Govt loosens purse strings, announces relief for exporters

To cushion the damage caused by the appreciating rupee, the Government on Saturday announced some more relief measures for the exporters...

To cushion the damage caused by the appreciating rupee, the Government on Saturday announced some more relief measures for the exporters and expanded the list of sectors that are eligible for lower bank lending rates.

“The government has broadened the list for the exemption of service tax for general insurance services, technical testing and analysis agency and inspection and certification agency services for exporters,” a finance ministry statement said on Saturday.

The rupee hit 39.36 per dollar on Thursday, its strongest since March 1998, and has gained 1 per cent this week. Since the US Federal Reserve’s rate cut, the rupee is up more than 2.5 per cent and has risen nearly 12 per cent this year.

The surge has triggered complaints from small and medium-sized exporters, who account for nearly 45 per cent of the country’s exports. “The government has been monitoring the situation arising out of the appreciation of the rupee,” the statement said.

“The appreciation of the rupee is a reflection, in part, of the growing strength of the economy and has positive economic benefits by way of cheaper imports. However, the rapid appreciation of the rupee in recent weeks has adversely affected exporters who had contracted export orders earlier.”

Last month, the government announced a refund of the service tax that exporters pay for transporting goods in major ports, and from inland container depots to ports through rail and roads.

Regarding the daunting target of $160 billion set for exports till March 2008, analysts argue that the surge in the value of the rupee is expected to moderate export growth in the months ahead.