India Tuesday announced a 100 billion rupee ($1.8 billion) package to boost exports in an effort to narrow the country's trade deficit, which is one of the main reasons for a recent slowdown in Asia's third-largest economy.
As part of the package, the government has extended the import-tax waiver on certain capital goods used by exporters by a year to March 31, Trade Minister Anand Sharma told reporters. The tax waiver aims to aid technological improvement that would make Indian exports more competitive.
It will also extend a 2% interest subsidy given on loans to handloom and handicraft exporters and some other small and medium enterprises by a year to March 31. The subsidy benefit will be extended to companies which make processed farm goods, sports goods, toys and readymade garments.
A senior government official, who didn't wish to be named, said that the steps would cost the government 90 billion rupees-100 billion rupees. Of this, 80 billion rupees-90 billion rupees will be toward the import tax waiver while the rest will be for interest subsidy, the official said.
Deteriorating economic conditions in the U.S. and Europe have hurt demand for India-made products, while high oil prices have driven up its import costs. The South Asian nation's trade deficit ballooned in the last fiscal year to $184.9 billion, partly contributing to weakening the local currency that is trading near its all-time low against the U.S. dollar.
As part of the package, the government has extended the import-tax waiver on certain capital goods used by exporters by a year to March 31, Trade Minister Anand Sharma told reporters. The tax waiver aims to aid technological improvement that would make Indian exports more competitive.
It will also extend a 2% interest subsidy given on loans to handloom and handicraft exporters and some other small and medium enterprises by a year to March 31. The subsidy benefit will be extended to companies which make processed farm goods, sports goods, toys and readymade garments.
A senior government official, who didn't wish to be named, said that the steps would cost the government 90 billion rupees-100 billion rupees. Of this, 80 billion rupees-90 billion rupees will be toward the import tax waiver while the rest will be for interest subsidy, the official said.
Deteriorating economic conditions in the U.S. and Europe have hurt demand for India-made products, while high oil prices have driven up its import costs. The South Asian nation's trade deficit ballooned in the last fiscal year to $184.9 billion, partly contributing to weakening the local currency that is trading near its all-time low against the U.S. dollar.
India's economic growth slowed to 5.3% in the January-March quarter, its slowest pace in nearly a decade, partly because of weak external demand and also due to stalling policy reforms and economic uncertainties at home.
Despite the odds against growing its exports, India is targeting its annual exports to reach $500 billion in two years. It expects exports to expand 20% in the current fiscal year that started April 1 from last year's $303.7 billion.
"We shall be watching the global economic developments closely and shall intervene effectively to ensure that Indian exports stay well on course for achieving the targets," Mr. Sharma said.
Besides these incentives, the government has been encouraging exporters to tap markets in Asia, Africa and Latin America to reduce their dependence on the developed economies.
