Magazine

English Hindi

Index

Prelims Capsule

Economy

India’s exports cross 100 billion dollar mark for the first time in quarter ending September

India’s exports cross 100 billion dollar mark for the first time in quarter ending September

Relevance:

  • GS 3 || Economy || External Sector || Foreign Trade

Why in news?

The ministry of commerce and industry said that India reported $101.89 billion in exports in the quarter ending September.This is the first time that Indian exports have crossed $100 billion mark.

Present Context:

  • In September alone, the exports stood at $33.44 billion, according to government data.
  • In August, the figure was $33.28 billion.
  • The highest export amount in the second quarter was recorded in the month of July ($35.17 billion).

Why this deficit?

  • The trade deficit in September was at $22.94 billion as gold imports jumped nearly 750% to $5.11 billion.
  • The imports of ‘petroleum, crude and products’ soared nearly 200% to $17.436 billion in September on an annual basis.
  • The data also showed that imports of ‘coal, coke and briquettes’ were up 82.89% at $2.18 billion in September 2021 over the same month last year.

Target of $400 Billion:

  • The Modi government has set an export target of $400 billion for financial year 2021-22.
  • Until September that is in the first six months of the current financial year almost half of that target stood achieved.
  • Exports from India till September this year touched $197 billion.This is an increase of no less than a whopping 56.92% in the year-ago.
  • Is it achievable?
    • India’s success comes in the backdrop of the global pandemic which had disrupted the supply chain market.
    • China – the world’s factory dropped the towel and countries across the globe were left scrambling around in search for alternatives.
    • Sensing a window of opportunity, the government swooped in and in March last year, launched the PLI scheme and fast forward, the same has been extended to nearly 13 vital sectors of the economy.
    • With six more months to go, the target of $400 billion exports looks well attainable.
    • With the introduction of the PLI scheme in the textiles sector, the Union Textiles Minister, PiyushGoyal has set eyes on the target of textile exports worth 44 billion dollars by next year, compared to the current 33 billion dollars.

Understanding Foreign Trade Policy:

What is Foreign Trade Policy?

  • The government’s foreign trade policy (FTP) defines plans and actions to encourage domestic production and exports in order to spur economic growth.
  • It’s basically a set of rules for importing and exporting products and services.
  • These are developed by the Directorate General of Foreign Trade (DGFT), the Ministry of Commerce and Industry’s regulating body for the promotion and facilitation of exports and imports.

Foreign trade policy 2021-26:

  • Merchandise exports increased by 48.34% year on year to US$ 32.50 billion in June 2021, indicating a wide trade recovery aided by strong small business performance.
  • From 2021 to 2026, the administration plans to emphasize SMEs and new export potential in its next trade policy (2021-26). In March 2021, the federal government announced plans to develop a new technique for tightening import screening in order to protect indigenous businesses.

Key Highlights of the new Foreign Trade Policy:

  • The new Foreign Trade Policy will place a strong emphasis on district export centres.
  • The policy will be aimed at increasing exports.
  • It will make doing business easier.
  • Infrastructure support will help to strengthen the operations of the domestic manufacturing and service sectors.
  • The policy will result in legislative and operational reforms, as well as lower transaction costs.

Remission of Duties and Taxes on Exported Products (RoDTEP) scheme:

  • About:
    • The RoDTEP program would refund to exporters the embedded central, state, and municipal charges or taxes that had previously gone unrefunded, putting India’s exports at a disadvantage.
    • The rebate would not be payable in respect of duties and taxes that have already been exempted, paid, or credited.
  • Key Features of the RoDTEP Scheme
    • Coverage: The system includes more than 8,555 tariff products, accounting for around 75% of traded goods and 65% of India’s exports.
    • Rates: Tax refunds will range from 0.5 percent to 4.3 percent of the value of items exported. Chocolates, toffees, and sugar sweets are offered at the lowest price. Yarns and fibers were given the utmost priority.
    • Sectors covered include: Marine, agriculture, leather, gems and jewellery, automobiles, polymers, textiles, and electronics are among the industries covered by the scheme.
    • Pharmaceuticals, steel, and chemicals are among the industries that have been excluded from the plan. For the time being, products made in export-oriented units and special economic zones have also been excluded from the scheme.
  • Concerns:
    • Lower Rates: Many exporters were disappointed by the scheme because the rates are substantially lower than MEIS rates and there is a smaller budget allocation. In a great number of cases, the rates have not taken into account the taxes buried in their raw materials, such as steel in technical items.
    • Deprive Large Sectors: It appears that the benefit is not available to significant exporters such as steel, pharmaceuticals, and exports done under Advance Authorisation, EOU (Export Oriented Unit), SEZ (Special Economic Zone), and other similar arrangements. It will have a negative impact on Indian export competitiveness and convey a negative message to exporters.

Major Initiatives under the Foreign Trade Policy:

  • Niryat Bandhu Scheme:
    • The NiryatBandhu Scheme was created by the Directorate General of Overseas Trade (DGFT) to coach aspiring exporters on the subtleties of foreign trade through counseling, training, and outreach initiatives.
    • MSME clusters have been chosen for concentrated interventions to enhance exports, given the expansion of small and medium size firms and their significance in hiring people.
    • Outreach efforts are being arranged in a coordinated manner with the support of Export Promotion Councils and other willing knowledge partners in academia and the research community to meet the scheme’s objectives.
    • Furthermore, all stakeholders, including Customs, ECGC, Banks, and pertinent Ministries, will be attempted to be involved in order to maximize resource usage.
  • Duty-Free Import Authorization (DFIA):
    • It is a system that allows duty-free imports of inputs, gasoline, oil, energy sources, and a catalyst that are required for the manufacturing of export goods in exchange for the importer meeting specific export obligations with respect to the final items.
    • The minimum value addition of 20% is necessary to be achieved.
    • This method is mostly used for raw sugar imports that will be used in the production of an export product.
  • Export Promotion Capital Goods (EPCG):
    • The EPCG Scheme aims to make it easier to import capital goods for the production of high-quality goods and services while also improving India’s competitiveness.
    • The EPCG manufacturing scheme allows for zero-duty imports of capital goods for pre-production, production, and post-production.

Way forward:

  • India’s trade policies, government reforms, and inherent economic strengths have attributed to its status as one of the most sought-after destinations for foreign investments in the world. • Additionally, technological and infrastructural development taking place across the country bodes well for the trade and economic sectors in the years ahead.
  • The Indian government has been working on key agreements with the governments of Japan, Australia, and China in order to increase contributions to the country’s economic development and worldwide market growth.