India Takes Radical Steps To Aid Exporters

by Lorys Charalambous, Tax-News.com, Cyprus

02 April 2002

Indian Commerce and Industry Minister Murasoli Maran told a news conference in New Delhi on Sunday that the government would take radical steps to improve the regime for exporters in order to boost its tiny share of world trade.

The changes will include the removal of virtually all quantitative restrictions on exports, an incentive package for the electronics hardware industry to help it catch up with India's software sector, assistance for the country's key handicrafts industry, and permission for foreign branches of Indian banks to set up in India's Special Economic Zones to take advantage of lighter regulation and tax incentives,

Banks in the SEZs will be exempt from domestic banking rules like cash reserve ratios and will be able to offer credit at international rates - much lower than domestic rates - to exporters in the zones. Exporters in the SEZs will be free to make overseas investments, to engage in commodity hedging, and would get tax concessions.

India needs to "release itself from feelings of export pessimism and apathy," Maran said. "Anti-export bias both in policies and mindset needs to be corrected. Unless capacities are created in India specifically for the export market, it's unlikely export growth expectations can be met."

Secretary-General of the Federation of Indian Chambers of Commerce and Industry Amit Mitra said: "Without removal of these restrictions, you can't have a big boost in exports." Confederation of Indian Industry trade analyst K.C. Ravi added: "The focus is export-oriented and a lot of procedures have been simplified."

Mr Maran said that the government would also abolish import duty on uncut diamonds which should put India on the road to becoming "a major international centre".

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