Long before the US lashed out at India for exceeding the time period for giving subsidies to its exporters, the government had taken cognisance of the fact that the existing export promotion schemes would need to be phased out and replaced with WTO compatible schemes in the Foreign Trade Policy (FTP) released three years ago.
The policy statement and its midterm review done late last year, also reiterated that the commerce department would re-calibrate the export promotion efforts to more fundamental measures rather than incentives and subsidies alone.
As per the policy statement of 2015, some sectors may be affected and would require rationalisation of support over a period of time. The rethinking on subsides has become critical at this juncture as the US has challenged practically almost India’s entire export programmes at the WTO claiming them to harm American workers.
It has cited the Agreement on Subsidies and the Countervailing Measures (ASCM) of the WTO that envisages the eventual phasing out of export subsidies.
The agreement provides a period of eight years for graduating countries (least developed and developing) which cross the $1,000-mark at 1990 exchange rate to phase out export subsidies.
However, such countries need to stop all export incentives if per capita GNI of such a country crosses $1,000 for three consecutive years.
Source: The Economic Times