. In the past months, the Centre has taken some positive steps, such as to speed up clearances and processes and make it easier for exporters to access credit, but these measures by no way seem enough.

According to recent media reports, the Commerce Ministry has petitioned the Finance Ministry for substantial increase in annual fund allocations under the MEIS scheme, especially to help the labor-intensive sectors such as engineering products, leather, textiles and chemicals. I hope the Finance Minister, while presenting the next Budget, would not pay a blind eye to this issue. Our exporters, particularly the SMEs engaged in exports have long been suffering severely due to low global demand and their woes have doubled due to the recent demonetisation move. So with the Budget ahead, it is the right time to come forward with some much-needed financial assistance for the sector.

Meanwhile, in a welcome move Prime Minister Modi last week announced the enhancement of credit guarantee scheme for the MSME sector for loans up to Rs 2 crore. It is also encouraging that the scheme will from now cover loans given not only by banks but also by non-banking financial companies. It was also announced that banks would raise cash credit limit for small businesses to 25 percent from 20 percent. This cash booster shot will ensure that the SME sector will get a share of the benefits arising from the demonetisation-driven deposit mobilization by banks.

I invite your opinions.