Boost to exports in FTP, but inflation casts its shadows

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New Delhi, Apr 11 (UNI) The Annual supplement to Foreign Trade Policy (2004-09) today announced a slew of measures to boost exports, including extending the DEPB scheme till May 2009 and reducing custom duty from five to three per cent under the EPGC scheme, but inflation cast its deep shadow compelling the government to withdraw incentives on exports promotion schemes relating to steel and cement.

Unveiling the Policy, Commerce and Industry Minister Kamal Nath extended interest subvention by one year to provide succour to sectors affected by rupee appreciation, announced a new export promotion council for the telecom sector and specific focus to IT Hardware.

Income tax benefit to 100 per cent Export Oriented Units (EOUs) under section 10B of Income Tax Act are to continue for another year beyond March 31, 2009.

The Minister said five per cent additional credit would now be available for export of toys and sports goods and enhanced duty credit of 2.5 per cent for exports of high value-added manufactured products.

Mr Nath set an ambitious export target of 200 billion dollars for 2008-09, substantially up from 155 billion dollars figure achieved in 2007-08.

The Policy which has withdrawn incentives on exports of steel and cement came in the wake of the news this morning that headline inflation had touched a three year high at 7.41 per cent for the week ended March 29.

After presenting the Policy, Mr Nath told reporters that the government will ban the export of cement to put water on the fires of inflation.

This is perhaps the only time that the Foreign Trade Policy has put spanner in the path of export expansion, whose purpose is to create a conducive climate to propell export growth.

The Policy contains major initiatives to reduce transaction costs and has incorporated procedural simplifications in many areas.

The fast growing telecom sector was the only one chosen by the Minister for purposes of setting up of such a Council.

The Policy was lauded by industry and commerce, who thanked the Minister for being considerate in providing a cushion against the secular appreciation of the rupee. The mechanism was extension of the interest subvention scheme.

The Chambers, however, thought that the 200 billion export target was too ambitious and difficult to achieve in view of the global slow down, hardening of interest rates, soaring oil prices and appreciation of the rupee by as much as 11 per cent in the last one year.

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