Like even Harvard Business Review equates Indian innovation to "jugaad", strictly in line with this thought, we have the FTP being worked upon to play saviour to exporters. So, first we hurt and then we heal. Is't?

Steven Philip Warner | September 2017 Issue | The Dollar Business


India's foreign trade community. I think it's time we change that to India's foreign trade business community. "Business" being that needed addition. India's exporters are now quite getting used to "outbursts" that appear less thought through. High time they get a rational, plan-on-paper to work with.

Fine. Ours is still an imperfect union, bound by the trust that we will always improve. Until November last, until demonetisation struck, much working capital was floated around in the form of cash unaccounted for. Then, exporters learnt overnight that "moral" wins over "business". Even the most unwilling of moral policemen will agree that our exporters were affected negatively for a brief period.

Then came GST. It strummed the deepest chords of grievance and resentment amongst the exports business community, especially those in the MSME segment, who now have their working capital locked up, thanks to the 'pay first, refund second' rule under GST. (As per industry estimates, exporters' working capital in excess of Rs.1.85 lakh crore could get stuck due to upfront IGST duty payments per year.) The new tax regime has brought in newer headaches for exporters. The doing away of upfront IGST payment exemption on export-related imports and local sourcing results in a reduction of import duty benefits under the current FTP, including those which exporters earlier enjoyed under DFIA and Adv. Auth. schemes. The limit on scope of usage and increase in tax incidence on duty credit scrips gives rise to concerns that exporters may fail to use the scrips within the validity period of 2 years. Restrictions on Advance Release Order facility under both EPCG and AA schemes will further ensure that a significant portion of an exporter's working capital remains blocked, thus raising cost of capital. Even EOUs, EHTPs and STPs have been at the receiving end.

Like even Harvard Business Review equates Indian innovation to jugaad, strictly in line with this policy, we have the FTP being worked upon to play saviour to exporters. So, first we hurt and then we heal? We have every kind of logic floating around as to how the FTP should be that movement on paper that will help Indian exporters break the shackles of stagnation. Mind you – every movement isn’t progress! This revision has to be more than just jugaad for Indian exports! The fine print will need to be altered for it to have consequences far beyond renamed schemes.

With GST coming in, a big percentage of Indian exporters feel their costs will rise because they have been forced to transition from a “literally tax free” to a “tax-onall-products” regime. And this when non-tariff trade barriers remain a silent bother, inverted duty structure and high cost of borrowing for export credit are prevalent, lack of a national plan for manufacturing clusters and absence of any strategy to link even the existing export temples to ports coexist, and fall in exports in traditionally strong segments (like agriculture, textile, etc.) and to a market like Africa are present realities.

Indian exporters need an FTP that’s symbolic of multiple factors – freedom (from domestic dependence), justice (to exporters), imagination (of reaching beyond the targeted 5% world exports share), ambition (of being able to bully China and Trump), enduring (of being a policy that’s likely to stay put for many months), and inspiration (with a belief that the government is on their side!).

It’s high time we treat India's exports community like India's exports ‘business’ community. And if this business community doesn’t win, the nation loses. This is an especially delicate moment for India, one that needs more than just “movement”; one that needs “progress”.