India Extends Export Relief Scheme

Export Relief Scheme Extension

• Ministry Involved: Commerce and Industry Ministry
• Scheme Duration: Extended until March 31, 2027
• Initial Launch: March 2026
• Scheme Name: Part of the Export Promotion Mission (EPM)
• Target Region: West Asia, including UAE, Saudi Arabia, Kuwait, Qatar, Oman, and Iran.

Key Features of the Relief Scheme:

• Compensation: Export Credit Guarantee Corporation of India (ECGC) provides up to 100% compensation for war-related and associated political risks.
• Premium Rates: Frozen at pre-disruption levels for the scheme's duration.
• Risk Coverage: Offers 95% risk cover for upcoming shipments to specified regions.
• Policy Types: Covers Standalone Policies and Whole Turnover Policies starting from March 16, 2026.
• Eligible Cargo: Full Container Load (FCL), Less than Container Load (LCL), and refrigerated containers (excludes energy shipments).

Export Performance Data

• Struggling Sectors: Low-margin exports, specifically agricultural commodities, alongside high freight costs and port congestion.
  • Garments Exports: Declined by 6% (April-September 2026 vs. 2025).
  • Edible Items Declines: Fruits (9.6%), Vegetables (13.6%), Tea (5.7%), Oil Meals (26%).
  • Rice Exports: Growth of only 2.5%, significant as rice is a major export to West Asia.

Economic Context

• General Export Trends:

  • Exports to the UAE dropped nearly 11%, totaling $16.7 billion in the first half of FY27.
  • Saudi Arabia: decline of 5.3%, totaling $4.7 billion.
  • Iraq: significant decline of 49.6% to $836 million.
  • Exports to Qatar, Kuwait, and Iran saw drops of 34%, 37.5%, and 37.5% respectively.

• Growth in Specific Markets:

  • Exports to Oman surged by 47.4% post-India-Oman Free Trade Agreement (FTA), reaching $3.28 billion.

Global Trade Insights

• World Trade Organization (WTO) Outlook:
  • 2026 total trade volume growth for Asia projected at 9.9%.
  • Negative outlook for the Middle East with a contraction expected at -17.2%.
  • World GDP growth forecast at 2.6%, regional distributions vary, with Asia (4.3%) and Africa (4.1%) leading.

Maritime Transport Changes

• Due to regional conflicts, maritime transport has been reorganized:
  • Jebel Ali port in UAE experienced a 60% decrease in container throughput in the first half of 2026, with a notable decline of 90% in Q2.
  • Contrarily, ports in Oman and Saudi Arabia reported increases in throughput, indicating a shift in trade patterns.

Summary:

The Commerce Ministry’s extension of the exporter relief scheme aims to stabilize Indian exports amid ongoing geopolitical disruptions in West Asia, while addressing rising operational costs and facilitating better coverage for exporters’ risks. However, exports remain under pressure, particularly in low-margin sectors like agriculture, with varying performance observed in target markets. The international trade environment shows significant regional disparities, influenced heavily by the ongoing conflicts impacting Middle Eastern economies.