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  3. Commerce Ministry sets up panel to suggest steps to lower transaction cost for exporters

Commerce Ministry sets up panel to suggest steps to lower transaction cost for exporters

08 Mar 2013 Evaluate

Concerned over the declining exports and widening trade deficit, the Commerce Ministry has set up a panel to recommend steps to cut down transaction cost with a view to make exports more competitive. 

The panel headed by Minister of State for Commerce and Industry, D Purandeswari, is expected to submit its report within three months. The committee would examine the problems faced by exporters that pushed their transactions costs. Exporters have been bearing the burden of high transactions cost, which have been affecting the country’s exports. It is reported that the quantum of transaction cost is about 7-10% of the total value of Indian exports, which amounts to a significant $15 billion. Further, average cost to an exporter on account of transaction cost has been monetized at a level of $945 per container as against $460 in China, $450 in Malaysia and $625 in Vietnam. 

As per the Apparel Export Promotion Council Chairman A Sakthivel, ‘these figures clearly reflect the burden of transactions cost on exporters. It needs to be eliminated in order to boost exports and reduce trade deficit.’ Apex exporters’ body, FIEO also suggested that complete electronic flow of all the relevant documents will help in reducing the cost substantially. Currently about 13 agencies are involved in exports that include DGFT, banks, RBI, customs and chambers but the flow of document is not smooth among them.

Earlier in 2011, the government had announced 21 steps, like round-the-clock customs clearance at eight major ports, reduction in bank charges on foreign currency and concessional loans to cut transactions cost. 

India's exports, marking a recovery after a gap of eight months, grew by a marginal 0.82% in January, but trade deficit widened to around $20 billion, the second highest figure ever in a month. However, during April-January period, overseas shipments shrunk by 4.86% to $239.6 billion. The CAD had touched a record high of 5.4% of GDP in the July-September quarter.

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