Covid19 has taught governments across the globe that economy cannot run on auto pilot. One cannot keep on taxing citizens to feed the poor, the main vote banks of the world’s largest democracy. In this difficult scenario one needs to take care of various sectors of the economy. Only when the economy prospers, will the nation prosper. This in turn will keep current account deficit in control.
Unlike USA, India has resorted to offering cheaper credit and various other non-cash incentives in the pandemic to MSME sectors rather than cash distribution to its citizens. This has resulted in controlling fiscal deficit too. However the government almost forgot to give direction and keep the incentives schemes going for exports. This kept India’s second largest employer, textiles and apparel sector, on tenterhook.
In mid-July, 2021, government decided to extend the ‘Rebate of State and Central Taxes and Levies’ (RoSCTL) scheme on apparels and made-ups till 31 March 2024 and other existing schemes for the sector with same rates as notified by the Ministry of Textiles in March 2019. This move will likely add another 4-6 million jobs ahead, according to the apex textile body The Textile Association (India). According to the government, the move is “expected to make these products globally competitive by rebating all embedded taxes/levies which are currently not being rebated under any other mechanism. It will ensure a stable and predictable policy regime and provide a level playing field to Indian textiles exporters. Further, it will promote start-ups and entrepreneurs to export and ensure the creation of lakhs of jobs.”
“From the last three-four years, textile exports were stagnant at around $38-40 billion. The government is now targeting to touch $80 billion by 2024-25. In the upcoming textile policy, the government is also aiming to make Indian textiles more competitive in the world. The biggest beneficiary here would be MSMEs and enhance India’s competitiveness against Bangladesh, Vietnam, Myanmar, etc…..” RK Vij, Vice President, The Textile Association (India) told Financial Express Online.
NPowersU Expert Opinion
Government has rightly given direction to the manufacturing sector by extending the incentive scheme.
However what about the incentives and boost to the service sector which contributes most as a percentage to GDP than the manufacturing sector? Equalisation levy, GST and TDS levied on same set of transactions in the Information Technology (IT) sector has led to non-resident enterprises passing of all these taxes on the Indian IT industry. IT sector utilizes such services and is unable to jack up charges on its exports due to global competition. Thus making it uncompetitive. It is an open and known fact that IT sector can do wonders to the Indian economy in the near future by its phenomenal contribution to the GDP. However blinded by revenue targets and its bureaucratic adherence by the tax department, the government has still now turned a blind eye leading to step-governmentally treatment to the IT sector.
To end the blog with a funny statement we can state as under:
‘It is high time that the Indian government finds its ‘Sanjay’, just as blind ‘Dhritarashtra’ of the Mahabharata fame got verbatim happenings in his empire through his ‘Sanjay’ who would religiously and impartially share the same to help him take able decisions.’