The government is likely to announce the Foreign Trade Policy (FTP) only after the finance minister presents the Budget for 2015-2016. The much-delayed policy would then be applicable from the next financial year.
This is the first time in 20 years that the government has not issued an FTP. The existing one officially ended on March 31, 2014 and was expanded in phases for the current financial year.
However, the ministry has not made the announcement officially or given reasons for not unveiling the new FTP, rolled out till now for a period of five years, with annual revision.
It is learnt the ministry, ready with a draft FTP, was not able to have its way with the finance ministry, which refused to allocate additional funds for the various incentives schemes planned for exporters, officials in the commerce department told Business Standard.
The finance ministry is already struggling to rein in the Centre's fiscal deficit at 4.1 per cent of the country's gross domestic product, as pegged in the Budget Estimate (BE) for this financial year. The actual number had reached 99 per cent of the BE in the first eight months.
Exporters would like the government to extend some of the other important benefits, such as the three per cent interest subvention scheme.
"The exporting community was looking for the new FTP, as the current policy was up to March 2014. They were not able to plan in advance for future orders," said M Rafeeque Ahmed, president, Federation of Indian Export Organisations (FIEO).
The interest subvention scheme expired in March 2014 and they'd like it to be continued with retrospective effect, as the cost of credit is very high, he said.
The government came to power in May and wanted to give the policy "a brand new look", with a renewed push to manufacturing under the Make in India policy. Also, a plan on how to better utilise free trade agreements (FTAs). According to an internal study by the commerce department, it has been found the rate of FTA utilisation by Indian exporters is the lowest among partner countries.
Merchandise export saw huge volatility in growth till November of the current financial year. While outbound shipments expanded by double digits for May and June, the growth declined considerably in the next few months to reach below three per cent in August and September. Exports contracted five per cent in October but rose 7.3 per cent in November.
Total merchandise exports during April-November, the first eight months of the financial year, rose five per cent to $216 billion, compared to $205.4 bn in the corresponding period of 2013-14, slightly lower than the 6.3 per cent in the corresponding period of 2013-14. Merchandise export missed the target of $325 bn in 2013-14, ending the year at $312.35 bn.
The trade deficit was also slightly higher at $100.6 bn from $96.9 bn in these months.