India’s new foreign trade policy must address rising commodity prices and logistics cost

India must address the rising cost of commodities and escalating logistics cost that is impacting the micro, small and medium enterprises (MSME) in its forthcoming foreign trade policy.

The rising prices of metals, plastics, fuel and other raw materials along with shortage of shipping containers have been adding to the woes of the MSME sector, said Rupa Naik, senior director, MVIRDC World Trade Center, Mumbai – a trade facilitating organisation.

The ministry of commerce and industry is likely to roll-out its new foreign trade policy for a five-year period effective from April 1 in a bid to boost India as a leader in international trade.

The need to address the inflationary trend in commodity prices needs to be addressed as India’s MSMEs, which contribute over 48 percent of the country’s exports, are operating on too thin a margin to absorb this cost pressure, Naik said.

Also, the forthcoming foreign trade policy should provide renewed thrust on 235 commodities that witnessed strong growth in exports despite the challenging world economic environment amidst the pandemic.

In the calendar year 2020, India’s trade surplus across select 235 commodities grew to $33 billion from $12 billion in the previous year as imports declined by 14% to $27 billion, while exports surged 36% over last year, as per the data analysed by World Trade Center, Mumbai.

Out of the 235 commodities, pharmaceuticals including medical equipment and agro-products are the largest categories accounting for 22% each with an export value of $13.4 billion and $13.2 billion, respectively. Metals and chemicals stand at third and fourth positions accounting for 18% and 11% respectively, out of these 235 commodities.