About Us > Chairman’s Pen
November 8, 2016 will be remembered as a historical day in the annals of India’s monetary history. Prime Minister Narendra Modi announced that the higher denomination notes of INR 500 and 1000 would cease to exist as legal tender from that midnight. This sudden move is intended to directly attack black money and counterfeiting of notes which has been impacting the functioning of the formal sector of the economy for years.
Given the large informal sector in the country, a sudden withdrawal of higher denomination note has caused disruption in the economy and led to hold up problems. This was to be expected and it is felt that once the RBI and the country’s banking channel is able to replace the demonetized currency with the new currency, the “choking effect” will ease and the deflationary impact will be neutralized. While lauding this major initiative, it is important that the government does not remove its foot from the accelerator in curbing generation of black economy in the country. A lower black or illegal economy is likely to lead to greater tax buoyancy without the need for higher taxes, lower the cost of doing business and raise transactional transparency in the medium to long term.
In order to lessen the short term impact on our member’s ability to carry out foreign trade, the Government should look to quickly raise the cash withdrawal limits from Current Accounts and Open Cash Credit Accounts (OCC) to enable small businesses to get back on their feet at the earliest and revive the stalling that has happened. This will also lead to cash flow generation through the economy and dampen demand deflation. I am sure the Government is working on these lines and has strategized the steps that it will take in the days ahead.
The foreign trade sector has been looking up and even though the trade deficit has increased due to the increase in Gold imports, total exports seem to be northbound. Engineering exports has now signaled a clear reversal of the earlier continuous decline. Indian engineering exports retained its growth momentum for the third consecutive month reversing the negative growth observed in July 2016. The engineering exports moved up sharply to 14.10 percent from US$ 4.5 billion in October 2015 to US$ 5.11 billion in October 2016. The share of engineering exports with respect to total merchandise exports was roughly 21.7 percent in October 2016 as against 21.9 percent during September 2016. Cumulative engineering exports, however, declined by 0.54 percent for the first seven months of the current fiscal to USD 35.17 billion in Apr-Oct 2016-17 from USD 35.36 billion during Apr - Oct 2015-16.
Going ahead, apart from the short run impact of demonetization, the near stubbornness of industrial production to move up remains an area of concern. The Overall IIP Index, the standard measure for industrial output, stood at 179.5 in September 2016 as against 175.4 in August and 176.0 in July 2016. This couple with the inverted duty problem on a range of engineering products, protective measures on steel as also the possibility of MIP in the Aluminium does not augur well for the user industries and their exports. We believe that the Government must take a long term view of its industrial pricing policy and bring about a balance in the entire chain of products.
EEPC India continues with its export promotion programmes. In November 2016, we had two successful INDEE Exhibitions in Kenya and Peru and these were highly appreciated amongst the participants.
This week’s issue deals with our National Award Export Excellence Award winners, the 47th in its series. It is always a privilege to acknowledge the great work done by our award winners as well as those who competed in these Awards. We do hope that all our members will draw inspiration and strive for greater glory of the country and in branding our products abroad.