Context

First-quarter growth in India’s gross domestic product (GDP) stands at 20.1 %. This however still means that GDP in the first quarter was 9.2 % below its level two years ago.

Export: Challenges

• The key driver of growth in the coming quarters will be exports riding on the rapidity of recovery in major markets.
• There are two serious worries here.
• 1) Bullwhip element: This could cause an immediate ramp-up in demand for steel and other such upstream elements in global supply chains, with a corresponding damp down in the months to come.
• In this connection, although the rates under the scheme for remission of duties and taxes on exported products (RODTEP) were finally notified in mid-August.
• Steel, pharma and chemicals get no rebate at all, although many products using these inputs do.
• The scheme looks like a subsidy to selected sectors disguised as duty rollback, which can get India into trouble at the World Trade Organization (WTO).
• These excluded products need the rebate if they are to survive in a fiercely price-competitive global market in the months to come.
• 2) Container shortage: A crippling shortage of sea-borne containers has afflicted key large-volume products in the Indian export basket (tea, basmati rice, furniture, garments).
• Sea-freight subsidy: At a time when container rates have shot up, there is surely a case for a sea-freight subsidy (for a limited period).
• Even more urgently, the estimated 25,000-30,000 containers locked up at different ports owing to customs disputes need to be unloaded into warehouses and these containers freed.

Can National Monetisation Pipeline (NMP) spur growth?

• Even if the expected ₹88,000 crore of revenue under NMP is realized during the current year, it is intended to feed only a small part of the infrastructure expenditure budgeted for the year.
• It is the latter that will have to drive growth. Monetization is merely a funding source.
• The scheme offers a participation incentive to states with a 33% matching transfer from the Centre for revenues that states realize under the scheme.
• This matching transfer could well have the perverse consequence of states under-achieving the potential value realizable. 
• Volume II of the NMP document refers to the Scheme for Special Assistance to States for Capital Expenditure announced in October 2020.
• It offered states an interest-free loan with bullet repayment after 50 years to complete stalled capital projects, or settle the outstanding bills of contractors.
• The NMP demands clear and well-thought-through processes, with sufficient transparency and safeguards in the form of regulatory structures.

Conclusion

For now, the need of the hour is export facilitation.

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