INDIA: Downslide feared in textile exports

NEW DELHI: The annual supplement to the Foreign Trade Policy (FTP) has baffled the exporters as there is a fight between the commerce and finance ministries on the exemption of the 12.36% service tax on exports. The exemption was eagerly awaited by the exporters.

The commerce ministry said that the waiver announcement was not made unilaterally and that the decision was taken after meeting the Prime Minister. Earlier the finance ministry had said that the decision was suo moto.

Textile exports which are on the growth path would see a downslide if steps are not taken immediately. The export performance of these sectors which are labour-intensive is not satisfactory.

The Federation of Indian Export Organisations (FIEO) president G K Gupta said "The announcement of exexption of service tax on exports in FTP by the commerce minister was thought as a boost for the flagging export market. He said both the commerce and finance should take a combined decision about the exemption. He wondered why the decision was made public till an aggreement has been reached.

Gupta said the FIEO has received reports from many labour-intensive and employment-intensive sectors that there will be substantial growth in exports in 2007-08.

Textile exports showed a growth of 7% in 2006. If the service tax on exports is not abolished they are not expected to show any increase he added.

Mr. Gupta said said the appreciation of the rupee by over 13% last year has badly hit exporters. The has RBI also failed to counter the reverse trend in FTP he concluded.


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Added: April 26, 2007 Source: Agencies
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