Talking Points of Shri Ashwani Kumar, President, FIEO for the Budget Meet on 26th Dec, 2024
1. US centric focus on exports:
The US intending to impose higher tariffs on China can create a significant opportunity for Indian exports, particularly in sectors where China has previously been a dominant supplier.
As per our study, we can get an additional export of around US$ 25 Bn US due to tariff war in sectors such as electronics & electricals, automotive parts & components, organic chemicals, apparel & textiles, footwear, furniture & home decor, toys etc.
For that we require increasing our presence in the US with showcasing in a large number of exhibitions, buyer sellers meet and tie up with large local associations of retailers and distributors in the US with proactive support of the Government.
A marketing scheme to focus on the USA with a corpus of Rs 250 Cr per year (Rs 750 Cr overall) for 3years may be launched to generate an additional exports of US$ 25 Bn by the end of three years.
The details are being submitted separately.
2.Continuation of the Interest Equalisation Scheme:
With inflation increasing the cost of inputs and freight rates still high, we require more credit. The buyers are also seeking a longer time to make the payment. Thus, exporters require more credit for longer duration making interest cost all the more relevant.
The Interest Equalisation Scheme was providing a level playing field to exporters vis a vis our competitors. The scheme has certainly helped exports as our exports during the operation of IES between 2015-2024 grew at a CAGR of 6.6 % as against merchandise trade growth of 4.4%. India's non -oil exports are still growing despite global challenges. Interest Equalisation Scheme has helped exporters to obtain orders giving very less profit, which could have been lost but for the interest equalization scheme.
A detailed note justifying continuation of scheme with a cap of Rs 10 Cr per exporter is being submitted.
3. R&D Support to Industry:
R&D and product innovation is key to sustain exports. Our R&D spending is very low as compared to our competitors. Globally R&D is incentivised either through tax exemption or tax deductions. 35 out of 38 OECD countries provide tax support to R&D spending in view of huge uncertainty and long gestation period. R&D is required for almost all sectors but is more crucial for the sunrise sectors of exports which will be the new driver of exports. We requested that a tax deduction of 200% to 250% may be provided for R&D spending under section 35(2AB) of the Income Tax Act.
4. Make India Atma Nirbhar with its own Shipping line of global repute:
India is becoming self-reliant in many sectors under various flagship programmes of the Government. The start of container manufacturing in India has stabilized the container charges to a large extent. However, most of our international trade happens through foreign shipping lines and our MSME exporters remain at their mercy. We are remitting over US$ 100 Bn as transport service charges annually and shipping freight is a major component of the same. We are happy that the Shipping Corporation of India is acquiring additional fleets. We request to infuse more equity into it or encourage a large private sector shipping line so that a significant portion of our international trade happens through our own shipping line over a period of time. This will also secure us against supply chains during disruptions.
5. GST liability on exporters on foreign bank charges and drawback refund relating to such charges:
The last issue which is not related to Budget but which I would like to bring to your kind notice.
A large number of exporters are receiving notices on GST liability on Foreign Bank Charges which the Fitment Committee clarified that this is to be levied on bank and bank can claim ITC of the same. The GST Council took note of it also. However, since no clarification has been issued, GST authorities are issuing notices to exporters.
Similarly, on a shortfall of US$ 100-150 on account of foreign bank charges, Customs is issuing notices as the bank charge is not separately mentioned. The drawback on such a shortfall generally ranges between RS 500-1000. The paperwork and administrative cost both for exporters and the government is much more than that. We request that the shortfall resulting in excess drawback upto Rs 1000 may be waived for administrative convenience.
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