RoDTEP Benefits Restored Amid Trade Challenges

This decision to fully restore RoDTEP benefits for exporters comes at a crucial time. While the support offers a much-needed financial cushion, it also highlights how much exporters depend on government aid when facing global economic challenges and trade disruptions.

RoDTEP Reversal Amidst Trade Storm

The Directorate General of Foreign Trade (DGFT) has reinstated full RoDTEP benefits for eligible exports from February 23, 2026, to March 31, 2026. This reverses a recent notification that cut benefits by 50%, a move that disappointed exporters. The government's action aims to ease trade disruptions from the West Asia crisis, which has heavily impacted global shipping. Exporters are facing much higher sea and air freight costs and rising insurance premiums. The full trade impact of the West Asia conflict, which worsened after February 28, will likely show in March trade figures.

Export Performance Under Strain

India's merchandise exports fell slightly by 0.81% in February 2026 to USD 36.61 billion. The monthly trade deficit also narrowed to USD 27.1 billion. However, the trade deficit was much larger year-on-year, rising from $14.42 billion in February 2025 to $27.10 billion in February 2026. This comes amid challenges like US tariffs, which caused India's exports to the US to drop 21.77% in January 2026. Some US tariffs reached 50%, making Indian products less competitive, especially for labor-intensive sectors and small businesses with tight margins. While January 2026 exports grew slightly overall, higher imports pushed the trade deficit up.

Fiscal Concerns and Competitive Gaps

While restoring RoDTEP benefits offers relief, it comes alongside significant budget changes. The RoDTEP scheme was allocated ₹18,232 crore for FY2025-26 and proposed to rise to ₹21,709 crore for FY2026-27. However, only ₹10,000 crore was actually spent in FY2025-26. The FY2026-27 budget has now been cut to ₹15,728 crore, with ₹5,346 crore set aside for old dues. This large cut to available funds questions the scheme's future and India's commitment to export support. India also faces stiff competition globally. Rankings often place India behind countries like Malaysia and Vietnam, due to trade policy and business strategy differences. Vietnam gains from its location near China and better trade deals. The West Asia crisis worsens these issues, as disruptions in shipping routes like the Strait of Hormuz are causing emergency surcharges that could triple freight costs. Around 40,000 to 45,000 Indian export containers are estimated to be stranded, with cargo worth up to $1.5 billion at risk.

Future Outlook

The current RoDTEP extension is temporary, ending March 31, 2026. Although the government promises full restoration from April 1, the reduced budget for the next fiscal year makes ongoing, broad support uncertain. Analysts expect the West Asia crisis to severely impact March trade figures. Commerce Secretary Rajesh Agrawal warned of a "downward" trend in exports due to shipping problems. Lingering uncertainty from US trade policy and global instability means Indian exporters must continue to seek new markets. However, competition from countries with lower costs and better trade deals, plus rising shipping and compliance costs, create a difficult situation for Indian exports.