The Reserve Bank of India (RBI) has announced a series of support measures for exporters to help them navigate the challenges posed by the Trump administration’s recent imposition of a 50 percent tariff on Indian exports.
The decision, announced by RBI Governor Sanjay Malhotra on Wednesday, came alongside the Monetary Policy Committee’s (MPC) move to keep the repo rate unchanged. These new measures are designed to ease the compliance burden and streamline processes, particularly for small exporters and importers, by simplifying documentation and reducing regulatory requirements.
In his address, the RBI Governor emphasized the importance of the export sector to India’s economy. “export sector is a vital part of India’s economy,” he stated, adding that the new measures are intended “to further strengthen the sector and enhance ease of doing business.”
A significant change includes extending the period for repatriating foreign currency from accounts of Indian exporters in the International Financial Services Centre (IFSC) from one month to three months. Additionally, for merchanting trade, the time limit for foreign exchange payments will be extended from four months to six months. The RBI is also streamlining the process for resolving pending export and import entries on the Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS) portals.
Despite the central bank’s proactive steps, challenges remain. Speaking on the RBI’s recent move, YES Bank Chief Economist Indranil Pan noted, “Challenges persist due to geopolitical tensions and trade policies. It remains to be seen how they impact the domestic growth from the consumption side, as most of the export related sectors are labour intensive and could shed manpower to factor in loss of export market. The inflation story of India remains conducive with continued soft and declining food prices. The latest push to ease further is the GST rationalization that will reduce prices of products that find place within the CPI basket.”
These concerns highlight the complex interplay between global trade policies and domestic economic stability. The RBI’s measures are a direct response to a specific external threat, but the broader economic implications, particularly on employment in export-oriented, labor-intensive sectors, are still to be determined.
A decline in export markets could lead to job losses, which in turn would dampen domestic consumption and growth. However, the economist’s observation about declining food prices and the impact of GST rationalization suggests that India’s domestic inflation remains under control, providing some buffer against these external pressures.
The RBI’s decision to support exporters while maintaining a stable repo rate indicates a balanced approach, aiming to support a critical sector without destabilizing the broader economy.
