Export Assistance and Incentives
INTRODUCTION
Export incentives Devices used by countries to encourage exports. These can include tax incentives for exporters, allowing them exemptions from the normal provisions of anti-monopoly legislation, preferential access to capital markets, priority
Developing countries have started manufacturing industries only recently. As a result, their cost of production generally tends to be high because of the following reasons:
Total market availability within the country is small with the result that the economies of large-scale production cannot be reaped.
Productivity of labor is low because the level of mechanization as compared to that in the developed countries is low.
Manufacturing units in developing countries, being small and new, have considerably less expertise in the field of international marketing and because the volume of exports is low, the per unit cost of trade promotion expenditure tends to be high.
India has to raise higher resources for development which has to be done through a number of indirect levies which tend to push up the overall cost of production.
Most developing countries have, therefore, resorted to a number of export promotion measures. India has also been providing export assistance to Indian exporters.
However, the WTO Agreement on Subsidies and countervailing duties does not allow specific types of export subsidies. The Government of India is, therefore, removing those export incentives which are not WTO compatible.
NEW SYSTEM OF EXPORT ASSISTANCE:
From 1992, export incentive system in India has been made simple. There are essentially three major incentives. These are: (1) Market-based Exchange Rate; (2) Fiscal Concessions, and (3) Facilities under the Export-Import Policy. These are discussed in detail below:
MARKET BASED EXCHANGE RATE:
For long, external value of the rupee was managed by the Reserve bank of India (RBI) by pegging the value of the rupee to a basket of currencies. RBI used to keep the value of the rupee at
Export incentives Devices used by countries to encourage exports. These can include tax incentives for exporters, allowing them exemptions from the normal provisions of anti-monopoly legislation, preferential access to capital markets, priority
Developing countries have started manufacturing industries only recently. As a result, their cost of production generally tends to be high because of the following reasons:
Total market availability within the country is small with the result that the economies of large-scale production cannot be reaped.
Productivity of labor is low because the level of mechanization as compared to that in the developed countries is low.
Manufacturing units in developing countries, being small and new, have considerably less expertise in the field of international marketing and because the volume of exports is low, the per unit cost of trade promotion expenditure tends to be high.
India has to raise higher resources for development which has to be done through a number of indirect levies which tend to push up the overall cost of production.
Most developing countries have, therefore, resorted to a number of export promotion measures. India has also been providing export assistance to Indian exporters.
However, the WTO Agreement on Subsidies and countervailing duties does not allow specific types of export subsidies. The Government of India is, therefore, removing those export incentives which are not WTO compatible.
NEW SYSTEM OF EXPORT ASSISTANCE:
From 1992, export incentive system in India has been made simple. There are essentially three major incentives. These are: (1) Market-based Exchange Rate; (2) Fiscal Concessions, and (3) Facilities under the Export-Import Policy. These are discussed in detail below:
MARKET BASED EXCHANGE RATE:
For long, external value of the rupee was managed by the Reserve bank of India (RBI) by pegging the value of the rupee to a basket of currencies. RBI used to keep the value of the rupee at