Senior finance ministry officials are working on steps to relax rules pertaining to the Foreign Exchange Management Act (FEMA), on top of recent changes, and also make bilateral investment treaties more investor-friendly, one of them said.
Officials at both the finance ministry and Niti Aayog are identifying economic opportunities presented by the Iran conflict, as well as gauging the impact of the surge in global oil prices on the economy under different price bands. Niti Aayog will likely draw up a report on matter.
The country’s goods trade deficit — excluding petroleum and gems & jewellery — is about $140 billion a year.
Leveraging Trade Deals Better
There is enough space for local industry to build capacity in these areas.
At the commerce ministry, senior officials are exploring ways to encourage the substitution of cheaper imports, especially from China, with domestic manufacturing wherever feasible.
Also Read: Global turmoil tests India’s resilience; time for a strategic economic pivot
An earlier study by SK Mohanty of Research and Information System for Developing Countries had identified 327 items, mainly electronics, pharma, and chemicals, where India’s imports from China could be substituted through local production.
Officials are also engaged with industry to improve the low utilisation of some of the earlier free trade agreements (FTAs) by domestic exporters, while enabling them to better leverage the latest trade deals, taking advantage of a weak rupee. Efforts to reduce non-essential imports, including those of bullion and gems and jewellery, are back in focus.
“Individual departments and ministries are evaluating the evolving situation relating to their areas with urgency and coming out with their suggestions,” said one of the officials. “The PMO is actively assessing these suggestions and giving its own inputs and directions. Both short and medium-to-long term steps are being considered. Immediate focus is on low-hanging fruit.”
Also Read: Retail inflation up a tad on rise in food, bullion prices
The idea is to curb the debilitating impact of a wide merchandise trade deficit on the current account by bolstering exports, and also to draw greater foreign capital, said the officials cited. Keeping the current account deficit at a reasonable level will also prevent a further rupee slide. Projections of India’s current account deficit generally range from 1.5% to 2.4% of GDP for FY27, compared with 0.6% in FY25 and 1% in the first three quarters of the last fiscal year. Economic growth is expected to drop to 6.5% in FY27 from an estimated 7.6% in FY26, according to the International Monetary Fund.
As for non-essential imports, while an immediate hike in the import duty on bullion is ruled out, a renewed push to monetise household gold holdings through an existing scheme is being considered, ET has learnt.
Prime Minister Narendra Modi has appealed to Indians to try and reduce the consumption of petroleum products — the largest import component — and cooking oil, and trim bullion purchases. These three are among the biggest drivers of the country’s goods trade deficit.
Similarly, deliberations are being made to further ease FEMA regulations on equity investments to draw overseas interest.