Parliamentary panel voices concern over decline and volatility in exports

RSTV Bureau
Rajya Sabha Member, V. Vijayasai Reddy

Rajya Sabha Member, V. Vijayasai Reddy

The 31 Member Department-related Parliamentary Standing Committee on Commerce headed by Rajya Sabha Member, V. Vijayasai Reddy presented its 152nd and 153rd Reports on Demands for Grants of the Department of Commerce and the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry to Parliament today.

Parliamentary Panel in its 152nd Report has stressed the need for a calibrated approach, concerted efforts, diversification of India’s export basket, removal of supply chain bottlenecks and simplification of export procedures, among others, to achieve the goal of making India a significant global player in goods and services trade with USD 1 trillion export volume by 2024-25.

The Committee in its Report noted that in 2019, India was the 19th largest exporter in the world in merchandise trade with a share of 1.7 per cent and 10th largest importer with a share of 2.6 per cent. India’s exports have surpassed half trillion mark (USD 538.08 billion) in 2018-19 for the first time.

The Committee, however, expressed its concern on the contraction of exports in 2019-20 and noted volatility in export growth in key sectors such as engineering goods, petroleum products, gems and jewellery, cotton yarn/fabrics, leather, etc. It recommended undertaking detailed analysis of performance and close monitoring of existing schemes and policies aimed at boosting exports.

Taking note of an allocation of Rs.6219.32 crore in BE 2020-21 against the Department’s projected demand of Rs.9238.51 crore, the Committee felt that reduction of allocation to the tune of Rs.3019.19 crore will adversely impact promotion of trade, augmentation of export and revival of subdued trend in export. It recommended to enhance budgetary allocation for optimal implementation of policies and schemes in ensuing year, while ensuring maximum utilization of funds at the disposal of the Department.

Observing decline in India’s export due to global economic slowdown, increasing protectionism, heightened trade tensions between US and China, US sanctions against Iran, etc., the Committee urged the Department to make vigorous efforts for market expansion and establish trade synergies with new emerging trade destinations in Africa, Latin America and West Asia region to reduce overdependence on developed countries especially US and EU for exports and to minimize uncertainties in our exports due to adverse global event/scenario. It recommended the Government to be vigilant in checking fluctuations in exchange rate of rupee and unfair trade practices adopted by the trading partners.

The Committee appreciated the strategic initiatives taken by the Government to deal with unfair trade practices against India, to safeguard the Indian domestic industries against dumping of cheap and subsidized goods and setting up a monitoring committee to address key issues related to Free Trade Agreements (FTAs), etc. The Committee recommended to strengthen the Directorate General of Trade Remedies (DGTR) for conducting quality investigations into unfair trade practices within reasonable time frame.

Expressing concern on discriminating measures such as delisting India from ‘Developing Beneficiary Country’ under the ‘Generalised System of Preferences (GSP)’, inclusion of India in ‘Priority Watch List’ by United States Trade Representative (USTR) and increase in disputes against India in the WTO, the Committee urged the Department to undertake a comprehensive study/analysis of trade remedial measures and constitute a research wing under DGTR for detailed examination and assessment of such issues and for apprising traders/exporters of the adverse consequences.

Referring to the Economic Survey 2019-20, the Committee noted that specialization of labour intensive sectors and identification of group of industries in network products for including them in Global Value Chains (GVCs) would tremendously boost India’s trade competitiveness and export performance. While appreciating measures undertaken by the Government for facilitating ease of doing business, the Committee felt that India’s integration in GVCs calls for sustainable trade growth, strengthening of export infrastructure, effective implementation of GST, timely refunds of duties and taxes to the exporters, reforms in land acquisition and making India an attractive global destination for investment by Multinational Enterprises (MNEs), etc. The Committee recommended the Government to formulate a Global Value Chain Integration Policy to facilitate Indian industries participation in GVCs.

Pointing out that proper assessment of the Merchandise Exports from India Scheme (MEIS) vis-à-vis the WTO norms since its implementation from 2015 has not been made by the Government, the Committee felt that merely discontinuing the MEI Scheme before putting in place any suitable substitutive mechanism will impact the sectors which at present are under the garb of inverted duty structure. The Committee recommended to make a careful evaluation and analysis of new scheme viz. Remission of Duties or Taxes on Export Products (RoDTEP) Scheme before its implementation for its compliance with global trade norms.

Taking note of the significant role of MSME sector in country’s economy accounting for nearly 48 per cent share in India’s total exports and about 29 per cent contribution in GDP, the Committee stressed the need to address issues concerning MSME sector and apprised MSME exports about the benefits of various schemes and subsidies and encourage their participation in the GVCs. The Committee recommended to devise a customized export scheme encompassing financial, technological and policy aspects for holistic promotion of MSME sector, which would provide much needed fillip to the overall exports of the country.

Appreciating the Government to come out with a new Agriculture Export Policy aimed to double farmers’ income by 2022 and boost agricultural exports by integrating farmers and agricultural products with the GVCs, the Committee recommends the Department to ensure active participation of the State Governments in effective implementation of the policy in agriculture clusters for promoting exports in the year ahead.

The Committee noted that the Scheme of Price Stabilisation Fund aimed at providing financial relief to small growers of tea, coffee, rubber, tobacco, etc. has discontinued since 2013 and in its place a new Scheme of Revenue Insurance Scheme for Plantation Crops (RISPC) has not been implemented. The Committee has recommended to launch a new crop insurance scheme at the earliest to provide security to the plantation growers in terms of price stabilization and crop protection and thus contributing to the welfare of farmers in the plantation sector.

The Report has also expressed its deep concern on the substantial reduction of the budgetary allocation made to Agencies/Commodity Boards viz. Agricultural and Processed Food Products Export Development Authority (APEDA), Marine Products Export Development Authority (MPEDA), Tea Board, Coffee Board, Rubber Board and Spices Board from the proposed outlay under the Medium Term Expenditure Framework. The curtailing of funds will, thus, impact the functioning of the schemes and programmes of the Agencies and Boards and the shortfall may lead to upsurge in liabilities in the coming years. It, therefore, recommended the Department to engage with Ministry of Finance for additional allocation at the supplementary grants stage for their optimal functioning.

While appreciating the initiatives of the Government in according high priority to promote trade and exports from the North Eastern Region, the Committee felt that the allocation of funds provided under various schemes for boosting trade from the region is considerably low. The Committee laid emphasis on raising budget to give effect to various activities such as production, processing, marketing, infrastructure, packaging, international meets and seminars to promote exports from this region. Taking cognizance of trade facilitation measures being taken by the Department for boosting trade and commerce in the North-East Region, the Committee stressed the need for devising a comprehensive trade promotion programme for the entire region of North East.

As regards 153rd Report relating to the Department for Promotion of Industry and Internal Trade, the Committee took note of the declining sectoral growth rate of Index of Industrial Production (IIP) comprising three sectors, namely, mining, manufacturing and electricity with mining registering a negative growth rate during April-October 2019-20 and the declining growth rate of Gross Value Added (GVA) in industry at constant prices with manufacturing sector registering a negative growth rate during second Quarter (2019-20). While appreciating the measures taken by the Department to boost industrial production, the Committee recommended the Government to make concerted efforts to revive the industrial sector with focus on mining, manufacturing and electricity sectors given their importance in the economy and address declining capacity utilisation of manufacturing sector considering its impact on investment and job creation.

The Committee appreciated the Department for devising new Industrial Policy, which is currently under consideration, having the objective to improve the share of manufacturing sector to more than 20 per cent by focusing on 10-12 industry sectors for boosting competitiveness, generating jobs and growth in manufacturing and exports. The Committee has recommended to finalise the policy at the earliest in tune with changing global scenario.

The Committee took note of the positive trend in the FDI inflows since the launch of Make in India flagship programme in 2014. In the last 5½ years (April 2014-September 2019) India received FDI inflows worth USD 319 billion which is 50 per cent of the total FDI inflow (USD 642 billion) in the last over 19 years since April 2000. The Committee while appreciating the measures taken by the Department for making the process of FDI simpler and investor friendly, has, however, expressed its concern on the declining FDI inflow in manufacturing sector and also disparity in FDI inflows among the States and recommended to address these issues to make India an attractive destination for investment.

Regarding the budgetary allocation to the Department, the Committee noted that an allocation of Rs.6605.55 crore in BE 2020-21 has been made against the Department’s projected demand of Rs.16767.40 crore and expressed its concern on the shortfall in allocation at a time when the industrial sector is in doldrums. It stressed the need for adequate allocation for implementing optimally the major schemes such as National Industrial Corridor Development and Implementation Trust, Refund of Central and Integrated GST to Industrial Units in North Eastern Region and Himalayan States, Transport/Freight Subsidy Scheme, etc.

Regarding the intellectual property rights, the Committee appreciated the steps taken by the Department for reducing the time to examine and dispose of the patent applications from average 72 months in 2014-15 to about 24-36 months at present. The Committee stressed the need to further reduce the time for examination and disposal of patents to match the international standard, create awareness among various stakeholders and fill the sanctioned posts of Patent Examiners and Controllers at the earliest. While taking note of the World Intellectual Property Organisation (WIPO) Report 2019 which ranks India at 13th place in Patent Cooperation Treaty (PCT) filing of patent applications, the Committee stressed the need to strengthen intellectual property ecosystem to keep pace with research and innovation and to compete with developed countries.

Taking note of the World Bank’s Doing Business Report, 2020 which ranks India at 63rd amongst 190 countries, improving its rank by 14 from 77 in the 2019 Report, the Committee appreciated the sustained measures taken by the Department for improving India’s ranking in ease of doing business. It stressed on the need for further improvement to foster a vibrant business environment thereby promoting entrepreneurship, innovation and wealth creation and to make India an attractive destination for business and investment.

Regarding Startup India, a Government’s flagship initiative aimed at building a strong ecosystem for nurturing innovation and start-ups to drive sustainable economic growth and to generate large scale employment opportunities, the Committee recommended the Government to fast track the finalisation of Startup Vision 2024 which aims to facilitate establishment of 50,000 new start-ups by 2024 creating 20 lakh jobs. Further, it recommended to increase registration of Startups in GeM portal, facilitate establishment of start-ups in those States with dismal record, address the issue of insignificant drawing of funds from the Fund of Funds Scheme for Startups, to operationalise Credit Guarantee Scheme for Startups to ease the availability of credit to start-ups, etc. Expressing concern over the delay in payment by the PSUs and the Government Departments to the Startups, the Committee recommended to increase procurement by PSUs and Government Departments from Startups and payment of dues within a stipulated time period to maintain constant cash flow to the Startups.

Regarding five industrial corridors viz. Delhi-Mumbai, Chennai-Bengaluru, Amritsar-Kolkata, Vizag-Chennai and Bengaluru-Mumbai Industrial Corridors, the Committee expressed its displeasure at their slow pace of their development and urged the Department to expedite their construction to provide much needed thrust to the Indian industry.

Regarding the industrial development of backward and remote areas, the Committee took note of the various schemes, viz. Transport/Freight Subsidy Scheme, package for special category States for J&K (now UTs of J&K and Ladakh), Himachal Pradesh and Uttarakhand, refund of Central and Integrated GST to industrial units in North Eastern Region and Himalayan States, North East Industrial Development Scheme, etc. and expressed displeasure at slow pace of utilisation of funds and urged timely disbursal of incentives, subsidy and tax refunds to industrial units and adequate allocation of funds under the schemes in the ensuing financial year.