Remove the value cap on exports by courier for an SME trade boom

Source: The post is based on thearticle “Remove the value cap on exports by courier for an SME trade boom”published in Mint on 13^thMarch 2023.

Syllabus: GS 3 –Indian Economy

Relevance: concerns with export sector in India

News: The International Monetary Fund (IMF) has predicted that India will be the world’s fourth largest economy by 2027 with a GDP of about $5.53 trillion.

The article highlights the measures required in the export sector to reach this target.

What are some measures taken by India to support growth and trade?

Measures taken by India are – a) GST, b) production-linked incentive program, c) PM Gati Shakti National Master Plan for Multi-modal Connectivity and the National Logistics Policy of 2022, d) various trade agreements, e) onboarding small and medium enterprises (SMEs) to digital platforms.

These are some of the steps taken by India to increase its export and its integration in global value chains.

However, despite these efforts challenges still exist with India’s export sector.

What are the challenges associated with exports?

India’s share in global exports is less than 2% and the country is struggling to meet export targets of $1 trillion of goods and services each by 2030.

This is because of certain restrictions faced by SME exporters. SME exporters lack integration in global value chains, and they also face barriers while using express delivery services.

What are the problems with SMEs in using express delivery services?

The express delivery sector is regulated by the Courier Imports and Exports (Electronics Clearance) Regulation, 2010. This law makes India the only country with a value limit of ₹5 lakh on exports of goods through courier/express mode.

Therefore, high-value shipments are exported through the general cargo mode which causes delays.

This adversely impacts the ability of SMEs in high-value sectors like gems and jewelry, handicrafts, electronics and auto component goods to use express delivery services (EDS) at reasonable cost.

Even though there have been significant changes in India’s express delivery industry over the 25 years, the value restriction continues.

What can be the way ahead?

First, there is an urgent need to review the 2010 Courier Imports and Exports (Electronics Clearance) Regulation and align it with the demands of modernization and with upgraded infrastructure and global best practices.

Second, Indian exporters compete with exporters from countries like Malaysia, Vietnam, China or Thailand in global markets. Therefore, the limit should be removed, and Indian exporters should be provided a level playing field with other countries.

Third, the upcoming Foreign Trade Policy should examine the adverse implication of value limits on exports through the courier mode and push for their removal.