Jayantilal Bhandari
Due to the Ukraine crisis, India has started seeing export difficulties in the financial year 2022-23. Not only are exports to Russia and Ukraine expected to decline, but India’s exports will also be affected due to disruption in the movement of goods from the Suez Canal and Black Sea to other Eastern European countries and economic sanctions by Western countries on Russia. .
Finance Minister Nirmala Sitharaman recently expressed concern over the impact of the Russo-Ukraine war on India’s foreign trade. Due to this war, there is a possibility of a huge impact on the exports from the country. It is also a matter of greater concern because the longer the war lasts, the more it will hit foreign trade. While the rupee depreciation benefits exporters, export challenges have been compounded by depreciating currencies in India’s other rival countries, costlier raw materials and a sharp fall in export demand from the European market.
According to the data released by the Ministry of Commerce on March 2, in the current financial year 2021-22, from April to February, 2022, India’s exports reached three hundred and seventy four billion dollars and exports for the first time reached a record of four hundred billion dollars according to the set target. Height touched. But now due to the Ukraine crisis, India is facing export problems in the financial year 2022-23. Not only are exports to Russia and Ukraine expected to decline, but India’s exports will also be affected due to disruption in the movement of goods from the Suez Canal and Black Sea to other Eastern European countries and economic sanctions by Western countries on Russia. .
At present, four effective steps are necessary in the strategy to increase exports while dealing with the export challenges arising out of the Ukraine crisis. One, to make the role of Special Economic Zones (SEZs) effective in the country, second- to make the Make in India campaign more successful, three- proper implementation of Production Based Incentive (PLI) scheme and fourth- United Arab Emirates (UAE) Formulation of FTAs with other countries like Free Trade Agreements (FTAs) with the
It is noteworthy that while presenting the budget for the year 2022-23 on February 1, the Finance Minister had said that the government would change the existing form of the Special Economic Zone (SEZ). The SEZ will be manufacturing for both domestic and international markets, utilizing the available resources. The new rules related to SEZ will be implemented by 30 September this year. The new name of the SEZ will be Development of Enterprises and Service Hub (DESH or Desh).
In such a situation, now under the new concept of SEZ, the government will provide special facilities to the producers manufacturing SEZs for international and domestic markets. The vacant land and construction area in the SEZ can be used for domestic and export manufacturing. The SEZ will have the facility of custom clearance through a full time portal and all the clearances required to start the product manufacturing will also be done there.
States will also be involved in this process. With the increase in infrastructure, especially supply, the cost of production will come down and Indian goods will be able to compete easily in the international market. Large network of facilities like rail, road, port will make India cost globally and help in making India an export based economy.
It is also worth mentioning here that the new concept of SEZ, after giving it a better shape, will make it easier to make the country a major manufacturing hub of the world. It is to be known that along with the new rules of SEZs proposed in the budget of the upcoming financial year 2022-23, big export incentives will also be beneficial. The budget announcement will also boost exports of gems and jewelery which form a major part of the country’s exports. There will also be an increase in exports from sectors like textiles and apparel, leather, handicrafts and electronics. Gati Shakti program will bring down the cost of supply.
An announcement has been made in the budget to build one hundred cargo terminals, which will make the movement of goods easier and reduce the cost. The import duty of diamonds and gems prepared in the budget and duty on import of fashion jewelery have been reduced. This will put a stop to cheap jewelery coming from China and will encourage its manufacture in India. In order to encourage export of textile and leather products, import of products like zippers, buttons, special types of leather and packaging boxes have been made duty-free. This will boost their exports.
While the success of the Production Linked Incentive Scheme (PLI) will enable alternatives to be imported from China, the export of industrial products will also increase. The country still has many industries, such as the pharmaceutical industry, the mobile industry, the medical device industry, the vehicle industry, and power tools, and much of it is based on imported goods from China. The government has extended the PLI scheme for fourteen industrial sectors with incentives of about two lakh crore rupees from November 2020 under the Self-Reliant India Campaign. With the various incentives given under this scheme, the country’s producers will prepare some of the raw materials imported from China on the basis of local products.
The role of free trade agreements with various countries can be important in increasing exports. It is worth noting that on February 18 this year, India and the United Arab Emirates (UAE) signed the FTA. This agreement has been named the Composite Economic Partnership Agreement (CIPA). With this trade agreement, the target of doubling the trade between India and UAE is set to double to $100 billion in five years, from about $60 billion at present. At present, UAE is India’s third largest trading partner and second largest export center after the US.