Amid a slowdown in exports, the government will likely raise allocation for its flagship tax remission scheme for exporters by 10% in the Budget for FY24 from the revised estimate for the current fiscal, official sources indicated to FE.
It had budgeted Rs 13,699 crore for the so-called Remission of Duties and Taxes on Exported Products (RoDTEP) scheme for FY23 and the revised estimate is expected to be around this level.
Under the scheme, eligible exporters get refunds in the range of 0.3% to 4.3% of the freight-on-board value of the exported products.
The commerce ministry has already decided to expand the scope of the RoDTEP scheme by including sectors like steel, pharmaceuticals and chemicals from December 15. But no extra budgetary allocation has been made for this purpose for FY23.
Given that merchandise exports are going to be under pressure, thanks to an economic slowdown in key markets, the commerce ministry may manage to fund the expanded RoDTEP scheme with just a 10% hike in the FY24 outlay, one of the sources said. Of course, the scheme has been expanded to cover exports of steel, pharmaceuticals and chemicals until September 30, 2023. After that, a fresh review of the scheme will be undertaken to gauge if any calibration in the RoDTEP benefits will be warranted to keep the offtake within the budgeted amount for FY24, said the source.
The inclusion of more sectors will widen the number of products to be covered under the RoDTEP to 10,342 from the current 8,731.
India’s exports already dropped 16.7% in October, the first contraction in 20 months and the worst since May 2020. Of course, exports were still up 12.6% to $263.4 billion until October this fiscal, thanks primarily to decent performance earlier this fiscal.
The World Trade Organization has warned of a “darkened 2023”, as it has slashed the global trade volume growth forecast to just 1% for the next calendar year from 3.5% in 2022. It has even flagged the risk of a contraction in 2023 if the conflict in Ukraine escalates. This will weigh on the Indian export prospects as well.
Analysts have argued that sustained and adequate remission of taxes, in addition to structural reforms, will help exporters improve their competitiveness and better equip them to boost shipments at a time when demand from key markets, such as the US and the EU, has started to falter due to an economic slowdown there. It also remains critical to India’s efforts to scale up goods exports to the targeted $1 trillion by FY30 from $422 billion in FY22.