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Government unveils new foreign trade policy; aims to raise exports to $900 billion by 2020

The Economic Times:  April 06, 2015

New Delhi: The government unveiled a five-year plan for lifting India's 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.

The simplified Foreign Trade Policy (FTP) for 2015-20 collapses five earlier schemes for promotion of merchandise goods into one single programme and revamps one for promotion of services It focuses on reducing transaction costs for exports besides extending incentives to special economic zones (SEZs) and e-commerce.

"The focus of the foreign trade policy is to support services and exports along with improving the ease of doing business.

The new trade policy will boost exports and create jobs while supporting Make in India and Digital India," said commerce and industry minister Nirmala Sitharaman while announcing the FTP on Wednesday.

"It will promote defence, pharma, environment-friendly products and value-added exports." Industry welcomed the policy that has been delayed by a year. "The new policy recognises the global challenges faced by the export sector and also identifies the potential sectors which could emerge as winners in the next five years," said SC Ralhan, president of the Federation of Indian Export Organisations (FIEO). He described the policy as "pathbreaking".

The Confederation of Indian Industry said in a release that, "The much-awaited Foreign Trade Policy 2015-20 seems to be a visionary policy which is in sync with government's campaigns like Make in India, Digital India and Skills India, which indicates that India is geared up to realize the aim of improving the ease of doing business." India's exports contracted 15% in February, the third successive month of decline, because of a global slowdown and the appreciation of the rupee against a basket of currencies.

Merchandise exports account for about one-fifth of the country's $2 trillion economy.

Several promotional schemes such as focus product and focus market schemes for goods have been consolidated into a single Merchandise Export from India Scheme (MEIS). Under the scheme, incentives will be given for export of specific goods to specific markets.

The Services Export from India Scheme (SEIS) will replace the Serve from India Scheme (SFIS), giving a push to sectors such as medical tourism, accountancy and architecture.

"These schemes (MEIS and SEIS) replace multiple schemes earlier in place, each with different conditions for eligibility and usage. Benefits from both these schemes will be extended to units located in SEZs," the minister said. India's services exports stand at around $145 billion, about half that of merchandise exports of over $300 billion.

The government aims to raise India's share in world exports from 2% to 3.5% by 2020. "FTP lays down a road map for India's global trade engagement in the coming years... India (will become) a significant participant in world trade by 2020," Sitharaman said.

Incentives under MEIS and SEIS will be in the form of fully transferable duty credit scrips. Exporters can use these scrips to offset service tax, excise duty or customs duty.

This addresses the long-pending demand of the services sector as many sectors do not import and were not able to use the incentives.

E-commerce-enabled exports of handloom products, books, leather footwear, toys and customized fashion garments through couriers or foreign post offices will also get the benefit of MEIS for a value of up to Rs 25,000. In an effort to revive floundering special economic zones, the government extended export inventive schemes for both goods and services to units in SEZs as well.

Instead of an annual exercise, the government will conduct a midpolicy review after two and a half years. The government also extended tax breaks to exporters of defence, pharma and environment-friendly products. The export-obligation period for items related to defence, military stores, aerospace and nuclear energy will be 24 months instead of 18. It also reduced the export obligation for those procuring capital goods domestically to 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, analysts said. This will help exportersdevelop productive capacities for both local and global consumption, they said. Moreover, manufacturers that are also status holders will be enabled to self certify their manufactured goods as originating from India.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.