Malawian consumers should brace for increased prices on Indian goods by December 2018 if India decides to phase out its export subsidy regime in its current form as stipulated by the World Trade Organisation (WTO) rules.
Export subsidy is a government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low-cost loans, tax relief for exporters, or government-financed international advertising.
According to information sourced from the Trade Law Centre, WTO rules bar India from offering export incentives to any sector, including textiles, when it reaches certain thresholds that it is nearing.
Information sourced from the Malawi High Commission in India website indicates that most of India’s exports to Malawi include textile yarns, fabrics, transport equipment, pharmaceuticals, machinery and instruments.
Under the special and differential provisions in the WTO’s Agreement on Subsidies and Countervailing Measures, least developed countries and developing countries whose gross national income (GNI) per capita is below $1 000 per annum at the 1990 exchange rate, are allowed to provide export incentives to any sector that has a share of below 3.25 percent in global exports.
India’s textile exports crossed the 3.25 percent 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 Equalisation Scheme for the textiles sector under the Foreign Trade Policy (FTP) 2015-20 are likely to get impacted.
Data from International Trade Centre (ITC),a subsidiary organisation of the WTO and the United Nations Conference on Trade and Development (Unctad), show that exports increased from $31.7 million (about K23 billion) in 2015 to $67.5 million (about K50 billion) last year.
On the other hand, imports from India declined from $243.1 million (K178 billion) to $177.7 million (K130 billion) during the same period, according to ITC figures.
However, in an interview with Business Review on Sunday, Ministry of Industry, Trade and Tourism spokesperson Wiskes Nkombezi while saying it is difficult to state whether Malawi has fully benefitted from these schemes, consumers benefit if the products are priced cheaply and we import them.
He said: “What this will do is to affect the competitiveness of Indian products in export markets as they will no longer enjoy export subsidies. Export subsidies are currently being given to Indian exporters by the Indian government to prop up their competitiveness.
“We can only say we benefit if the products are priced cheaply and we import them. But remember these products are sold to the rest of the world. They are not only sold to Malawi. If their prices rise, Malawian importers can look for them elsewhere like China or Turkey and others”.
Ajay Sahai, director general of the Federation of Indian Export Organisations, said the industry needs to be made aware of the development.n