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Easing of import restrictions, thrust on reforms may mark Exim Policy

Rediff Business Bureau

On March 31, when India announces its Export-Import or Exim Policy for the fiscal 2000-2001, it is almost certain that it would impart more momentum to the reforms it had earlier set rolling.

Industry observers and analysts feel that India's Commerce Minister Murasoli Maran may simultaneously try to cushion the rap to appease exporters who were adversely affected by the withdrawal of tax concessions extended to them earlier.

Moreover, encouraged by a substantial growth in exports, Maran may try to do away with import restrictions on more items, other than the mandated 714, in the next financial year.

About 1,439 products still fall under the purview of import restrictions, and due to India's commitment to the World Trade Organisation or WTO, some of these products need to be brought out of these restrictions. However, analysts feel that despite good growth figures, Maran may not come up with anything worth writing home about.

In the nine months from April 1999 to January 2000, India's exports increased by 11.32 per cent over the previous corresponding period to over $ 30 billion. Moreover, Commerce Secretary P P Prabhu had just a few days ago expressed the opinion that India would be able to maintain this growth rate for the entire fiscal.

Industry observers say that if certain items are indeed brought out of import restrictions, the government may face a lot of flak from sections of industry. Used cars and foodgrains are two such areas where Maran would have to tread cautiously.

Analysts believe that processed foods, coffee, tea and cotton may find themselves on the list of free imports soon.

However, the toughest task for Maran and his commerce ministry mandarins would be pacifying disappointed exporters. In Union Budget 2000-2001, the latter were slapped with a tax on 100 per cent of their earnings over a five-year timeframe, annual tax being one-fifth of their income.

Observers opine that the new Exim Policy will also address the fiscal issues and rationalise or extend some fiscal incentives.

Although the government may not find it easy to do away with incentives like the Duty Entitlement Passbook Scheme or DEPB, under which exporters earn entitlement points for exports that can be traded for lower duties on imports, a few popular steps may have to be taken.

Maran may also rationalise the exports promotion capital goods or EPCG imports scheme. The likelihood of a flat 5 per cent levy instead of the present duty structure based on two rates -- 0 per cent and 10 per cent -- is also quite strong, feel analysts.

Analysts see some fiscal concessions for deemed exports being extended to sectors like power generation, transmission and distribution, aviation, fertilisers, railways, roads, ports and hydrocarbons.

Maran is also seen increasing the number and the scope of free trade zones to encourage export-oriented foreign direct investment. Last year's Exim Policy changes had announced the creation of free trade zones, but these have yet to materialise.

The Exim Policy is a five-year document, but it is annually amended by ministry officials. The instant Exim Policy document pertains to the period April '97 to March 2002.

Exim Policy 1999-2000

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