export promotion capital goods (EPCG) scheme

COMMERCE Minister Anand Sharma has extended the interest subsidy and export promotion capital goods (EPCG) schemes by another year. Exporters engaged in labour-intensive sectors like handlooms, handicrafts, textiles, sports goods and food processing are allowed loans at 2 per cent cheaper interest rates. The EPCG scheme helps exporters upgrade their machinery through duty-free imports with the obligation to make exports eight times the value of the duty saved. The incentives will cost the exchequer less than Rs 1,300 crore.
India’s exports shrunk 5.7 per cent for the first time since 2009 in March this year but picked up slightly in April. Though official export targets are often ambitious, it would be quite creditable if Indian exports grow more than 10-15 per cent this year. Imports have risen faster than exports, resulting in an unacceptable trade deficit. The rupee has depreciated against the dollar but volume of trade may not go up significantly as Europe is on the edge due to a possible Greek exit and the US economic data is hardly encouraging. India will have to look for markets other than Europe and the US if it wants to push export growth to the targeted 20 per cent level this fiscal. Apart from African countries Asian nations such as Myanmar, China and Pakistan are attractive markets where increased trade may also improve bilateral relations.
In a difficult economic environment selling goods is hard. India has never been an aggressive exporter like China. Its growth is largely driven by domestic consumption. Producing world-class goods at competitive rates is a challenge which is difficult to meet in view of high interest rates, infrastructure bottlenecks and project delays. The government is under pressure to remove policy and other hurdles to fast growth. Aviation Minister Ajit Singh and Commerce Minister Anand Sharma are reportedly trying to soften political opposition to FDI in airlines and multi-brand retail. The RBI too may further cut interest rates at its review meeting later this month. These positive developments contributed to the sharp stocks rally, which lifted the country’s economic mood a bit on Wednesday.