4/7/2015 Eye on India

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New Policy to Double Exports

Foreign Trade Policy 2015­20 (FTP) With the objective of increasing global competitiveness of domestic products and aligning India’s tariffframework with the long term commitments at World Trade Organization, the Government of India hasrolled out the new Foreign Trade Policy 2015­20 (FTP 2015­20). The policy aims to double India’sexports in the next five years. This will be achieved through two schemes: Merchandise Exports fromIndia Scheme (MEIS) & Services Exports from India Scheme (SEIS). These two schemes will replace a gamut of existing norms and reward exporters on the basis of theimportance attached to the exported items and the targeted market. The quantum of incentives — fixedat two, three and five per cent of the value of exports — is, however, lower or at best at the same levelsas the existing schemes for most items. Although the FTP has not set an annual export target for the new fiscal, it has fixed a long­term target ofexporting goods and services worth $900 billion annually by 2020. This is almost twice the level ofexports being made by India today. The Policy spells out measures for increased digitisation of exportsand imports with the aim to gradually move towards a paperless office and self­certification byestablished exporters and importers.

Key Highlights

The government has extended tax breaks to exporters of defence, pharma, farm produce andenvironment­friendly products.The export­obligation period for items related to defence, military stores, aerospace and nuclearenergy will be 24 months instead of 18.The policy has also reduced the export obligation for those procuring capital goods domesticallyto 4.5 times imports as against six times under the export promotion of capital goods scheme(EPCG), which will encourage the domestic capital goods industry, according to analysts. Thiswill help exporters develop productive capacities for both local and global consumption.Moreover, manufacturers that are also status holders will be enabled to self­certify theirmanufactured goods as originating from India.

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4/7/2015 Eye on India

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Exports of handloom products, books/periodicals, leather footwear, toys and customized fashiongarments through courier or foreign post office would also be able to get benefit of MerchandiseExports from India Scheme (MEIS) (for values up to Rs.25,000).Duty credit scrips will be freely transferable and usable to facilitate payment of custom duty,excise duty and service tax.Unlike annual reviews, FTP will be reviewed after two­and­Half years.

Its Impact on Business ClimateThe Foreign Trade Policy 2015­20 will accrue substantial gains for India’s trade as well asmanufacturing sector. Enhanced focus will be placed on export of high value products to traditionalmarkets in developing world. Similarly, there will be strong emphasis to supply high quality inputs for themanufacturing sector in these markets. Plus, the custom duties applied on inputs for India’smanufacturing sector will be fully optimised. The realignment of tariff structure will put India inadvantageous position in regional trade pacts being negotiated. So far India was excluded from pactssuch as the Trans­Pacific Partnership (TPP) partly because its tariffs are not competitive. The expertsfeel the policy will benefit the exporting community, with special focus on services exporters.Simplification of procedures will go a long way in integrating India in the global value chain; improvingIndia’s ranking in ease of doing business index and reducing the transaction cost in international trade.E­commerce sector stands to gain from the FTP. More importantly, the Foreign Trade Policy 2015­20 willcreate more employment avenues in manufacturing and services. Intensive focus on higher value­addition and technology infusion, quality and standards will lead to zero defect products. Lower tariffs oninputs and raw materials will have a cascading impact on the economy.

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