March 31 marked 10 years since the Modi government introduced its first Foreign Trade Policy (FTP 2015-20) that lasted for 8 years before the current FTP 2023 came in. Here is a brief assessment.
In 2015, the government said that it aims to increase India’s exports of merchandise and services from $465.9 billion in 2013-14 to approximately $900 billion by 2019-20 and to raise India’s share in world exports from 2 per cent to 3.5 per cent.
This financial year, goods and services exports together are expected to be around $780 billion and their share in global exports around 2.8 per cent.
In 11 years, that is a compounded aggregate growth rate of 4.79 per cent.
FTP 2025-20 abolished targeted subsidies for export of specified products or to specified markets that did not attract the attention of our trading partners and brought in Merchandise Exports from India Scheme that provoked some countries to challenge the scheme as direct export subsidy at the WTO.
The WTO dispute settlement panel upheld the plea of the complainants and India’s appeal remains unheard as the appellate body does not have enough judges to hear the matter.
The government, however, discontinued the scheme because the exports did not grow even with subsidies of around ?42,000 crore every year under the scheme.
The merchandise exports in 2019-20 were lower at $313.361 billion compared to $314.405 billion in 2013-14.
The Rodtep scheme was introduced in 2021 to refund un-rebated taxes/duties/levies.
This financial year merchandise exports are likely to be around $435 billion, which means a CAGR of 3.1 per cent in 11 years.
Our share in global merchandise exports remains around 1.8 per cent. FTP2015-20 abolished subsidies by way of duty credits to exports of select categories of services that were non-transferable and brought in the Services Exports from India Scheme (SEIS) that gave tradable duty credits.
This scheme was abolished due to misuse.
The services exports grew from $167 billion in 2013-14 to only around $206 billion in 2020-21, a CAGR of 3.04 per cent.
Thereafter, probably due to lowering of our income tax rates and more services getting sourced from India, the services exports have grown smartly and in FY25, it is expected to be around $380 billion, a CAGR of about 7.76 per cent over 11 years.
Our share in global exports of services has also gone up to about 4.3 per cent.
In 2013-14, our goods imports were about $450 billion.
This financial year, total imports are likely to be around $855 billion, a CAGR of about 6.01 per cent over 11 years.
Since 2014, our average industrial tariffs have gone up from about 13 per cent to about 18 per cent.
Besides numerous anti-dumping and safeguard measures, the government has introduced non-tariff barriers such as import licensing, minimum import prices, registration requirements, quality control orders, onerous documentation to protect domestic producers.
The government entered into free trade agreements with the UAE and Australia and is engaged in bilateral trade negotiations with some other countries.
Although the government has taken several trade facilitation measures, importers complain about more hassles, compliance costs and uncertainties.
'Obviously, the last 11 years’ export performance is uninspiring and the post-Covid rebound is losing steam.
We are not globally competitive. Deregulation and simplification of processes will help.
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