The country’s exports will likely face a temporary “slowdown” due to the cash crunch following the announcement of demonetisation on November 8, according to Commerce Secretary Rita Teaotia.

Already, merchandise exports witnessed a rise in only three of the past 23 months through October. Small and Medium Enterprises, who deal mostly in cash, have been particularly worried after demonetisation.

“It is a fact that perhaps the demonetisation process, as has been pointed out, may cause a momentary setback (to) or momentary slowdown (in exports),” Teaotia said.

The merchandise exports data for November are scheduled to be released, which would bring further clarity on the extent of slowdown.

However, demonetisation should be viewed as an opportunity for capitalising “on the benefits that we can get from a far more transparent, far more open and let me say far less messy cash-based transactions,” she said. In the long run, the gains to the country from demonetisation — combined with the rollout of the goods and services tax — will be substantial.

Separately, Teaotia told PTI that the Commerce Ministry has initiated a broader consultative process with all export promotion councils to gauge the level of adaptation to demonetisation.

Commerce and industry minister Nirmala Sitharaman has already held meetings with exporters following
demonetisation and assured them that she would take up their demand of raising the cash withdrawal limit with the finance ministry to minimise the impact on production chain.

In one of the meetings, exporters had sought up to a ten-fold hike in the cash withdrawal limit from the current R50,000 a week to be able to conduct certain necessary business transactions.

At an awards ceremony, organised by the Engineering Export Promotion Council, said the engineering sector is “leading the reversal of the decline of exports over the last two years and has allowed us in October to register a growth of 9.6% in overall exports from India”.

EEPC India Chairman T S Bhasin said notwithstanding the short-term difficulties, the digitisation would lower transaction costs for exporters in the long run. From the exporters’ point of view, Bhasin added, revising upward the investment limit of plant and machinery in the micro and small enterprises would be as big a step as demonetisation.

Source: Financial Express