Provide low cost funds for hi-tech industries: EXIM Bank

The government should consider providing low cost funds to corporates for investments in hi-tech industries to boost export competitiveness of the sector besides encouraging them to focus on R&D activities, EXIM Bank has said in a report.

The government and the RBI could consider setting up a credit facility "exclusively" for investments in hi-tech industries, the report of Export-Import Bank of India (EXIM) said.

"Such mechanism, if considered for implementation, should provide low cost funds, cheaper than the cost of External Commercial Borrowing financing."

This would "pave the way for India to either move into hi-tech products which are currently not being manufactured or enhance their competitiveness in such products where it is competing with other global players," it said.

It added that Brazil has implemented such a programme for the sector and the Indian government can look at that model.

It also said that there is a need to encourage private players to increase investments in research and development (R&D) activities.

"Indian investment in R&D is largely government driven, Indian firms need to be encouraged to invest in R&D which will make them technologically strong while at the same time incentivise their entry into technologically advanced product lines," it added.

Corporate sector investment in R&D is at less than 1 per cent of turnover in India as compared to about 5 per cent in several developed countries, it said.

"Proactive policies that incentivise industry efforts to invest in innovation and develop hi-tech products are required. One important way to achieve this is through financial and fiscal incentives," the report said.

It added that countries such as Japan and South Korea are looking out for alternative investment destinations, 'instead of China', because of geopolitical reasons.

"There has to be a pull factor to attract investments into this sector," it added.

While India's total hi-tech exports stood at USD 20 billion in 2011, imports in the same year stood at USD 33.6 billion.

The main hi-tech export products from the country include parts of telecom, sound recording, transformers, diodes, transistors and parts of data processing machines. The key export destinations for such products from India are the US, UAE, the UK, Netherlands and Russia.

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