The government of India has announced export incentives of around £850 million for labour-intensive sectors and services in an attempt to lower the blow caused by the goods and services tax (GST) and push shipments from the country amid signs of a pickup in global demand. Incentives worth £845 million were applicable from November and will include higher benefits of £274.3 million offered to ready-made garments. The government has also faced negative feedback from exporters over tardy refunds and a reduction in drawback rates meant to offset the impact of taxes.
By doubling incentives to 4 per cent under the Manufacturing Exports from India Scheme (MEIS), the government hopes to address the concerns and shield Indian businesses from the adverse impact of competition. Such incentives under the MEIS and Service Exports from India Scheme basically aimed at labour-intensive sectors like agriculture, leather, carpets, and marine products. They came just days before the Gujarat elections where the launch of GST and the impact on small businesses has emerged as a key issue.
There is also a parallel effort to reorient the focus with a thrust on agriculture, where a new export policy is due to be introduced. Also, Indian companies are encouraged to participate in global and regional value chains at a time when giants like Apple depend on inputs and expertise from all over the world to manufacture iPhones. Revealing mid-term review of the five-year policy, Commerce & Industry Minister Suresh Prabhu said, “The policy aims to promote exports by simplification of processes, enhancing support to high employment sectors, leveraging benefits of GST, promoting services exports, monitoring exports performance through state-of-the-art analytics.”
The government hopes to leverage the WTO's trade facilitation agreement to make life simpler for exporters and importers. Prabhu appears to give special emphasis on ease of trading borders where India has not fared well. The Centre also hopes to address repetitive concerns over high cost of doing business in the country, apart from improving the logistics network, to make exports less competitive in the global market.
