“There is still a shroud of uncertainty over the fragile nature of global economic recovery. Even as global economic rebalancing is proceeding apace, it is not going to be an easy patch for our exporters,” Sharma said. “We also have to be conscious of the need for and the inevitability of fiscal consolidation,” he said. “Suffice it to note that the level of resources available today may not be available in the future.” India has been saddled with a high fiscal deficit and aims to cut the deficit to 4.1 percent of GDP in 2012/13 from 5.5 percent projected for this fiscal year. The need for fiscal prudence stopped Sharma from providing incentives for all export-oriented sectors and instead focus on labour-intense industries and those which are important for capacity expansion in the economy.
As part of the new incentives, the government will allow duty free imports of capital goods until end-March 2012 and provide an interest subsidy of 2 percent to textiles, leather and jute industries for 2010/11. It will also continue to refund taxes paid as custom duties until end-June 2011. Sharma said the additional export incentives would cost the government $214 million in the current financial year. Continue reading