The Government will release a new foreign trade policy in the coming week, that could include measures to help push up goods and services exports as well as rein in the runaway import bill. The current trade policy was introduced in 2015. When its five-year term ended a week after the national lockdown to curb the pandemic, it was extended for a year considering the extenuating circumstances. However, the old policy’s extensions beyond March 2021, especially the current six-month stretch that drags its end-date to September 30, are not as understandable. Beginning the new policy in the middle of a financial year, unlike the traditional clean slate in a new fiscal year, is not ideal. Moreover, exports have been one of the few growth engines firing up the post-COVID recovery, so putting off a policy to bolster outbound shipments was baffling. Enunciating India’s strategy to cash in on a world seeking to become less dependent on China would also enable exporters (and importers) to plan their investments ahead. Last January, a WTO-compliant export incentive scheme was kicked off to refund domestic taxes to exporters, but the rates were only notified months later with a few sectors left out. Despite this completely avoidable uncertainty, goods exports touched a record $422 billion in 2021-22.
This year, the Government expects goods exports to hit at least $450 billion, but growth has slipped to the low single digits over July and August, while imports have been over $60 billion each month since March. A global growth slowdown and recession fears in Europe and the U.S. do not augur well; and though order books are still full, many buyers are seeking to defer deliveries. The new policy will have to find ways to provide a leg-up to exports and address some of industry’s key concerns, including a buffer against rising interest rates. With revenues buoyant, it is also time to reconsider the stance to exclude key growth sectors such as pharma, chemicals, and iron and steel from the duty remission scheme. Having decided to keep away from the trade track of the Indo-Pacific Economic Framework for now, assertions that the Government has ‘no bandwidth’ left for new free trade pact negotiations though more countries are wooing it, and is seeking to slow talks with the Gulf Cooperation Council, are unnecessary. If there is a genuine constraint, a solution must be sought, perhaps, by roping in economic policy makers with residual bandwidth. But surely, there are better ways to drive home India’s rising clout than by driving away potential partner countries, however small.