India may soon have to phase out its export subsidy regime, according to WTO rules. Least developed countries and developing countries whose gross national income per capita is below a certain level are allowed to provide export incentives to any sector that has a share of below 3.25 per cent in global exports.
In case a sector in such a country crosses the 3.25 per cent threshold for two consecutive years, it has to phase out export subsidies for that sector within eight years. India’s textile exports crossed the 3.25 per cent mark in 2010, requiring it to end its export incentives to the sector by December 2018. Schemes such as the Merchandise Exports from India Scheme, Export Promotion Capital Goods Scheme and Interest Equalization Scheme for the textile sector are likely to get impacted.
Though India is likely to seek two to four years’ extension, the country has to move toward WTO-compatible, production-based subsidies from export- based subsidies. It needs to provide support for technology upgradation, capacity building and resolve infrastructure bottlenecks and move away from direct incentives to exporters. Simultaneously, India is also set to face the larger challenge of completely phasing out export incentives for all sectors.