FIEO President Calls for Investment Incentives to Reach Export Target

Addressing the media in his first Press Conference after taking over as President of FIEO, Mr M Rafeeque Ahmed said that India is likely to miss the Export Target of US$ 300 Billion set for the current fiscal. He went further to say that even US$ 500 bn for 12-13 with compound annual growth rate of over 29% is difficult without a fresh round of investment incentives. China is coming down in exports due to rise in wages by 14% every year. This makes Indian exports competitive vis a vis China. The revaluation of the Yuan by four percent too makes India competitive. However, huge capacities must be created to meet this demand.

The volume-wise growth in World Trade is forecasted to be around 4.4% which will moderate growth in our exports also.

Sovereign debt concerns in the Euro Zone pose a major challenge to overall export growth.

Rupee is also strengthening now and thus the exchange advantage available in the recent past may no longer be there. However, there will be high volatility in the exchange rate thus decision making for exporters will be a herculean task.

Slowdown in manufacturing will have its impact on exports as the share of Capital Intensive Products in our exports have more than doubled to reach a share of 54% in 2010 while share of labour intensive products declined by half from 30% to 15%. There has been a direct relationship between GDP growth and Exports in the sense that better GDP growth propelled better exports. Since GDP growth is likely to moderate, the same will have its repercussion on exports.

The cumulative impact of interest hikes [13 since March 2010] has resulted in an increase in interest costs. This has resulted in a slump in credit off-take.

FIEO Western Region Chairman Amit Goyal complained that infrastructure in Mumbai was still rudimentary. Air Cargo has not been modernised since 1960. There is scope for textile exports to East Asia and South East Asia who have become importers with shift in industry to sunrise sectors like electronics.

Income Tax on Agency Commission: Tax TDS on agency commissions has of late been an issue of much litigation and may also be taken up by the Government in the forthcoming Budget.

Huge demands with retrospective effect from 2005 are being raised on exporters on grounds of non deduction of tax on tyre earnings of agents who procure orders from foreign buyers even though the transaction was carried on foreign territory.

Service Tax on ECGC Premium, currency conversion, commission made to foreign agent, transports of export goods from place of removal to ICD or from ICD to Ports etc should be covered in the negative list of services thus exempting them from purview of service tax.