The Foreign Trade Policy to be announced on Friday, amid a slump in global demand and sustained contraction in export of goods, will likely give thrust to more coordinated government support to boost exports, and refrain from rolling out any new incentive schemes.
While tax remission for exported goods will be an inalienable right of exporters, the new policy could feature several facilitation programmes to make it easier for firms to export. Relaxation of procedures and paperwork, especially in seeking permits and licence renewals, removal of human interface and bolstering of automation on various aspects of trade are on the cards. The annual export target of $2 trillion (both goods and services) by 2030 will be reiterated (exports of goods and services have crossed $750 billion mark in the current fiscal, as services exports remained buoyant despite the setbacks in merchandise shipments).
There is also a possibility of the new FTP being valid for a period less than the usual five years to ensure agility of policy in the fast-changing global market matrix which has led to a major rejig in India’s export destinations in the last few years. The validity of the current FTP, initially designed to cover the period between 2015 and 2020, has been extended up to March 2023 in the wake of the outbreak of the pandemic.
Commerce & industry minister Piyush Goyal has repeatedly called upon exporters to shun the “crutches of subsidies” and improve competitiveness. Earlier, FTPs used to pledge more fiscal support to exporters, via schemes like Merchandise Export from India Scheme (MEIS) announced in 2015. However, such incentives run foul of the multilateral trade rules under the World Trade Organisation and have been done away with.
The MEIS was replaced with the Remission of Duties and Taxes on Exported Products (RoDTEP) programme from January 2021.
PTI reported, quoting unnamed sources, that the new policy is likely to incorporate “WTO-compliant export promotion measures”. Speaking at an event in Mumbai, Goyal said that amid all the economic challenges faced by many countries, India is the bright spot, which almost everybody recognises and respects.
India’s merchandise exports shrank for the third month in a row and imports for the second straight month in February, in what reflected the impact of a global demand slump in India’s external trade.
Export of goods contracted by 8.82% to $33.88 billion and imports by 8.21% to $51.31 billion last month, precipitating a trade deficit of $17.43 billion, the lowest since January, 2022, easing the pressure on the current account.
Merchandise exports and imports had fallen by 6.59% and 3.63%, respectively, in January.
Merchandise exports were still up 7.5% to $405.94 billion in April-February, and imports during the period rose 18.82% to $653.47 billion. The trade deficit for the April-February stood at $247.53 billion.
Overall exports (merchandise and services) in April-February 2022-23 is estimated to exhibit a positive growth of 16.18% over the same period last year.
Commerce secretary Sunil Barthwal had said after the release of February trade data: “Going by the trend, India’s goods and services exports will cross $750 billion in 2022-23. We have kept the momentum despite the global headwinds. Services exports are doing extremely well. Trade deficit has really come down.”
The commerce ministry will also announce the export targets for the next fiscal with the FTP.