Budget FY23: Increase in trade infra spending to boost exports

New Delhi, Jan 24: An increase in budgetary allocation for creation of trade infra will boost exports, said Crisil Research.

Notably, it said the Budget should focus on developing infrastructure in shipping and logistics to reduce time and non-tariff costs.

“Exports in India have historically ridden the global growth wave. But when that recedes, as expected this calendar year, exports cannot rely on external demand alone to prop it up. India also needs to consolidate the recently seen increase in share of industrial or investment goods in overall merchandise trade, Crisil Research said.

“To tackle both these, the Budget’s focus on developing infrastructure in shipping and logistics to reduce time and non-tariff costs of trading across borders will be imperative.”

Further, it said that an increased budgetary allocation in the form of ‘grants-in-aid’, as envisaged under the trade infrastructure for exports scheme, which seeks to create first or last mile connectivity for export-oriented projects, will drive the objective of enhancing competitiveness.

Besides, Crisil Research said facilitating finance and insurance cover for exports should be another focal point of the budget.

Last year, after the budget, the Finance Ministry had announced ‘grant-in-aid’ infusion of Rs 1,650 crore for the National Export Insurance Account (NEIA) to underwrite Rs 33,000 crore of project exports in the FY22-26 period.

The NEIA aims to ensure the availability of credit risk cover for project exports.

“The progress on this front has been relatively slow this year ” according to the Ministry of Commerce, the NEIA supported exports worth only Rs 91.4 crore by issuing insurance cover worth Rs 58 crore between May-August 2021. This initiative could be expedited through announcing steps to support project exports.

In addition, it cited that the budget should focus on the opportunity of the China-plus-one policy.

“Relentless focus on electronic and electric exports will be important to take advantage of this.”

“The Production Linked Incentive (PLI) scheme is a good starting point for this.”

Thus, a serious effort to reach the $1 trillion target for merchandise exports needs to begin with this Budget “by initiating measures in terms of infrastructure spending, reduction in tariff costs, and enhancement of credit risk cover to facilitate trade.”