The twin schemes rolled out by the Modi-led coalition government on the second day of the New Year as part of its larger ongoing Export Promotion Mission (EPM) to provide interest support and collateral guarantee for export credit, particularly for labour-intensive manufacturer-exporters have not come a day soon.
In fact, the EPS itself with a massive outlay of 25,000 crore of rupees for the 2025-26 to 2030-31 span was a response to the tariff tantrums displayed by the US President Donald Trump in his second coming, much to the consternation of allies and adversaries, when Indian exporters were slapped 50 percent for tariff hike in the middle of the bygone year. That the domestic exporters always trot out alibis for subvention of one kind or another to stay in the business of exporting lest the markets captured so assiduously may lose out of their hand has been known for decades. The authorities on their part are also alive to the overall deficiencies in export infrastructure and other regulatory hurdles equally assiduously raised by them over the years to extract rent for support extended at taxpayers’ cost and in cutting down outlays on competing demands from other segments!
Even as the global outlook for engagement either for goods trade or for services remain highly bleak with each major nation with a bottomless market is wedded to nationalism and promoting its own products with a view to make itself great, the scope for mercantilism of exporting one’s way to growth or prosperity do not portend inspiring or to hope for harvesting any bonanza. It is against this emerging self-focus by trade majors and their diminished faith in multilateralism that moved the post-war prosperity to unheard of development across the divide of the developed North and the developing South that global trade is increasingly getting fragmented. This is made possible with the fascination of major trading countries to carve out free trade agreements (FTAs) among themselves or with emerging economies to corner benefits of exclusively for themselves. The earlier canon of the most-favored nation (MFN) evolved by the General Agreement on Trade and Tariffs (GATT) and its successor the World Trade Organisation (WTO), placing primacy and implicit faith in non-discrimination that demanded countries to treat all trading partners equally was wantonly emasculated. This meant if a member grants one country special benefits such as lower customs duties it must instantly and unconditionally extend that analogous treatment to all the WTO members. But under the FTA, this basic barometer of free and fair trade is turned topsy-turvy with participants exchanging trade concessions among themselves to the exclusion of non-signatories to the FTA! They could even trade sans tariffs once the negotiation is over after providing a few years of phased pruning of duty to address the vulnerabilities of the weak partner!.
India being a founder member of the GATT immediately after the second world war, it remained coy in wrapping up any meaningful FTA till the dawn of the millennium, save the one it concluded with the SARRC (South Asian Association for Regional Cooperation)-spurred Preferential Trade Agreement (SAPTA) in 1993. Even this regional pact could not last beyond 2003, as the internal rivalries and political dissents within could not hold it any further. It is small wonder that India’s first bilateral FTA was signed with Sri Lanka in the end of 1998 that became operational in March 2000, just a quarter century ago.
In the meanwhile, India was actively playing its part in the WTO in espousing the cause dear to the developing world, without bothering to take serious measures to tone up its exports by specializing in value-added products and new destinations when minnows like Bangladesh, Vietnam and Sri Lanka began boosting themselves, following the Asian Tiger economies of Malaysia, Singapore and Thailand of the 1980s vintage. A point to note is that without support from the Government, India’s services exports especially software began to make waves in the rich world during this phase when goods exports were struggling with all the official handholding! Now India’s services exports including financial services register robust growth as they fetched 234.2 billion dollars during April-October 2025, having increased by 8.2 percent, in contrast to a growth by 4.1 percent of merchandise goods during the same period.
Now that the unilateralism of trade major like the US is hurting India’s exports that offered the lucrative market and lulled the exporters into complacency, the authorities are on a spree to wrap up FTAs with the aim being to promote export diversification. It has signed so far 15 FTA and six PTAs, even though the experience has left us with a hefty trade deficit as imports became much cheaper and the exports encountered technical barriers to trade in partner countries. Any salutary outcome from the FTA is predicated on how deftly they are availed of but here the record speaks poorly of low utilization rate of 28 percent only in the past. Presumably, FTAs remain underutilised for want of awareness chasms, compliance tasks, and non-tariff measures. It is time the authorities seized the time by forelock so that the exporters derive benefits in the engagement with other FTA members for a mutual win-win position.
(G Srinivasan is a senior economic journalist based in New Delhi)
