Budget likely to up outlay for market development fund

The Budget to be presented on July 6 is likely to substantially hike outlay for the market development fund to promote exports to the Latin American and African countries, according to two senior government officials.

This comes in the backdrop of declining demand from traditional export markets like the US and Europe due to the ongoing global economic crisis.

"The commerce ministry aims to tackle the demand slowdown expeditiously. For this, expenditure on special promotion measures like the Market Development Access and Market Access Initiative will be increased substantially," said a senior commerce ministry official in the know.

The increase in allocation to MDA and MAI would be mainly towards developing nations like Brazil and South Africa.

At present, the size of market development funds (both MDA and MAI) is only Rs 300 crore (Rs 3 billion) per annum, according to the Federation of Indian Export Organisations, which has demanded an increase in the fund size to Rs 5,000 crore (Rs 50 billion).

The government officials said finance and commerce ministries were discussing the quantum of increase in the fund size, but early indications were that it would be increased to at least Rs 2,000 crore (Rs 20 billion) for 2009-10.

"We are actively encouraging industry bodies to diversify and tap new markets. Increase in market development funds will be there," said another government official.

India's exports have been in the negative territory ever since the collapse of banking giant Lehman Brothers heightened the financial crises post-September. In the fiscal gone by, exports expanded by a mere 3.4 per cent to $168.7 billion, falling short of the scaled-down target of $170 billion.

Export bodies, in their pre-Budget presentations to the finance minister, have demanded the creation of an export development fund with a minimum corpus of Rs 5,000 crore (Rs 50 billion). This fund is to be specifically targeted at Medium, Small and Micro Enterprises to enhance market diversification.

"We expect 80 per cent of MDA funding to SMEs, which are the worst-hit," said Ajay Sahai, director general of FIEO.

The promotional measures of the government under the MDA will include trade fairs in various developing markets. The official said that active consultations for trade promotion activities were underway with bodies like the Indian Trade Promotion Organisation.