Relief for Exporters: Trade Enhancement Initiatives on the Horizon

A review of potential assistance provisions for international commerce entities is underway by the central authorities, chief amongst them is the expeditious deployment of the previously proposed trade enhancement initiative, coupled with possibly reinstating cherished former programs. It’s believed these steps will alleviate cash-flow pressures that exporters are currently suffering. This comes as recent statements from U.S. officials indicate no instant relief for the ongoing issues with tariff hikes, which this week witnessed a surge to 50% from previous levels.

The White House representative, Peter Navarro, in a recent dialogue gave an insight that an additional 25% duty hike might be rolled back if India refrains from its oil trade partnerships with Russia, a proposal that India has routinely declined. Navarro continued to criticise India for favouring authoritative custodians over democracies. He cited India’s longstanding contentious relationship with China and its territorial disputes as examples, questioning India’s affinity towards Russia.

Kevin Hassett, the director of the US National Economic Council, noted in a separate conversation that the avenue for negotiations appears bleak as the perceived immovability of the Indians may lead to stagnation in the dialogue efforts. In light of these comments, Indian exporters have been notifying the government about the financial hurdles and complications they’ve been encountering due to the elevated US tariffs, now hitting the 50% mark.

However, a government official, addressing these concerns, stated that productive actions are underway to support the exporters. All proposed solutions by exporters to solve credit-related problems, such as the reintroduction of the interest equalisation scheme and the launch of credit guarantee programs, are reportedly under the consideration of the Reserve Bank of India.

Brazil, the lone other nation that has received similar treatment with high tariff imposition on many of its goods, has publicised a $5.6 billion ‘Sovereign Brazil Plan’. This strategic plan includes various facets such as an export guarantee fund for credit at accessible rates, financial export-oriented programs and place a hold on taxes for exporting organisations.

The proposed trade enhancement initiative, which was originally announced by the Finance Minister earlier this year, with a designated yearly allocation of ?2,240 crore ($255.62 million), aims to provide exporters with benefits such as easy access to credit, marketing aid, and extended term warehousing support for up to five years. However, short-term initiatives targeting the US export market are also being given a thought by the government, according to an industry insider.

A powerful appeal from the industry for a momentary reestablishment of the Merchandise Export from India Scheme (MEIS), albeit with minor alterations to conform to global norms, is also noticeable. Traditionally, under this scheme, certain sectors were offered duty-free scrips proportional to a predefined percentage of the export value.

The government has the authority to determine a suitable amount of support under the possibly reinstated scheme, which could be provided for a limited duration. Similarly, the government may opt to perpetuate the interest subvention scheme which offers reduced rate credit to the industry, added the same source.

Some exporters have articulated the need for up to 15% of the export value in terms of government support. Some industry commentators interpret this figure to represent the government absorbing half of the additional 30% tariffs on Indian exporters when compared to their global competitors.

Countries like Vietnam, Indonesia, Bangladesh, and the Philippines are subjected to a lesser 20% tariffs in the U.S., a fact emphasized by the industry source.