Even as the COVID-19 pandemic throws everyday life into turmoil (as per the latest estimates by the World Health Organization (WHO), India has 151 confirmed cases and three deaths so far), there are faint glimmers of hope amidst all the gloom. The RBI’s trade data for the month of February revealed that contrary to all expectations, merchandise exports recovered slightly after contracting for six straight months. While the Federation of Indian Export Organizations (FIEO) and other trade bodies have cautioned that the true effects of the COVID-19 pandemic may be visible only from March onward, the news of the export recovery came as a small beam of hope for India’s beleaguered exports sector. In further good news, the Union Cabinet also approved the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme to reimburse taxes and duties to exporters. This scheme will lend support to exporters worried about the impact of the global trade slowdown because of the COVID-19 pandemic. FIEO has reportedly asked for further government assistance and intervention to help exports survive the coronavirus crisis, even as exporters have warned that high volumes of order cancellations and delays may lead to a significant rise in defaults of bank loans. Prime Minister Narendra Modi has announced the setup of a Task Force under Finance Minister Nirmala Sitharaman to guide India’s response to COVID-19. As the outbreak spreads and more and more businesses and individuals are affected by it, the Task Force’s role will become increasingly important to boost morale and keep up hope in the time of the coronavirus.
Trade Update
21ST MARCH
# 63
Merchandise exports showed a mild recovery in February after contracting for six consecutive months amid fears that the COVID-19 pandemic could pause the recovery process. Exports rose 2.9% on-year in February while imports grew at a slower pace of 2.5% leading to a narrowing of trade deficit at $9.8 billion in the month, data released by the Commerce and Industry Ministry showed on 13th March. “Despite global challenges, Indian exports once again entered into growth trajectory on Feb 20 after a gap of 6 months. Exports of electronic goods and chemicals grow at 37% and 16% respectively,” Commerce and Industry Minister Piyush Goyal said in a tweet.
With a view to boost the country’s dwindling outbound shipments, the government on 13th March approved a scheme for reimbursement of taxes and duties to exporters. The decision to approve the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme was taken in a cabinet meeting chaired by Prime Minister Narendra Modi. The scheme is expected to cost Rs. 50,000 crore to the exchequer. “The reimbursement of taxes such as duty on power charges, VAT on fuel in transportation, farm sector, captive power generation, mandi tax, stamp duty on export documents, CGST and compensation cess on coal in power production, central excise duty on fuel used in transportation would make Indian products competitive in global markets,” said Piyush Goyal, Commerce and Industry Minister.
Exporters have lined up applications seeking a licence to ship restricted Active Pharmaceutical Ingredients or APIs. The government has received as many as 200 applications from pharma firms in a span of 10 days after it tightened their export norms. “We have received about 200 licence applications. We will examine them,” said an official in the know of the development. The government, on 3rd March, restricted the exports of 26 API and formulations, including paracetamol and vitamins B1, B6 and B12 in order to ensure there is no shortage of drugs in India due to the lockdown in China’s Hubei’s province, the epicenter of the coronavirus outbreak, and a major source of these raw materials.
The COVID-19 pandemic has taken the exporting community by storm. “The situation is grave. Many factories across sectors have started feeling the pinch. While the Government is taking all measures to contain this serious issue, the industry needs government support and immediate intervention to tide over the crisis,” said Israr Ahmed, Regional Chairman, Federation of Indian Exports Organisation (FIEO). FIEO has appealed for relaxation of NPA norms, extension of export realization period from 270 days to 360 days, for direction to banks to facilitate faster clearance of credit applications, facilitate instant refund of ITC/IGST claims, extension of interest equalization at 5% to all sectors, deferment of ESI payments up to three months and advance tax dues at least till 30th September, 2020 and possible consideration for extending the PMRPY scheme incentive of 8.33% for a period of six months till exporters tide over the crisis.
Exporters have cautioned the government over higher defaults of bank loans because of cancellations and the reduction of orders caused by the coronavirus outbreak. “Near lock down and quarantine in many advanced economies has given a jolt to demand and added to the rising uncertainties with looming recessions in a large number of economies with consequent fallouts”, Sharad Kumar Saraf, President of FIEO, said.
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