Govt eyes exports as one of the engines of growth
The 2025-26 Union budget may enhance exports through interest subsidies, customs tweaks, e-commerce hubs, FTAs, and focus on agri-exports like turmeric.
The Union budget for 2025-26 may focus on exports as one of the engines of growth by extending interest subsidy for exporters, tweaking of customs duties for enhanced competitiveness, setting up e-commerce export hubs, finalising free trade agreements (FTAs), incentivising agri-exports, and providing a special emphasis on organic produce such as turmeric, three people close to the development said.
Despite global headwinds India’s merchandise exports managed a positive growth of 2% in the April-November period. This trend is expected to continue in December too, which signifies resilience of Indian exports and exhibits further growth potential with the right policy push, they said, requesting anonymity. According to the commerce ministry’s data, India’s exports grew by 1.95% to $283.7 billion in April-November 2024 from $278.3 billion in April-November 2023. The official release of trade data for December 2024 is expected on Wednesday.
“The budget is likely to announce several policy measures to boost exports because it is a key growth driver besides capital expenditure and production-linked incentives,” one of them said. The budget for FY26 is expected on February 1. The government is considering incentives like an interest subvention, particularly for micro, small and medium enterprises (MSMEs). A proposal to relaunch the interest equalisation scheme (IES) for five years is under consideration,” a second person said.
The IES gave cheaper rupee credit to exporters for their pre-shipment and post-shipment activities to help in reducing the high cost of credit incurred by Indian exporters as compared to their foreign counterparts. It was first launched on April 1, 2015 for five years and then extended multiple times until December 31, 2024. Indian exporters’ interest burden is more than double compared to their Chinese counterparts.
The first person said the government is keen to forge at least two free trade agreements this year to boost bilateral trade. “One with Oman is expected very soon. Prospects for a deal with the European Union or the United Kingdom are also bright,” he said. India and Oman on Tuesday concluded the fifth round of bilateral discussions in New Delhi.
“The government is also considering several policy measures to boost agri exports, particularly region-specific popular and valuable organic products,” he said. One such move is to set up the National Turmeric Board, a promise made by Prime Minister Narendra Modi to turmeric growers in 2023, he said.
Announcing the decision on Tuesday, commerce minister Piyush Goyal said: “The new board will promote research and development of new turmeric products, and look into the value addition of turmeric-related products for marketing abroad.”
The government aims to boost turmeric exports from $207.45 million in 2022-23 to $1 billion by 2030. The new board will initially be funded by the existing Spice Board until a separate provision for it is made in the budget for FY26, the first person said.
Another move expected in the budget is rationalisation of customs duties on at least four dozen items to encourage domestic value addition and exports of manufactured items, two of the people mentioned above said.
“Expect some tweaks to reduce input costs for domestic steel manufacturers, who are facing stiff Chinese competition. Some tariff measures are also expected to check dumping of Chinese steel while ensuring that Indian MSMEs continue to get inputs (steel) at reasonable costs,” the second person said. Some inputs of steel under consideration include coking coal, pure nickel, molybdenum and scraps.
“Customs duties will be rationalised to shield citizens from inflation, to ensure sufficient supplies of essential commodities, to eliminate duty inversion and to incentivise domestic manufacturing by reducing taxes on inputs and imposing higher duties on imports of finished goods,” a third person said.
The budget may also give a policy push to e-commerce export hubs to ship unique goods from the country’s remote areas to overseas markets, he said. “The target for this segment is around $200-300 billion by 2030. Work to set up five such hubs in PPP [public-private participation] mode are in an advance stage,” he said.