India Gives Tax Incentive to Exporters as Global Risks Threaten Shipments
By Unni Krishnan and Kartik Goyal - Aug 23, 2010 4:53 AM PT
bloomberg.com
India will continue with a plan to refund taxes to exporters in a bid to boost overseas sales, as risks to global economic growth threaten shipments.
“The global recovery so far has been fragile,” Trade Minister Anand Sharma said at a press conference in New Delhi today. “The uncertainty surrounding exporters’ prospects continues to linger.” He said the tax giveaways will cost the government 10.5 billion rupees ($225 million).
India’s merchandise exports grew in July at the slowest pace in six months as demand for textiles and tea weakened in the U.S. and Europe, which account for 40 percent of the nation’s overseas sales. The U.S. economy grew at a slower-than- estimated 2.4 percent annual pace last quarter, while investor confidence in Germany dropped to a 16-month low in August.
“We are not out of the woods as yet,” said A. Shaktivel, president of the Federation of Indian Export Organisations. “There are sectors like textiles, leather and handicrafts which need hand holding by the government.”
Refunds of taxes such as customs duties, under the government’s Duty Entitlement Pass Book Scheme, will be provided until June 2011, Sharma said today. The government will also extend until March 2012 duty-free import of capital goods and offer loans at cheaper rates to exporters of engineering goods, textiles and leather.
Stocks, Rupee
Financial markets were little changed today. The Bombay Stock Exchange’s Sensitive Index closed at 18,409.35 at 3:30 p.m. in Mumbai. The rupee traded at 46.65 against dollar.
Merchandise exports account for about a fifth of India’s $1.3 trillion economy and are vital to help accelerate the nation’s economic expansion, Shaktivel said. Prime Minister Manmohan Singh’s government is aiming to spur growth to 8.5 percent in the financial year ending March 31 from 7.4 percent in the previous year.
India is trying to reduce its dependence on U.S. and European Union markets and is negotiating free-trade agreements with Japan, Malaysia and the European Union, Sharma said. India signed a free-trade pact with the Association of Southeast Asian Nations last year.
“These initiatives will provide new avenues for expansion of our exports,” the minister said. “We shall arrive at balanced and optimistic outcomes in these agreements over the next one year.”
Exports expanded 30.1 percent to $68.6 billion in the four months through July, according to India’s commerce ministry. Sharma today said exports will touch the targeted $200 billion by March 2011, a 12 percent increase from the previous year.
To contact the reporter on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net; Kartik Goyal in New Delhi at kgoyal@bloomberg.net |
