Foreign trade Policy of India

2014-15
GOI unveils new foreign trade policy
Key highlights

>> Focus in Foreign Trade Policy is to support services and exports

>> Have taken a number of very important initiatives
>> Will focus on export of high value addition products
>> Focused on improving ease of doing business in new policy
>> Challenge is to address infra bottlenecks, complex procedures, manufacturing
>> Need to ensure local products and services are globally competitive
>> Market diversification is a key focus of Foreign Trade Policy 2015-2020
>>Three prime sectors focused in the Foreign trade Policy--- (a) promotion of manufacturing exports (b)
promotion of service exports (c) strive for greater use of Free Trade Agreements (FTA)
The government recently unveiled a five-year plan for lifting Indias exports in a policy that seeks to make the
country a bigger player in global trade by doubling overseas sales to $900 billion by 2019-20 while giving a boost
to the Make in India initiative.
This is also in line with other initiatives like the Digital India programme, lays down a blueprint for the Indian
Inc. to enhance exports by leveraging simplified schemes and policy measures like subvention and tax breaks.
The new FTP was delayed by a year, as it had to be in tandem with Prime Minister Narendra Modis Make in
India, Digital India and ease-of-doing-business initiatives
The new policy also focusses on simplifying old schemes and procedures under one streamlined policy
structure.
This time, it is unlikely for the GOI to set specific export targets
Through the past few years, the FTP has been favorable towards exports than imports
This year, the thrust will primarily be on manufacturing exports and services exports. Within
manufacturing exports, the government will chart out a strategy to promote the key sectors of engineering
products, electronic goods and textile exports.
Within services, a host of incentives are likely to be rolled out to sectors such as tourism, hospitality,
education, etc, which might be promoted in the form of project exports from India.
Besides, this year, the government should bring top exporting sectors under the purview of the Focus
Market Scheme and provide interest subvention to these sectors
The Focus Market Scheme is an incentive package under which exporters are entitled to duty credit
scrip equivalent to three per cent of the free-on-board value of exports in free foreign exchange.
This year, the FTP is also expected to put greater emphasis on more utilisation of FTA and other
multilateral arrangements such as regional comprehensive economic partnerships.
it was found the utilisation of FTAs was the lowest in India compared to its partner countries. As a result,
exporters lost out in markets with which India had such bilateral arrangements.
In a drastic change of stance keeping in view the global trading norms under the World Trade Organization
(WTO), the new FTP sought to consolidate all previous export incentive schemes under two:
1. Merchandise Exports From India Scheme (MEIS) and
2. Services Exports from India Scheme (SEIS).
Both of them is expected to provide the country's services sector with incentives such as duty credit that can be
used to pay customs duty, while importing other goods and services.
The MEIS has replaces five existing schemes: Focus Products Scheme, Market-linked Focus
Products Scheme, Focus Market Scheme, Agriculture Infrastrucutre Incentive Scrips and
Vishesh Krishi Grameen Udyog Yojana (VKGUY).

 While the SEIS has replaced the existing Served From India Scheme (SFIS).(--to accelerate the
growth in the export of services)
In a big relief to the exporters, all scrips issued under MEIS and SEIS and the goods imported
against these scrips will be fully transferable.
This means that scrips issued under export from India schemes can now be used for payment of
customs duty for import of goods, payment of excise duty on domestic procurement of inputs or
goods, and payment of service tax.
In an effort to push the domestic content requirement, measures have been adopted to
encourage procurement of capital goods from indigenous manufacturers under the EPCG
scheme by reducing specific export obligation to 75 per cent of the normal export obligation.
The FTP also introduced a concept of import appraisal mechanism which will be done on a
quarterly basis by the commerce department.
In a view to boost exports from Special Economic Zones (SEZs) the government also expanded
the benefits under MEIS and SEIS to the units located inside the tax-free zones.
The FTP from now on will be having a mid-term review after two and a half years, except for
exigencies.
In an attempt to achieve greater policy coherence and mainstreaming of all export incentive
schemes, the commerce department will now direct state governments to prepare their own
export strategies based on the new FTP.
The new policy has come out at a time when Indias merchandise exports continue to log a
decent growth, having expanded by just 0.88% in the first 11 months of the current fiscal.
Other salient features of the 2015-20 include boosting processed and packaged agricultural and
food items with better branding and quality control assurances. Importers will also gain from tax
breaks and financial support.
Under the scheme, agricultural and village industry products would be supported across the
globe.
Especially emphasizes is laid on promoting defense, pharma and environment-friendly
products. These exporters of these products will be given specific tax breaks for manufacturing
and trading purposes.
Tax breaks such as reduction of export obligation under EPCG (export promotion capital
goods) scheme will be a major draw for exporters. The obligation will be reduced by 25 percent.
Especial focus is being laid on branding campaigns and activities to promote exports and goods
manufactured in India.
Entrepreneurial training programmes for enhancing trade will be coordinated under the skills
India initiative.
For boost in the Make In India initiative, (a) reduces export obligation (EO) for domestic
procurement and (b) higher level of rewards under the MEIS for exports with high domestic
content and value addition.
All these policy measures said Sitharaman is focused at raising exports to $900 billion by 2019-20 from $465.9
billion in the 2013-14.
P.S:
1. Tax Breaks-- is a term referring to any item which avoids taxes, including any tax exemption, tax deduction,
or tax credit. It is also used in the United States to refer to favorable tax treatment of any class of persons. This is
considered to be a part of the tax reforms.
2. Subvention- a grant of financial aid as issued by the government.
3. EPCG schemeExport Promotion Capital Goods scheme ---The Export Promotion Capital Goods (EPCG)
scheme was one of the several export-promotion initiatives launched by the government in the early '90s. The
basic purpose of the scheme was to allow exporters to import machinery and equipment at affordable prices so
that they can produce quality products for the export market.
Also in the NEWS

Interest Subvention Scheme for exports likely to be revived

the government set to reintroduce the interest subvention scheme for the labour-intensive sectors
Finance Ministry given the sanction for 3 years, and the deal will be finalized within a couple of months
Hence exporters will get access to subsidized credit and labor intensive sectors will be given prominence
an allocation of Rs 1,650 crore has been made for this in the budget for 2015-16
the already vogue 3% interest subvention scheme for exports lapsed in April last year, affecting working
capital and margins of Indian exporters
The interest subvention scheme was expanded to 3% from 2% in 2013-14 for sectors including
readymade garments, carpet, handlooms, handicrafts, toys, and some engineering products.
The scheme provides credit to exporters at a subsidised rate by banks, which are later compensated by
the government.
The Emphasis of the government this time is to support value added exports
Challenges-- In the changed Global scenario based on competitiveness, subsidies might be difficult.
Hence industries should enhance their competitiveness at the global perspective without the aid of
subsidies.