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India's merchandise exports achieved year-on-year growth for the fifth straight month in January 2017 when it recorded 4.32 percent growth. Export was recorded at $22.1 billion during the first month of 2017 as against $21.2 billion during the same month last fiscal. The sharp rise in international crude prices led to higher realisation of petroleum exports while exports of engineering goods and readymade garments also played a supportive role in the growth of overall merchandise export. Cumulative value of exports during April-January 2016-17 rose to $220.9 billion as against $218.5 billion during the same period last year, registering a growth of 1.09 percent. Trade deficit narrowed down to $9.8 billion in January 2017 from $10.3 billion in December 2016 but it was higher than $7.7 billion of deficit conceded during January 2016. Cumulative figures also reflected the same trend as trade deficit for April-January 2016-17 was estimated at $86.4 billion which was 19.8 percent lower than that of the same period last year.
India’s engineering exports also grew for the sixth consecutive month to January 2017 and outperformed the overall merchandise export with a higher year-on-growth during the said month. Overseas shipment of engineering products from India stood at $5.3 billion in January 2017 as against $4.7 billion in the same month last year, registering a growth of 12.4 percent. However, the growth was lower than the 20.1 percent achieved during the month of December 2016. The share of engineering exports in India’s total merchandise exports was slightly up to 23.9 percent in January 2017 from 23.5 percent in December 2016. Cumulative engineering exports during April-January 2016-17, however, witnessed a much lower 3.7 percent year-on-year growth due to substantial decline during the months of April and July 2016.
The Union Budget for the next fiscal, 2017-18, assumed a nominal growth rate of around 11.8 percent implying a real growth of about 7 percent or thereabouts depending upon the inflation rate. This seems achievable as the demonetisation, post-30 December 2016, seems to be progressing much better than was initially expected. This should help in reviving industrial growth which tanked to -0.2 percent in December 2016. It is critical that domestic production revives as that is the base upon which exports happen for most segments of industry in the country.
While the Union Budget did not stress on exports barring the commitment for a trade infrastructure development policy, the Mid-Term Foreign Trade Policy review is being undertaken and EEPC India will be making a range of suggestions that could provide a big push to engineering exports from the country. Some of our suggestions that we will submit to the DGFT is in the following pages of this edition.
We believe that more than providing incentives, it is critical that transaction costs are reduced, more so since the GST is likely to be implemented from July 2017. A report in The Economic Times dated 23 February 2017 notes that physical permits for interstate trade will be replaced by a system of e-permits apparently because the states have insisted that the old analogue process be continued. Our members have expressed deep concern over such a system as the new GST system is increasingly resembling the existing system with new nomenclatures. Already, there are three kind of taxes – CGST, IGST, SGST; four tax slabs as also penal rates; multiple authorities at different levels, etc – all of which go against the very purpose for which GST is being introduced as a one market, one tax indirect tax system.
We, therefore, urge the Central Government and State Governments to ensure that the negatives of the existing system be done away with or minimised to the extent possible in the new GST framework, so that the benefits of a robust, one country, one market, one indirect tax system becomes a reality for producers, consumers and the revenue collecting authorities.
The International Engineering Sourcing Show (IESS VI) will be held over 16-18 March 2017 at the Chennai Trade Centre, Chennai. This will be the largest show compared to the previous five editions. The Russian Federation will be Partner Country while Tamil Nadu the Host State. A curtain raiser of IESS VI is presented in this edition and I urge all our readers to take advantage of India’s biggest engineering sourcing show where buyers from all over the world will converge during this period.