The government will extend again the validity of the current foreign trade policy (FTP), which provides a road map for boosting external commerce in goods and services, by six months through March 31, 2023.
Amit Yadav, additional secretary with the commerce ministry, told reporters that the decision was taken after demands from various industry associations and state-backed export promotion councils due to the uncertain external environment. The export bodies also suggested that the new FTP coincide with the beginning of a financial year, so that its performance can be better gauged. Yadav was accompanied by director general of foreign trade Santosh Kumar Sarangi.
The validity of the current FTP for 2015-20 was already extended three times, by a total of two-and-a-half-years, through September 30, 2022 in the wake of the Covid-19 pandemic, mainly to maintain policy stability and soften the blow to exporters. The ministry had planned to release the FTP on September 29; this was to come into force from October 1.
Given the fast-evolving geo-political situations in the wake of the Ukraine war, currency volatility and lack of adequate support for the services sector in the proposed FTP, the policy document shouldn’t be released at this point of time, exporters’ bodies said in a meeting convened by the commerce ministry on Monday.
As such, as FE had reported earlier, this policy was unlikely to roll out any big-bang programme involving substantial fiscal incentives for exporters, given that most of the key schemes had already been announced.
However, the new policy was to provide for support of at least `5,000 crore to develop select districts across the country as export hubs, official sources had told FE in early July. This was to be the most important scheme in the new FTP as far as fiscal incentives were concerned.
The latest extension will lend predictability to the policy regime for exporters and enable them to continue to get incentives under a clutch of extant programmes without any hiccups.
A new FTP is expected to be hammered out by March 2023, keeping in view fresh external risks as well as opportunities.
Endorsing the government’s move, Ajay Sahai, chief executive at the apex exporters’ body FIEO, said his organisation was of the opinion that a longer-term policy like the FTP should be released at a time when there is relative stability in the external environment. “The global situation is extremely fluid now,” he added.
Merchandise exporters currently get support under a clutch of programmes, including tax remission schemes (RoDTEP and RoSCTL) and interest equalisation scheme.
The government has earmarked `21,340 crore for the Remission of Duties and Taxes on Exported Products and the Rebate of State & Central Taxes and Levies in the Budget for FY23. Similarly, under the interest equalisation scheme, the government has budgeted `2,622 crore for FY23, against `3,151 crore (RE) for FY22.
Under the recently-revamped equalisation scheme, large manufacturing and merchant exporters will get an interest subsidy of 2% on pre-and post-shipment rupee credit for the outbound shipment of 410 products. Similarly, the subsidy for manufacturing MSMEs is pegged at 3%.
The incentives are crucial to achieve decent growth in exports, amid a demand slowdown in top markets such as the US and the EU. Having recorded a stellar performance in FY22, growth in India’s merchandise exports came under pressure this fiscal, especially from July, on an unfavourable base and the challenging external environment. While merchandise exports in the first five months of this fiscal hit $193.5 billion, up almost 18% from a year earlier, the growth was marginal in the past two months.