REUTERS

India is planning to raise spending on its key scheme designed to refund local taxes paid on export goods and extend the programme’s tenure by five years, two government officials said, as the Middle East war clouds the county’s trade outlook.

The scheme, ‌currently valid until September 30 with a budget of a little over $1 billion, reimburses exporters for taxes and levies paid to federal, state and local authorities that are not refunded under other programmes, to make export goods more competitive.

But India’s annual budget released in February nearly halved financial allocation for the scheme for the fiscal year 2026/27.

Talks to bolster the scheme follow a series of challenges faced by exporters in the Asian nation which are facing cash-flow strains due to prohibitively high freight rates around risk-fraught Gulf routes, after braving US President Donald Trump’s steep tariffs for months.

The Middle East conflict weakened trade in March, with India’s merchandise exports falling 7.4 percent year-on-year and 24 of 30 major export categories declining. Shipments to key trading partners in the region, including United Arab Emirates and Saudi Arabia, fell sharply.

The share of exports in India’s GDP has been increasingly steadily to nearly a fifth.

The nation’s finance ministry and commerce ministry are discussing reinforcing the Remission of Duties and Taxes on Export Products (RoDTEP) scheme, the officials said.