External sector prospects promising with export growth, world trade rising
With India’s export growth picking up sharply in recent months and world trade expected to grow at 4.2 per cent and 4 per cent in 2017 and 2018, respectively, from 2.4 per cent a year before, prospects for the country’s external sector seem bright, the Economic Survey has projected.
Addressing the current account vulnerability, though, requires raising the trajectory of export growth. “Here, an important lesson is the need for macroeconomic policy to support the development strategy,” the Survey said.
Supportive policies such as GST, logistics and trade facilitation policies of the government could help improve prospects further, it added.
Agreeing with the Survey’s suggestion on improving logistics and trade facilitation policies, the Engineering Export Promotion Council (EEPC) pointed out that logistic problems lead to high costs and impact the competitiveness of Indian products in the international market.
“The measures suggested in the Economic Survey like faster clearance for setting up of container freight stations , introduction of high end scanning equipment, online track and trace system would go a long way in improving India’s Logistic Index further,” said Ravi Sehgal, Chairman, EEPC.
Echoing the woes of exporters on the issue of non-reimbursement of embedded taxes, the Survey proposed that the GST Council should conduct a comprehensive review of embedded taxes arising from products left outside the GST (petroleum and electricity) and those that arise from the GST itself. “This review should lead to an expeditious elimination of these embedded export taxes, which could provide an important boost to India’s manufacturing exports,” it said.
According to exporters body FIEO, increased duty draw back rates (rates for reimbursing input taxes on exported products) which included embedded taxes need to be announced soon to help exporters gain back their competitiveness.
Exuding optimism for the future, the Survey said the behaviour of manufacturing exports and imports in the second and third quarters of this fiscal year had started to reverse. “The re-acceleration of export growth to 13.6 per cent in the third quarter of 2017-18 and deceleration of import growth to 13.1 per cent , in line with global trends, suggest that the demonetisation and GST effects are receding. Services export and private remittances are also rebounding,” the Survey observed.
India‘s balance of payments situation, which has been benign and comfortable since 2013-14, continued to be so in the first half of 2017-18, despite some rise in the Current Account Deficit (CAD) in the first quarter, with a relatively lower CAD in the second quarter.