Indian Gov’t Boosts Export Incentives

Apr. 23 – Last week, the Indian government announced a variety of measures to boost India’s exports, including added benefits to special economic zones (SEZs), and a slew of incentives for exporters.

In regards to India’s SEZ scheme, the new rules will allow information technology (IT) firms to claim tax breaks by moving offshore work to “duty-free enclaves” and reducing their minimum land area requirements.

“We have taken note of the fact that there are acute difficulties in aggregating large tracks of uncultivable land which is vacant and contiguous and we have decided to reduce the minimum land area requirement by half for different categories of SEZs,” said Anand Sharma, India’s Minister of Commerce and Industry.

Furthermore, the government has also decided to extend its Export Promotion Capital Goods policy and its subsidized interest rate scheme. The policy allows exporters to import machinery and capital goods without any tariffs or duties, and allows specified exporters to obtain bank loans at a cheaper rate. The scheme will now expire March 2014.

Overall, the newly introduced incentives will cost India an estimated 30 billion rupees, or US$555 million.

Indian Finance Minister P Chidambaram addressed the need to fix India’s current account deficit (CAD) problem by boosting exports and expanding overseas into new territories and markets. India’s CAD – which is the gap between the outflow and inflow of foreign currency – reached a record high 6.7 percent during the October-December quarter.

These measures were announced as trade data released last week showed that India’s exports declined by 1.76 percent to US$300.6 billion in 2012-13, a figure that was 16.5 percent short of the Government’s previously stated goal. However, March exports have grown 6.97 percent year-on-year.

---