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Uncertain times ahead for exporters as RBI’s draft OEIF guidelines excludes services exports.


Date: 26-09-2022
Subject: Uncertain times ahead for exporters as RBI’s draft OEIF guidelines excludes services exports
The clarion call is to enhance the exports, especially for the MSME from 48% to that of 60%, similarly to improve balance of trade export is to be a major focus. The consumer behaviour is now more and more ‘shopping through digital mode’, whether it is FMCG or metals or other goods. The payment is, therefore, real time and in digital mode. The exports are both of goods and services; however, some of the recent policies seem to have missed out on the ‘services’ as a major source for export.

India has always been a leader in services exports with a consistently growing share in the global services exports market. In 2015, India’s share in global services exports was 3.1% which rose to 3.9% in 2021 and is expected to rise further as India targets $1 trillion in exports by 2027. Apart from large value IT and BFSI exports which contribute significantly, there is also a microcosm of small value service exporters comprised of freelancers, entrepreneurs and professionals, who make up India’s thriving microeconomy. India’s newfound momentum on free trade agreements is also providing a thrust to services exports and focussing on digital cooperation.

After a stellar year of achieving record services exports in 2021, India is looking to clock $350bn worth of services exports in 2022-23, a growth of 40% over the previous fiscal year as key sectors including travel, health, hospitality, education, and entertainment set to post swift recovery post-pandemic. Nearly 65% of e-commerce transactions comprise services exports. The services exports target for FY23, revised upwards from $300 bn to $350 bn, was recently conveyed to the industry in a meeting called by Commerce and Industry Minister Piyush Goyal.

However, despite such a tremendous focus on enhancing services exports from India, the Reserve Bank of India's draft Online Export-Import Facilitators (OEIF) guidelines, which are set to replace Online Payment Gateway Service Providers (OPGSPs), have excluded services exports. The present OPGSP guidelines in effect for the past 12 years include the export of services, defined as “the facility shall only be available for export of goods and services (as permitted in the prevalent Foreign Trade Po ..

Over 3-lakh SMBs derive their income from the related e-commerce that OEIFs facilitate. These 3-lakh SMBs provide indirect employment to another 10 lakh individuals thereby compounding the effect of these draft guidelines. Currently, about Rs 15,000 crores worth of inward payments are processed annually. The guidelines, if implemented, will result in reversing India’s leadership position in the global freelancer economy and will allow neighbours like Bangladesh to race ahead of us. The draft gui ..

Another key impediment in the draft guidelines is the requirement of KYC/AML/CFT norms as stipulated in the Master Director of KYC issued by the RBI. These guidelines effectively require exporters from India and importers from overseas to be compliant with RBI’s KYC norms. Such blanket application of the KYC master directions to OEIFs will significantly impact the ease of doing business for SMBs. Since these export transactions take place through established banking channels where KYC is complet ..

In April 2022, RBI Governor Shaktikanta Das during the Monetary Policy Review briefing had said, “Despite the worsening global supply shocks slowing the recovery in the world economy, India’s merchandise exports grew robustly in 2021-22 overshooting the target of $400 billion.” On services, he had highlighted that sustained and robust growth in the services exports and inbound remittances continued to keep our (India’s) invisible account in large surplus, which helped to partly straighten out th ..

Given the resilience of the MSMEs during the pandemic, it is essential to provide a level-playing field and support to tide in a post-pandemic world. They partnered with online platforms and digital payment players to pivot and meet the changing demands of their consumers. Quite a few businesses, instead of shutting down, shifted their line of business to goods and services that were in demand and benefited from the recovery seen in other economies. In conclusion, the sector that was once grappl ..

 Source Name:-Economic Times
 
 

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