The third set of economic stimulus announcement brought some favourable news for the importers and exporters of the country.
As a part of the ₹20 lakh crore economic package, the amendment to the Essential Commodities Act was announced so as to deregulate the prices of potatoes, onions, cereals and pulses. It will ensure that stock limits on imports be imposed only during the times of unforeseen events or calamities.
Finance Minister Nirmala Sitharaman stated that creating a facilitative legal framework will enable farmers in engaging with processors, aggregators, large retailers and exporters in complete transparency. Additionally, this framework will also proffer assurance to farmers on the quality and price of agriculture produce while dealing with aggregators, retailers and the likes from across India. A budget of ₹1.63 lakh crore is allocated with an intent to mitigate the risk for farmers and promote quality standardisation.
In a nutshell, agriculture marketing reforms from the centre will be formulated to offer:
- A barrier-free inter-state trade
- Enough options to sell produce at attractive rates
- Option to carry out e-trade of agriculture produce
Animal Husbandry and Fisheries Sector
The government has decided to launch a Pradhan Mantri Matsya Sampada Yojana for integrated, sustainable, inclusive development of marine and inland fisheries. This is aimed at sewing the critical gaps in the fisheries value chain and provide employment to over 55 lakh people.
To add on, this will help double exports to ₹1 lakh crore. Out of this, ₹11,000 crore will be set aside for marine, inland fisheries and aquaculture activities, and ₹9,000 crore will be allotted towards fishing harbours, cold chain, markets, to list a few.
A ₹15,000 crore Animal Husbandry Infrastructure Development Fund has been setup to encourage private investment in dairy processing and cattle feed infrastructure. Incentives will be given for creating plants for the export of niche products.
There is a need for India to reduce import of substitutable coal and enhance its self-reliance in coal production. For this, government is introducing the commercial mining of coal with an investment of ₹50,000 crores.
The FDI limit for the defence sector under automatic route will be raised from 49% to 74%. Additionally, FDI norms will be relaxed under the automatic route to attract overseas players in the sector.
Indigenization of imported spares used by the armed forces was announced. Any part that can be manufactured in India will not be imported. This will improve self-reliance on defence manufacturing under the Make in India scheme. This move will boost domestic manufacturing industry as India imports about 70% of its military hardware.
MSMEs towards Atmanirbhar India?
The recent announcements made by the government addressed creating demand for domestically manufactured products and promoting import substitution. In order to make that happen, the manufacturing sector in India needs additional labour force.
However, with the advent of COVID-19, the ‘new normal’ is the one where social distancing is practiced, leading to choppy supply chain and shortage of skilled workforce. With this becoming a permanent challenge, reliance on domestic industry might come across as a hitch.
To resolve this, preparation is needed, for which additional investment in infrastructure needs to be put in, such as, protective cells in assembly lines, PPE kits, safe ways for material handling. Perhaps a surgeon’s precision is required to mend the gaps between self-reliance and availability of funds.
Apparel Export Promotion Council (AEPC) has favoured the decision to leave more money in the hands of companies announced as a part of ₹20 lakh crore economic package to make India atmanirbhar (self-reliant).
Leaving more money in the hands of companies will spur economic growth and boost their ability to fight the adverse scenarios caused due to the COVID-19. Moreover, the announcement of ₹3 lakh crore collateral-free automatic loans for MSMEs will help them get over the liquidity crunch and lack of working capital brought in by the lockdown.
The EPF benefit under Pradhan Mantri Garib Kalyan Package (PMGKP) of 12% contribution by employer and employee towards EPF accounts has been extended till August 2020. This will also help cover all the apparel exporting units that are highly labour intensive and have a huge women workforce.
Support measures from RBI
Export Credit: RBI noted the impact of COVID-19 on Indian exports and imports and decided to increase the maximum permissible period credit of post and pre-shipment to 15 months for disbursals up to July 2020.
Liquidity Facility for Exim Bank: Given that global trade has contracted owing to the COVID pandemic, the financial markets have turned highly volatile and risk averse. Since Exim Bank predominantly relies on foreign currency resources for its operations, that are raised from international financial markets, it is facing a challenge in the international debt capital markets. Thus, a line of credit worth ₹15000 crore has been extended by RBI to the EXIM Bank for a period of 90 days from the date of availing with the rollover facility of up to one year so as to enable it to avail a US dollar swap facility for fulfilling its foreign exchange requirements.
Time Extension for Payment for Imports: Thecross-border restrictions due to COVID-19 have imposed slowdown in manufacturing and sale of finished products. It has further led to delays in realisation of sale proceeds from domestic and international markets. This has stretched the operating cycle for business entities, and they are finding it hard to pay for their imports within the stipulated period under the Foreign Exchange Management Act (FEMA). Thus, for importers to manage their operative cycle, outward remittances against normal imports is bought down from 12 to 6 months.