Export growth: Slow GST refunds, volatile currency may hit Feb numbers

New Delhi, Mar 15: The slowdown seen of late in India’s export growth rate is likely to continue in February as well, thanks to a slow disbursement of Goods and Services Tax (GST) refunds, low growth in labour-intensive sectors and a volatile currency, say experts.
With a value of $24.38 billion, India’s exports in January grew by 9.07 per cent, a single-digit rate for the first time in three months. Earlier, the statistics for December 2017 had been unnerving, with the growth rate for the month more than halving to 12.4 per cent from November’s 30.5 per cent.
Currency volatility
An analysis by Bloomberg Economics showed that the historical link between exports and exchange rates was the highest in India in the decade through 2017, followed by China, Malaysia and Japan. The value of the Indian rupee continued to strengthen over February from the Rs 63.9 a dollar seen on February 1 to the Rs 65.1 value of a US dollar on the last day of the month.
Labour-intensive sectors
A negative fallout might be most visible in labour-intensive sectors, which continue to be stressed. These have been persistently dogged by a crippling liquidity crisis since the implementation of the Goods and Services Tax (GST) regime and might show signs of a deepening contraction.
“More than 6 per cent of the export growth in January had been contributed by petroleum products. More importantly, labour-intensive sectors like garments, carpets, handicrafts, and man-made textiles exhibited negative growth, primarily due to liquidity crunch because of funds getting blocked under the GST regime,” Ganesh Kumar Gupta, president of the Federation of Indian Exports Organisations, said.
The export of readymade garments fell 8.4 per cent to $1.39 billion, while major sectors saw a reduction in growth rates. They were engineering goods, which grew 15.77 per cent in January, compared to 25.32 per cent in December, as well as gems and jewellery, which rose 0.89 per cent from 2.38 per cent in December.
GST issues refuse to subside
Even as the Prime Minister’s Office has now stepped into the export refund mess, traders continue to complain over procedural bottlenecks in filing GST which haven’t been solved over the past six months. The industry claims that basic problems in electronic filing have persisted as some declarations are being insisted upon by tax authorities which are legally difficult to provide.
For example, exporters are required to declare that they have not or will not claim drawback. But many have already taken the drawback as the rules had allowed them. Till now, exporters have waited for the correction in RFD-01 declaration, as they fear they may be hauled up for mis-declaration, Ajay Sahai, director-general of apex body for exporters, Federation of Indian Exports Organisations said.
“While the declaration part has been corrected only on 8 march, but a glitch in the refund calculating software has now remained”, said Ajay Sahai, director-general of apex body for exporters, Federation of Indian Exports Organisations. Post-GST, duty drawback can only be used for customs duty refunds on inputs used and not for excise purposes.
Even those who have been able to file the applications, haven’t been able to give the manual copies which is require to complete the process. The simple reason behind this is that tax authorities refuse to accept them citing no instructions to do so while some have asked for bribes to accept these, multiple exporters said.
While only 10 per cent of refunds has been made by the government for input tax credit and 30 per cent in case of the integrated GST (IGST).