Exports have been the big unfinished agenda for the economy. The trade deficit in the month of December came in at $15 billion and that has largely to do with rising imports. The government had a twin agenda. Firstly, the imports had to be curbed to the extent possible and secondly exports had to be given a boost. The budget had addressed both these issues in a variety of ways. Here are the key takeaways for the exports sector..
What does the export sector have from the Union Budget 2018?
Some of the key highlights of the Union Budget for the trade sector were as under..
The government has imposed a 10% Social Welfare Surcharge on imports, replacing the education cess. This will not only be a major source of revenues for the government from rising imports but it will also ensure that the Make in India program gets a boost.
The government has increased the focus on Make in India program especially in the defence sector so that India can finally emerge as the major hub for manufacturing in India and exporting products to the rest of the world, something China achieved to perfection.
One must not forget that the huge boost to infrastructure spending at Rs.5.97 lakh crore includes ports and inland waterways. Indian export growth has been stuck due to weak outgoing infrastructure and this will be structural mitigated by the higher allocation.
The government sees a huge potential in sectors like food processing and medicinal plant to boost exports. The budget has announced a doubling of its allocation to the food processing sector to Rs.715 crore. This will boost investments in the food processing sector and also give a leg up to exports.
The government has announced the liberalization of agri-exports. This will not only boost exports but also help farmers get better prices in the global market. India currently exports agri products to the tune of $30 billion but this has the potential to go up to $100 billion. The budget proposes to liberalize the export of agri products and also set up state-of-the-art testing facilities in various food parks.
India has a huge potential in terms of fisheries and aqua exports. The government has decided to extend the Kissan Credit Card scheme to these industries. This will ensure that small and marginal farmers in aqua and fisheries will get the same benefits as other farmers boosting exports in the process.
The MSME sector is a major source of exports but they have been under financial stress after the demonetization and the launch of the GST. The budget has provided Rs.3794 crore to the MSME sector for credit support, capital and interest subsidy. This is likely to be a big boost for exports.
Recognizing the potential of exports of the Textile Sector, the government has set out an outlay of Rs.7148 crore for the fiscal year 2018-19. This is likely to give a major boost to the textiles sector and expand its exports potential.
The exports growth in the last fiscal year has been 15% on an annualized basis and the above measures are expected to boost exports growth to a much higher level and in the process help GDP grow closer to the 8% mark eventually.
With oil prices trending above $70/bbl, the focus of the government has to be on export promotion. Of course, the value of the INR is a major challenge but that is more of a market factor. A weak rupee will be a boost for exports but the government has wisely avoided getting into a devaluation war. That is perhaps the biggest takeaway, of giving a structural boost to exports through the Union Budget 2018.
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