The government will release a new foreign trade policy in the coming week, which could include measures to help boost exports of goods and services as well as curb the spiraling import bill. The current trade policy was introduced in 2015. When his five-year term ended a week after the nationwide lockdown to curb the pandemic, it was extended for another year given the extenuating circumstances. However, extensions of the old policy beyond March 2021, particularly the current six-month period which drags its end date to September 30, are not as understandable. Starting the new policy in the middle of a fiscal year, unlike the traditional clean slate during a new fiscal year, is not ideal. Moreover, exports have been one of the few engines of growth to drive the post-COVID recovery, so it was disconcerting to postpone a policy aimed at bolstering outbound shipments. Laying out India’s strategy for taking advantage of a world seeking to become less dependent on China would also allow exporters (and importers) to plan their investments in advance. Last January, a WTO-compliant export incentive scheme was launched to refund internal taxes to exporters, but the rates weren’t notified until months later, with a few sectors left out. Despite this entirely avoidable uncertainty, exports of goods reached a record $422 billion in 2021-22.
This year, the government expects goods exports to reach at least $450 billion, but growth fell to below single digits in July and August, while imports topped $60 billion. every month since March. A slowdown in global growth and fears of recession in Europe and the United States do not bode well; and although order books are still full, many buyers are looking to delay deliveries. The new policy will need to find ways to boost exports and address some of the industry’s key concerns, including a buffer against rising interest rates. With sustained revenues, it is also time to reconsider the position of excluding key growth sectors such as pharmaceuticals, chemicals and iron and steel from the duty rebate scheme. Having decided to steer clear of the trade lane of the Indo-Pacific economic framework for now, claims that the government has ‘no bandwidth’ for negotiations of a new free trade pact , although more countries are courting it and seeking to slow talks with the Gulf Cooperation Council, are unnecessary. If there is a real constraint, a solution must be sought, perhaps by appealing to economic decision makers with residual bandwidth. But surely there are better ways to tap into India’s growing influence than by alienating potential partner countries, no matter how small.
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