Popular incentive schemes for Indian exporters targeted by the US at the WTO — such as the Merchandise Export from India Scheme (MEIS) and the Export Promotion Capital Goods (EPCG) scheme — may have to be withdrawn in just about a year’s time if the Trump regime has its way.
“While India will try its best to convince the WTO panel that it should get more time to phase out the schemes, the Commerce Ministry is working on a contingency plan which may have to be put in place in the next financial year,” an official told BusinessLine .
The contingency plan, however, is difficult to give shape to, as the schemes to replace the export incentives need to be offered to all players in a targeted sector and not just exporters, and this could be a huge burden on the exchequer.
The US lodged a complaint with the WTO’s Dispute Settlement Body (DSB) in March, challenging six Indian government programmes, saying these provide financial benefits to Indian exporters, allowing them to sell their goods more cheaply to the detriment of American workers and manufacturers.
The WTO does not allow any country which has attained a per capita gross national product (GNP) of more than $1,000 for three consecutive years to give export sops, and India breached the threshold in 2015.
However, India is continuing with its export incentives, hoping to argue at the WTO that its demand for a eight-year phaseout period — the same as that given to developing countries when the WTO Agreement came into force, in 1995 — should be met. However, since the the WTO has not been allowing this since 2011-12, it is not likely to concede to the Indian demand now.
“Since the dispute lodged by the US is related to export subsidies, it could get expedited and get preference over other pending disputes and there might be a verdict in nine months. That is why the Commerce Ministry is trying to put in place a contingency plan, to replace all the problem schemes, by April 2019,” the official said.
The DSB has already approved the US’ request to set up a dispute panel against India.
The committee set up by the Commerce Ministry to come up with alternative schemes for exporters, which includes industry representatives as well as those from think-tanks, is struggling to come up with options that would provide exporters with the same level of entitlement as at present.
“The challenge is to come up with schemes which would ensure exporters are not worse off than before, do not hugely increase the burden for the exchequer and yet are compliant with WTO norms,” the official said.