22 Apr

India’s Foreign Trade Policy of 2015-2020

With an aim to make India a (x) significant partner in global trade by 2020, the government announced a five-year new Foreign Trade Policy (FTP) in April 2015, which may be integrated with ‘Make in India1, ‘Digital India’ and ‘Skills India initiatives’. The FTP has the objectives of boosting India’s exports; making exports an engine of economic growth and employment generation. In order to achieve these objectives, a mix of various policy measures is required which include number of changes in the area of fiscal policy, institutional design, rationalisation of procedures, diversification of export basket and penetration into new markets for enhancing trade prospects in the global market. All this requires improved export infrastructure. The following are the salient features of Foreign Trade Policy of 2015-2020 (FTP):

  • the policy is made product-wise and location-wise;
  • the policy includes long and medium term strategy to enhance trade competitiveness;
  • introduction of Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) to boost outward shipments;
  • several incentives for exporters and units in the Special Econo­mic Zones;
  • export promotion mission to take on board State Govern­ments;
  • unlike annual reviews, FTP will be reviewed after two-and-half years;
  • higher level of support for export of defence, farm pro­duce, and eco-friendly products;
  • give a push to services exports from sectors like entertainment, logistics, architecture, account­ing and health care;
  • simplification of procedures/ processes, digitisation and e- govemance;

PD/April/2016/95

 

facilitating and encouraging export of dual use items (SCOMET) which include export of special chemicals, organisms, materials, equipment and tech­nologies;

  • trade facilitation and ease of doing business; and
  • online inter-ministerial consul­tations.

Analysis of Policy

The policy provides instruments to accelerate export of goods and services and laid out the framework and the logic that will support the objective of doubling the annual export of goods and services to $ 900 billion in next five years of 2015-20. The aim is to enhance India’s share in world exports from 2 per cent to 3.5 per cent by 2020. The focus is on sustaining services exports and increasing manufacturing exports side by side making efforts to improve the ease of doing business. The FTP seems to be guided by the following four concerns:

  • keeping checks on how much money goes out on account of export incentives given the fiscal constraints;
  • WTO obligations to phase out export subsidies;
  • linking the FTP to the ‘Make in India’ initiative; and
  • improving free trade agreements (FTAs) for furthering exports.

The important positive aspects of the policy are :

  1. The setting up of a number of institutions to go forward and strengthening world trade. Following to the WTO agreement on trade facilitation, the setting up of National Committee on Trade Facilitation will help in the implementation of WTO’s com­mitments. The aim is to simplify customs procedure to reduce transactions cost for traders. In this area the policy is expected to

“No one ever drowned in sweat.”

 

coordinate several measures being taken by various ministries and departments to simplify administrative procedures and reduce transaction costs.

  1. Proposes institutions for involv­ing State Governments in export promotion policy formulation.
  2. The boost to e-commerce and services exports is well-timed and takes into account the shift in the business paradigm. Incen­tives to e-commerce companies exporting products from sectors with potential for creating jobs. The policy addresses markets and products strategies. It out­lines the measures required for trade promotion including infra­structure development and over­all trade ecosystem including electronic clearances on a 24×7 basis.
  3. The introduction of a simplified import duty exemption certifi­cate for all exports under the two schemes is expected to make incentives more transparent and non-discretionary. The quantum of export subsidies is lower than the earlier ones.
  4. Introduced a concept of import appraisal mechanism which will be done on a quarterly basis by the department of commerce.
  5. The schemes have been devised for further extending tax breaks to defence, pharma and environ­ment-friendly exports.
  6. The reduction in the specific export obligation under the Export Promotion Capital Goods (EPCG) scheme. In this scheme, exporters are allowed to import capital goods without duty, subject to their fulfilling an export obligation equivalent to 90 per cent of the total value of imports over a period of five years. Such export obligation has now been reduced to 75 per cent.
  7. The five-year programme focus­ing on the ease of doing business

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