India's exports could grow nearly 12 percent to $275 billion in the fiscal year that began in April, lower than the government's target, partly due to rising interest rates, even if tax incentives continue, the head of an exporters' body said on Tuesday.
The finance ministry is reportedly considering not extending beyond June 30 a tax incentive scheme for exporters under which the government reimburses about $1.8 billion a year to exporters on taxes paid on imported inputs. About 25 percent of the country's exports, or around $70 billion, could be affected if tax incentives under the Duty Entitlement Pass Book (DEPB) scheme are withdrawn, said Ramu Deora, president of the Federation of Indian Export Organisations (FIEO).
DEPB is set to expire on June 30 and, therefore, exporters are unable to book orders for the third quarter onwards, he said. India's merchandise exports rose an annual 37.5 percent to about $246 billion in the last fiscal year, surpassing the initial target of $200 billion, as demand soared for engineering goods, oil products and gems.
India hopes to achieve at least 25 percent exports growth in the 2011/12 fiscal year, and aims to double its merchandise exports within three years, Trade Minister Anand Sharma had said last month. Earlier in April, the government rolled back a 2 percent interest subsidy paid to exporters, as it seeks to rein in fiscal deficit - estimated at 4.6 percent of gross domestic product in 2011/12.
Deora said exporters got around $5.1 billion of tax incentives under various schemes. Indian exports could be hit by rising costs of funds, input material and currency appreciation as well, he said, and the government may miss the annual target of around $312 billion for this fiscal year. "If Indian exporters get credit at 10.5-11 percent compared with less than 5 percent rate in other countries, they could be totally out priced in global markets," Deora said.