Nath moots tax refunds for exporters to beat rising rupee
May, 30th 2007
The commerce ministry has expressed its concern over the rising rupee and has taken up the issue with the Reserve Bank of India, the commerce minister Kamal Nath said on Tuesday.
Speaking to reporters after the inaugural session of the third GCC-India investment conference in Mumbai, Nath said that the ministry proposes to introduce a scheme that will refund taxes and levies to industries which have no import obligations to offset the rising rupee.
The minister indicated that the ministry was seriously contemplating the launch of a refund scheme that will provide relief for industries such as handicrafts which have no import component.
The minister said that the ministry has also initiated talks with the Federation of Indian Exporters Organisation (FIEO) and various business and industry chambers on this issue. He however, opined that despite rising rupee Indian industry would be able to tackle this situation as it has more resilience and competitiveness.
Industry chambers have expressed worries over the appreciating rupee and feared the ongoing trend would affect exporters would lose out to competition.
Naths statement is crucial especially when the rupee Tuesday ended at a nine-year high of 40.49 against the US dollar.
Nath said that his ministry has already written to the prime minister expressing concern over the rising rupee affecting trade and has sought some intervention.
The merchandise export target for the current year (2007-08) has been set at $160 billion and $200 billion for the next year (2008-09). Exports during 2006-07 touched $125 billion.
According to the commerce ministrys internal study, the textile industry, one of the largest employment generators in the country, appears to be the severely affected the appreciating rupee. The industry has registered a 6.3- per cent dip in exports during the last four months.
According to the Apparel Export Promotion Council (AEPC), export receipts of apparel exporters decreased from Rs 20,484 crore in the first half of 2006-07 to Rs 19,181 crore during the second half of the year even though export figures remain at similar levels for both the years.