India’s new Foreign Trade policy
- The Govt will release a new foreign trade policy in the coming week.
- It may include measures to help push up goods and services exports & rein in the runaway import bill.
Trade policy of India
- The current trade policy was introduced in 2015.
- Extended for a year considering the pandemic situation.
New policy and its rationale
- Beginning the new policy in the middle of a financial year is not ideal.
- Exports are driving 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 started to refund domestic taxes to exporters, but the rates were notified months later with a few sectors left out.
- Despite this, goods exports touched a record $422 bn in 2021-22.
Expectations from the policy
- The Government expects goods exports to hit at least $450 billion.
- But growth has slipped to the low single digits these months, while imports have been over $60 billion each month since March.
- Factors affecting Indian Economy:
- A global growth slowdown
- Recession fears in Europe and the U.S.
- Buyers seeking to defer deliveries.
- New policy could provide a leg-up to exports and address some of industry’s key concerns, including a buffer against rising interest rates.
Conclusion
- It is time to reconsider the stance to exclude growth sectors like pharma, chemicals, and iron and steel from the duty remission scheme.
- 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.
Prelims Takeaway
- Free Trade Agreement
- Duty Remission scheme