The latest trade figures show that between April 2020 and February 2021, exports of merchandise and services stood at $439.64 billion
The Foreign Trade Policy 2015-20, which was extended by one year due to Covid-19, expires on March 31. It is not yet clear whether a new policy will be introduced or the same will be extended.
In the Foreign Trade Policy Statement 2015-16, the commerce ministry said the government aims to increase India’s exports of merchandise and services from $465.9 billion in 2013-14 to about $900 billion annually by 2019-20, and to raise India’s share in global exports from 2 per cent to 3.5 per cent. This has not happened.
The latest trade figures show that between April 2020 and February 2021, exports of merchandise and services stood at $439.64 billion. In pre-Covid years too, exports were barely at 2013-14 levels and nowhere near the target. It may be argued that commodity prices were higher in 2013-14 but even after factoring it in, it is clear that export dynamism has taken a knock.
In the 2015-20 policy, the earlier schemes such as Focus Market Scheme, Focus Product Scheme etc were tweaked and merged under the Merchandise Exports from India Scheme (MEIS). The finance ministry worries that despite subsidies under the scheme climbing to over Rs 40,000 crore each year, merchandise exports have not gone up significantly.
At the World Trade Organisation (WTO), the dispute resolution panel ruled that MEIS wasn’t consistent with the agreement on subsidies
and countervailing measures. MEIS was discontinued at the start of this year and replaced with the Remission of Duties and Taxes on Export Products (RoDTEP) scheme but details of the new scheme or rates of compensation are yet to be notified. Even under the Service Exports from India Scheme (SEIS), the rates have not been notified for exports made since April 2019.
The WTO panel ruled against the Export Promotion Capital Goods (EPCG) scheme and certain aspects of the Export Oriented Unit (EOU) and Special Economic Zone (SEZ) schemes. India appealed against the ruling but the appellate body at the WTO didn’t have the quorum to decide on the appeal. Once the appellate body starts functioning, it may uphold the panel ruling. So, there is uncertainty over maintainability of the schemes in the next five-year policy.
Currently, exporters are bristling with orders but the problem of getting goods to overseas buyers continues because of shortage of empty containers, high freight rates, fewer vessels and flights, and congestion at transshipment ports.
In recent months, India’s relations with China have deteriorated. China and the United States, the two major trading powers, are at loggerheads. The Regional Comprehensive Economic Partnership agreement may make it difficult for India to penetrate the bloc. Protectionism is growing in India and parts of the world. The post-Covid world may pose fresh challenges.
A view has gained ground that it may be better to extend the present policy and wait for clarity and broader ideas to help Indian exporters become more competitive before announcing the new five-year policy.