The government should grant subsidies to crisis-hit exporters in the form of reduced taxes in the upcoming foreign trade policy to make India's exports sector more competitive, the Associated Chambers of Commerce and Industry has said.
"Subsidies need to be extended to Indian exporters by substantially reducing excise and local levies and other export duties," ASSOCHAM president Sajjan Jindal said in a paper submitted to commerce and industry minister Anand Sharma.
Suggesting a multi-pronged strategy for accelerating India's export competitiveness, ASSOCHAM urged that the minimum alternate tax on export proceeds should be done away with, as the government refunds it to the exporters concerned and makes virtually no money on it. The tax thus only creates needless bureaucratic hassles Jindal said.
In its paper, ahead of the foreign trade policy for the next five years to be announced later this week, the chamber has emphasised the need for subsidising exports to create economies of scale such as in China, to create space for Indian products in overseas markets, particularly those of Africa, Latin America, Nepal, Sri Lanka, Bhutan, Burma, Bangladesh and Pakistan.
India's exports sector has seen a contraction for nine straight months starting from October 2008. "The country needs foreign exchange to correct trade imbalances in its exports and imports," the paper said.
The chamber has also urged the government to allocate funds for expanding the capacity of major ports. "This is because majority of India's ports are over-congested and no capacity expansion is taking place in many of them," it said.
Export logistics is another matter of concern, according to ASSOCHAM. "Freight rates are too high for exports as there are different slabs for different products. The freight rate slabs need to be rationalised."
The industry lobby has further sought the intervention of the Reserve Bank of India (RBI) to ease the credit squeeze. The RBI has to ensure that commercial banks and other financial institutions give enough credit to exporters, ASSOCHAM said.