Exporters on Thursday sought a fund of Rs 750 crore for three years to tap USD 25 billion export potential in the US, aiming to seize potential opportunities that may arise as the US President-elect, Donald Trump, has threatened to impose high tariffs on Chinese goods.
Photograph: Aly Song/Reuters
In its pre-Budget meeting with the finance ministry, Federation of Indian Export Organisations (FIEO) President Ashwani Kumar has also demanded extension of the five per cent Interest Equalisation Scheme (IES).
“A marketing scheme to focus on the US with a corpus of Rs 250 crore per year (Rs 750 crore overall) for three years may be launched to generate additional exports of USD 25 billion,” Kumar said.
He said that higher tariffs on China can create a significant opportunity for Indian exports, particularly in sectors where China has previously been a dominant supplier.
Based on a study undertaken by FIEO, India can replace China in sectors like electronics and electrical equipment ($10 billion additional export potential), textiles and garments, toys, chemicals, auto components, footwear, furniture and home decor.
He added that India’s marketing strategy for exporting products to the US should focus on several key areas, particularly on marketing and forming strategic partnership.
“We have already started contacting key trade associations to present India’s sourcing opportunity,” Kumar said, adding, “We should focus on participating in a large number of exhibitions in these sectors.”
On interest rates, the President said that the IES is currently available only till December 31, 2024, and that too to manufacturers in MSME (micro, small and medium enterprise) with an annual cap of Rs 50 lakh per IEC (import-export code) holder, which is insufficient for many MSMEs.
He said India experiences higher domestic interest rates compared to its competitors, especially advanced economies or countries with export-driven economies like China, Japan, South Korea, Euro Zone, Thailand or Malaysia.
This makes financing for Indian exporters more expensive than for exporters from these countries.
“If the IES is extended, it would help level the playing field by reducing the cost of credit for Indian exporters, improving their price competitiveness in the global market,” he said.
“For MSMEs, we should look for restoring 5 per cent subvention as it was reduced to 3 per cent when the repo rate got reduced to 4.4 per cent.
“With the repo rate moving up by over 2 per cent, it makes a strong case for restoring subvention to the original level of 5 per cent and 3 per cent, respectively,” Kumar noted.
The exporters also sought tax benefits on R&D, and infusing more equity to encourage large private sector shipping lines so that international trade happens through domestic shipping lines.
“We are remitting over $100 billion as transport service charges annually and shipping freight is a major component of the same,” he said.
Further, the gems and jewellery sector exporters urged budgetary support for the diamond industry for consumer education as the sector is witnessing a constant fall in exports.
They proposed the government to extend infrastructure status for jewellery parks so that the developers can get easy access to bank credit.
The export promotion gems and jewellery export promotion council (GJEPC) is developing the world’s largest jewellery park in Mumbai.
“Similar parks are coming up at Meerut and Bengaluru. I propose to include jewellery parks in the harmonised list of infrastructure,” GJPEC chairman Vipul Shah said.
The council has also asked for duty drawback benefits for platinum.
On declining export credit, FIEO director general Ajay Sahai said it is not keeping pace with the rising exports.
“We have seen a decline of 5 per cent in export credit between March 2022 (Rs 2,27,452 crore) and March 2024 (Rs 2,17,406 crore).
“Exports during this time have risen by 15 per cent in Indian rupee terms,” Sahai said.
“The lack of collateral free is a big challenge,” he said, adding that though the export sector is under the priority sector lending (PSL) but the flow of credit has not improved.
Export credit under PSL on July 1, 2022, was Rs 19,861 crore and it has declined to Rs 11,721 crore on June 28 this year, which is a dip of over 40 per cent, Sahai said.
Trump has threatened to impose new tariffs on Mexico, Canada, and China as soon as he takes office.
The US is the largest trading partner of India in 2023-24. India’s exports stood at $77.51 billion, while imports aggregated at $42.2 billion in the last fiscal year.
During the April-October period in the current fiscal year, the country’s exports to America rose 6.31 per cent to $47.24 billion, while imports grew 2.46 per cent to $26 billion.
Trade experts stated that Indian exporters may face high customs duties for goods such as automobiles, textiles and pharmaceuticals if the new US administration decides to pursue the ‘America First’ agenda, opined trade experts.
