In exports, the budget proposed to increase allocation for a key scheme, the Remission of Duties and Taxes on Export Products (RoDTEP), by 10%, from Rs 13,699 crore in FY23 to Rs 15,069 crore, in the next financial year. The outgo for the Rebate of State and Central Taxes and Levies (RoSCTL), a key scheme for exports of apparel or garments and made-ups, was raised from Rs 7,461 crore in FY23 to Rs 8,405 crore in FY24. The two export schemes refund to exporters the embedded non-creditable central, state and local levies paid on inputs.
“Various measures taken in the budget aim to support domestic manufacturing, which will positively impact exports,” said Mahesh Jaising, partner, Deloitte India. “The Budget 2023 has increased the allocation for some key export-boosting schemes such as RODTEP & ROSCTL by approximately 10%, which in turn will promote exports amid weak global sentiments.”
There was also a 23% increase in the allocation for the Interest Equalisation Scheme, from Rs 2,376 crore in 2022-23 to Rs 2,932 crore in 2023-24. The scheme provides subsidies for pre- and post-shipment rupee export credit.
The increased budgetary allocations for key exports schemes would support exports, particularly by MSMEs, according to a post-budget release issued by the trade promotion organisation, the Federation of Indian Export Organisations (FIEO). The budget also increased allocation for the market access initiative (MAI) scheme from Rs 160 crore in FY23 to Rs 200 crore in FY24. However, FIEO also claimed that the increase might not be sufficient for better showcasing of Indian products overseas. “This may not be adequate as the global trade shows are increasingly giving opportunities for showcasing, which needs to be exploited. A planned scheme for aggressive overseas marketing may be notified with a sizeable corpus to encourage exporters to showcase globally,” said FIEO President A Sakthivel.
A section of experts were also of the view that a mere increase in budgetary allocation for some schemes should not be considered as an incentive to boost exports.
“It is important to note that increased budgetary allocation for RoDTEP is primarily due to the addition of few more tariff lines. The expanded list of eligible export items under Appendix 4R will increase from 8,731 export items (8-digit tariff lines) to 10,342 export items (8-digit tariff lines). This essentially means that increased budgetary outlays is not going to make a difference. Most importantly, RoDTEP is not an export promotion scheme. It is a refund of duties and taxes which were paid by exporters during the manufacturing of goods at some point of time. Therefore, it need not be considered as an incentive,” said Surendar Singh, Associate Professor, FORE School of Management. Singh was also critical of the government for drastically bringing down the allocation for the Transport and Marketing Assistance (TMA) scheme.
Launched in 2019, the TMA scheme was introduced to provide support for the international component of freight and marketing of agricultural commodities. In budget 2023, the allocation for TMA was just Rs 1 lakh, against Rs 545 crore last year.
“Incentives given under Transport and Marketing Assistance have been drastically reduced without recognising the fact that it is critical for offsetting the disadvantage of high logistics costs. The scheme is useful for landlocked states like Punjab, Haryana and Uttar Pradesh,” said Singh. “Likewise, the budgetary allocation for the PLI scheme has been reduced in the budget, which is opposed to the government’s policy stance of promoting manufacturing under self-reliant India. The major decrease was for the PLI Scheme for large-scale electronics production. In contrast to the projected allocation of Rs 5,300 crore for 2022-23, the revised estimate is just Rs 2,300 crore, while the sector has been given Rs 4,600 crore for the next fiscal year.”
The government launched a production-linked incentive (PLI) scheme in 2020. The scheme offers cash incentive for three to five years on the incremental sale of goods manufactured in the country. However, the selected beneficiaries must commit to a certain minimum investment in India.
Sectors to watch out for
The government ensured there was something for all sectors in the budget, especially technologically intensive areas. For instance, the budget proposed reduction of customs duty on aqua feed in the agriculture and allied sector, and research and development grant and scrapping of customs duty on seeds used in the manufacturing of rough lab-grown diamonds.
On the sectors expected to gain from the budget, Jaising of Deloitte said, “The benefit is spread across all sectors but some sectors such as steel and base metals, chemical, gems & jewellery would benefit the most.”
There were also moves to reduce logistics costs via infrastructure investments, besides scrapping of import duties on some items. “The government’s decision to reduce import duties in some sectors is a good step and will certainly augment manufacturing. Reduction in import duties will ease out Indian domestic firms to source competitive imports from international markets for export manufacturing. Import duty reduction for the import of lithium-ion cells for batteries is an important development as it will help the country to boost its battery manufacturing. However, it is important to note that import tariff reduction can only be useful when we do not have domestic capacity to supply those inputs,” said Singh.
