Oil price hike main risk for Indian economy

The prospects for India’s External Sector in this and coming year look bright with world trade projected to grow at 4.2% and 4% in 2017 and 2018, respectively, up from 2.4% percent in 2016, says the Economy Survey released in Parliament on 29 Jan 2018.

Trade of major partner countriers are improving and above all India’s export growth is also picking up.

The downside risks lie in the rise in oil prices, the survey cautioned.

However, this could also lead to higher inflow of remittances which have started picking up.

The supportive policies like Goods and Services Tax (GST), logistics and trade facilitation policies of the government could help further, said the report.

Welcoming the prospects, the Federation of Indian Export Organiations (FIEO) said the survey pin hope on exports amidst global recovery,

FIEO President Ganesh Kumar Gupta said “such growth augur well for Indian exports as we have always been either above the curve or below the curve.

“Whenever, global trade has done well, Indian exports have posted much encouraging results,” he added.

However, the budget should look into the challenges faced by the export sector including loss of competitiveness of labour-intensive sectors, constant appreciation of Indian Rupee, less than flexible labour laws, need of skilling and improvement in logistics & infrastructure.

The survey has rightly recognized that embedded taxes arising from products left outside GST (petroleum and electricity) and those that arise from inverted duty structure with nil duty on the final product, needs to be compensated and Union Budget should announce a policy decision for factoring them through Duty Drawback route.

Gupta called for the budget to focus on job creation including in export sector thereby providing fiscal support to employment-intensive sectors in exports.

He called for 100% tax deduction on expenditure incurred by the industry on imparting skills or marketing.

He highlighted issues for the budget to address. These are legal issues requiring amendment in GST Law including an exemption from IGST on imports/inputs required for exports, a comprehensive drawback Scheme for MSME to provide refund of GST and Customs Duty, procedural changes to allow GST refund at let export order, etc.

With a view to double farmers’ income, the Budget should allocate substantial fund for backward and forward linkages in agriculture including in cold chains and warehouses “so that we build on a stable Agri Policy, likely to be announced soon”, said Gupta. fii-news.com