Published On : 14-Dec-2021
The effects of the COVID19 crisis on the Indian economy can be called detrimental at best, disastrous at worst. It is estimated that India lost about $4 Billion every day in the first weeks of the lockdown. Only about a quarter of India’s economy was functional during the time, wreaking havoc on supply chains, uprooting the progress of the past few years and debilitating the source of livelihood of tens of millions in the Indian population.
The Indian Foreign Trade Policy (FTP) was has been postponed thrice since the beginning of the pandemic. The latest extension came about only in September, when Piyush Goyal, Minister of Commerce and Industry announced that a new Foreign Trade Policy would be introduced in March 2022. Traders across the nation gave mixed reactions: while some were satisfied with the status quo, others wanted the government to release the policy soon to streamline the nebulous trade mechanisms that prevail.
The FTP of March 2022 will determine how and in what ways will Indian Import-Export traders interact with the world. Read on to find out more about what to expect from the Indian government and the much-awaited FTP.
SUBSIDIES TO TAKE A BACKSEAT
The Indian government has made it very clear that they are not too invested in the doling out of subsidies. Access to technology, credit and support facilities have been touted as substitutes of the rather indolent subsidies regime. While subsidies enable traders to function smoothly in the short-term, they can debilitate the market-economy dynamics that are required to propel India to a five-trillion dollar economy.
Indian sectors like automobile manufacturing, biotechnology, pharmaceuticals and textiles can stand to gain momentum if the government decides to promote its infrastructure and research and development practices.
UPGRADE OF INFRASTRUCTURE & DIGITIZATION
As compared to economies such as China and South Korea, India has a significantly poorer infrastructure in terms of transportation, warehousing, manufacturing facilities and hotspots etc. With the new Foreign Trade Policy of 2022, the government is expected to make basic manufacturing facilities more robust and accessible. An improvement in basic services will make Indian exports more competitive thereby helping traders lower cost and widen margins.
The advent of remote working and digitization of communication and processes has proved to be a very important development in international trade. Cost-efficiency and speedy payments processing has replaced delayed transactions and higher cost of doing business. The government, through the FTP 2022, must also look to invest in the economy by giving a boost to digitization.
TAXATION AND CREDIT ACCESS
Indian importers have continually demanded of the government to lower taxes on raw and intermediate goods while maintaining the higher tax rates on finished goods. This will enable India to become a part of the Global Value Chains(GVCs) economy, to which India currently contributes a meagre 2%. This can be improved only by making import taxation more structured, and a reduction in import duties. The latter will also assist in rooting out tax evasion.
Additionally, there are also hopes that FTP 2022 will make trade credit more accessible. Currently, small Indian exporters often find it difficult to gain access to credit due to gargantuan collateral needs, paperwork and finance costs. A rise in borrowing limits will also improve India’s export readiness.
The Foreign Trade Policy of 2022 has been long-delayed, and repeated extensions are now wearying traders. While the world battles with newer variants of COVID19, India too is slowly realising that another health crisis could be right around the corner. The government’s ability to release FTP 2022 is acutely dependent upon the arrival of the omicron variant and its spread in India. It, therefore, remains to be seen what March 2022 sheaths in its wondrous spring.
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