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A combination of higher input costs, tariff uncertainty, IGST refund woes leads to export contraction in September, the first time in six months
Exporters in India are not happy with the current policy and exchange rate situation even though they should be cheering the depreciating rupee. A combination of higher input costs, uncertainty over tariffs, and the fact that the government has said it would not be refunding them the Integrated Goods and Services Tax (IGST) they have paid, has meant that exports contracted in September for the first time in six months. Exports contracted by 2.34% in September, albeit on a high base, despite the rupee averaging more than 72 a dollar during that month. Over August and September, when the rupee averaged 70.8 per dollar, India’s average export growth stood at 8.5%. Compare this to the 16.8% export growth rate in the same period of the previous year, when the rupee averaged a much stronger 64.2 to the dollar. A depreciating rupee should ideally be good for exporters, since it means that India’s exports are relatively cheaper than they were before. However, export bodies such as the Federation of Indian Export Organisations (FIEO) have said that this benefit is not passing through to exporters. Others, however, say that they are receiving the benefits. It is up to the Indian government to clarify this situation with the U.S. government. The Commerce Ministry has also been somewhat casual about this issue, the exporters say, with officials shrugging the issue off by saying that Indian businessmen have been canny enough to invest in countries that are still eligible for GSP benefits, and so they have been able to indirectly avail of those benefits through that route. The government has also maintained a stubborn stance on IGST refunds., say exporters. The Centre argues that since the exporters have been receiving duty drawback on input taxes paid, they are not eligible for IGST refunds. Exporters say this view lack skews the playing field in favour of exporters operating in a single State. An exporter with operations in one State is eligible for Central GST and State GST refunds, but an exporter with operations across States gets no IGST refund. Many of them say the bulk of their working capital — in many cases more than 50% — is tied up in IGST refunds.
Source : https://www.thehindu.com/todays-paper/tp-business/depreciating-rupee-comes-as-no-solace-to-exporters/article25355664.ece
