Gujarat polls: Centre unveils Rs. 8,500cr export sops
Ahead of Gujarat polls, Congress has mobilized its alliance with Patidars and Dalits, promised sops for farmers and enticed small traders who are upset about GST. This may have made the BJP wary. Thus, to blunt the impact of GST, a major poll issue, government has announced export incentives of Rs. 8,500cr. These incentives target labor-intensive sectors like agriculture, leather, carpets and marine products.
What is the criticism against the government?
The government has been facing immense criticism from exporters about slow refunds and reduced drawback rates (tax refunded to the payer) of input tax reimbursement, meant to counterbalance the impact of taxes. Due to this, exporters experienced a drop in goods exports in October 2017.
How is government addressing these criticisms?
The government announced 2% higher incentives under the Merchandise Export from India Scheme (MEIS). Other initiatives include increasing MEIS scrips' validity from 18 months to 24 months and introducing zero GST on sale of scrips. MEIS is popular among exporters because some sectors are given duty credit scrips. These scrips allow the exporters to import commodities without paying the equivalent amount in import duties.
Why do these announcements come at a strategic time?
This announcement comes at a strategic time. As per an ASSOCHAM report, for 2014-15, Gujarat along with Maharashtra accounted for the country's 46% merchandise exports. Thus, these incentives may have been announced, keeping in mind the Gujarat polls. Commerce minister also spoke about re-orienting the focus on the farm sector, announcing sops worth Rs. 1,400cr to address farm distress.
FTP also addresses another issue of unemployment
Overall, there is a 34% rise in sops announced in this Foreign Trade Policy (FTP) mid-term review. The FTP also urges Indian companies to participate in global value chains even as MNCs like Apple look for expertise and inputs from other countries to manufacture iPhones. This will boost employment generation. Unemployment is a major poll issue in Gujarat as about 3L youth are jobless.
Meanwhile, BJP banks on OBC votes to off-set Patidar rebellion
Meanwhile, apart from wooing back traders/exporters, BJP is convinced that OBCs will help them in retaining Gujarat. OBCs constitute 40% of Gujarat's population. In past elections, OBC votes have been equally divided between Congress and BJP. However, as Congress has promised Patidar quotas, OBCs are uneasy about sharing reservation benefits with them. To tap into their anxiousness, BJP has fielded more OBC candidates.
