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Crisils focus on India’s labour-intensive sector's issues as exports decline

At a time when international trade is set to grow exponentially, the decline in India's export is disquieting and structural changes in labour-intensive sectors such as apparels and jewellery need to be immediately undertaken, Crisil says.

"Global merchandise trade is expected to grow stronger at 4.2 per cent, boosting trade intensity of growth for the first time in six years i.e. world trade growth being higher than world’s GDP growth. Yet, India's exports have not been able to take as much advantage of the stronger trade growth unlike many of its Asian peers like Vietnam, South Korea and Indonesia," said a note released by the rating agency.

The International Monetary Fund (IMF) also forecasts international growth in trade to rise to 3.6 per cent in 2017 from 3.2 per cent in 2016. However, the Federation of Indian Exports Organisations has noted almost Rs 50,000 crore worth of refunds under the Goods and Services Tax regime are still stuck with the Government, leading to a huge blockage of capital.

Exporters have also decried only around Rs 350 crore of refunds on account of integrated GST (IGST) have been released by the Government for July, against Rs 750 crore claimed by exporters. Furthet, the input tax credits are yet to be released. Responding to growing opposition by exporters, the government last week announced greater export support to items in the garment and the home furnishings sector under the Merchandise Exports from India (MEIS) and the Remission of State Levies.

"The enhancement in MEIS rates will help in the fulfilment of orders for the Christmas festival as it will result in easing blocked capital. It will help in the mitigation of the currency difference to some extent. However the Industry is disappointed over the announcement of the RoSL rate as it is far below what the industry has recommended and there has been no consideration of the central taxes rebate in the announcement. The industry is witnessing a slowdown with jobs being lost and buyers migrating due to high cost." Asho K G Rajani, Chairman of the Apparel Export Promotion Council said.

However, Crisil has pointed out that subdued export performance in recent months cannot be attributed to unfavourable currency competitiveness. In fact, a relatively stable rupee and enhanced international growth suggest that local developments such as GST might have had a greater role to play in the current export growth slowdown.

 
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