Foreign Trade Policy

Foreign Trade Policy (2015-20)

 The new Foreign Trade Policy 2015-20 was unveiled by Commerce & Industry Minister, Mrs. Nirmala Sitharaman on 1st April 2015. It provides a framework for increasing exports of goods and services as well as generation of employment and increasing value addition in the country, in keeping with the “Make in India” vision of Prime Minister. The focus of the new policy is to support both the manufacturing and services sectors, with a special emphasis on improving the ‘ease of doing business’.

The new foreign trade policy aims at increasing exports of goods and services to 900 billion by 2019-20, from $466 billion in 2013-14. It seeks to raise India’s share in world exports from existing 2% to 3.5% in near future.

Highlights

The foreign trade policy, 2015-20 may be categorized into following three parts for better understanding:

A. Simplification and Merger of Reward Schemes

The existing reward schemes have been merged into two new schemes as under:

1. Merchandise exports from India scheme (MEIS)

The earlier 5 schemes (Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, VKGUY) for rewarding merchandise exports with different kind of duty structure with varying conditions have now been replaced by a single scheme called Merchandise Export from India Scheme (MEIS). Objective of MEIS is to offset infrastructural inefficiencies and associated costs involved in export of goods and products, which are produced and manufactured in India.

It seeks to enhance India’s export competitiveness of these goods and products having high export intensity, employment potential. In this scheme, the incentives are to be provided in the form of duty scrips as percentage of FOB {free on board} value of exports. A scrip literally means a “chit” and refers to a form of credit. The Duty free scrips are provided to the exporters under various export promotion schemes of the government. Free on board (FOB) is a trade term that indicates whether the seller or the buyer has liability for goods that are damaged or destroyed during shipment between the two parties.

The Union Government has extended support to certain new products and the rate of incentives for

certain other specified products under the Merchandise Exports from India Scheme (MEIS). Decision

in this regard was taken by Department of Commerce (DoC) under the Ministry of Commerce & Industry in backdrop of the continued decline in growth of Indian goods exports.

2. Service Export from India Scheme (SEIS)

SEIS has replaced earlier “Served from India Scheme” and aims to encourage export of notified services from India. The SEIS applies to ‘service providers located in India’ instead of ‘Indian service

providers’. Thus, it provides for incentives to all service providers of notified services who are providing services from India, regardless of the constitution or profile of the service provider. The rates of incentivization under the SEIS are based on net foreign exchange earned. The incentive issued as duty credit scrip, will no longer carry an actual user condition and will no longer be restricted to usage for specified types of goods but be freely transferable and usable for all types of goods and service tax debits on procurement of services/goods. It is proposed to extend befits of both the reward schemes (MEIS and SEIS) to units located in SEZs.

B. Boost To “Make In India”

Specific Export obligation under EPCG scheme, in case capital goods are procured from indigenous manufactures which is currently 90% of the normal export obligation (six times at the duty saved amount) has been reduced to 75% in order to promote domestic capital goods manufacturing industry.

Higher level of rewards under MEIS for export items with high domestic content and value addition as compared to products with high import content and less value addition.

C. Trade Facilitation and Ease of Doing Business

 Online filling of documents/ application and paperless trade in 24*7 environment.

 Landing document of export consignment as proofs for notified market would be digitally uploaded by exporters/ status holders.

Simplification of procedures/processes, digitization and e-governance

 Resolving Complaints: In an effort to resolve quality complaints and trade disputes betweenexporters and importers, a new chapter on Quality Complaints and Trade Disputes has been incorporated into the Foreign Trade Policy.

FTP to be aligned to Make in India, Digital India and Skills India initiativesExport promotion mission to take on board state Governments

Higher level of support for export of defence, farm Produce and eco-friendly products.

Unlike annual reviews, FTP will be reviewed after two-and-Half years.

In this FTP, focus has been on simplicity and stability. Further, the policy on one hand seeks to realign multiple schemes with the objective of reducing the complexities, on the other hand it wants to promote increased use of technology to reduce the transaction cost and manual compliances. By extending benefits under EPCG on domestic procurements and offering them to more products under MEIS, the policy seeks to further incentivise the exports. The policy seeks to address the trade facilitation obligations of the country under the WTO. The policy is drafted in consonance with other initiatives of the government like Digital India, Skill India, improving ease of doing business and Make in India. While the measures proposed in the policy are not radical, they appear to be in the right direction.

FDI in E Commerce

Electronic commerce (ecommerce) is a type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet. Electronic commerce operates in all four of the major market segments: business to business, business to consumer, consumer to consumer and consumer to business. It can be thought of as a more advanced form of mail-order purchasing through a catalog. Almost any product or service can be offered via e-commerce, from books and music to financial services and plane tickets.

From the point of view of business, there are two models of e-commerce. First model is known as

i) Inventory based model of e-commerce- Inventory based model of e-commerce means an ecommerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.

ii) Marketplace based model of e-commerce- Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.

E-Commerce Guidelines

Department of Industrial Promotion and Policy (DIPP) has come up with new rules in March 2016 aimed to regulate the e-commerce marketplaces.

Under the new rules 100% FDI under automatic route is permitted in marketplace model of e-commerce and no FDI is permitted in inventory based model of e-commerce. At present, 100 per cent FDI is permitted in B2B (business-to-business) transactions under the automatic route.

 As per the new norms, an e-commerce entity will not be permitted to sell more than 25 per cent of total sales through its marketplace from one vendor or their group companies. New guidelines mandate the e-commerce entities to refrain from indulging in predatory pricing and directly or indirectly influencing the price of goods and services.

The new policy also mandates such e-commerce companies to display contact details of the sellers online. The warranty/guarantee of products or services sold online will also be borne by the sellers, not the e-commerce company.

Review of policy on Foreign Direct Investment (FDI) in e-commerce

26-December-2018

i) 100% FDI under automatic route is permitted in marketplace model of e-commerce.

ii) FDI is not permitted in inventory based model of e-commerce.

iii) E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.

iv) E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control over the inventory will render the business into inventory based model. Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies.

v) An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.

vi) In marketplace model goods/services made available for sale electronically on website should clearly provide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be responsibility of the seller.

vii) In marketplace model, payments for sale may be facilitated by the e-commerce entity in conformity with the guidelines of the Reserve Bank of India.

viii) In marketplace model, any warrantee/ guarantee of goods and services sold will be responsibility of the seller.

ix) E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory. For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.

x) e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only.

xi) e-commerce marketplace entity will be required to furnish a certificate along with a report of statutory auditor to Reserve Bank of India, confirming compliance of above guidelines, by 30^th of September of every year for the preceding financial year.

xii) Digital & electronic network will include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc.

xii) Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.

Advantages of FDI in the sector

(i) Boost to the infrastructural development: Increased capital will help to establish supply chain, distribution system and warehousing.

 (ii) Impetus to manufacturing sector: Growth in retail sector will have cascading effect in the manufacturing sector which will positively contribute to overall growth of economy and job creation.

(iii) More efficient supply chain management: Will reduce the need for middlemen leading to lower transaction costs, reduced overhead and reduced inventory and labour costs.

(iv) Adopting best global business practices: Will lead to better work culture and customer service.

(v) Increased outreach: Will provide increased access to buyers/sellers, allow MSMEs and artisans to reach out to customers far beyond their immediate location, both locally within India and abroad.

(vi) Traceability and transparency & Improved customer service.

(vii) Reduced costs: On marketing and distribution, travel, materials and supplies will benefit businesses.

Disadvantages of FDI in the sector

(i) Small time businesses/kirana stores remain the largest source of employment in the country. Opening of B2C e-commerce on inventory based model is likely to seriously impact these shopkeepers leading to large scale unemployment.

(ii) Indian market is not yet ready for opening up e-retail space to foreign investors. It will seriously impair small time trading of brick and mortar stores. Small time shopkeepers are not highly qualified and will not be able to compete with sound e-retail business format.

(iii) Because of scale of economic operations, e-commerce players in the inventory based model will have more bargaining power than standalone traders and will resort to predatory pricing.

(vi) Inventory based e-commerce competes directly with MSMEs. Indian e-commerce B2C is growing in an eco-system with Indian owned/led companies offering open marketplace models which provide a technology platform to help MSME reach across India and even globally.

These marketplaces do not compete with MSME or retailers and allow everyone to trade. On the other hand, allowing the entry of inventory based large foreign e-tailers may shrink Indian entrepreneurship and the MSME sector.

Conclusion

Overall, e-commerce including online retail in India constitutes a small fraction of total sales, but is set to grow to a substantial amount owing to a lot of factors such as rising disposable incomes, rapid urbanization, increasing adoption and penetration of technology such as the internet and mobiles, rising youth population as well as increasing cost of running offline stores across the country.

***********************************************************************************************************

The entire contents of above document have been prepared on the basis of Notification then exist.  Whereas deep care has been taken by author to ensure the correctness and completeness of the information provided.This is nothing but a knowledge sharing initiative by author and author do not intend to accost any business or profession.

Reservation: The Nuances

Reservation: The Nuances

The Union Cabinet on Monday January 8, has approved Constitution Amendment Bill for giving 10 % reservation to economically backward section in the general category and bill will be extended to Muslim, Sikh, Christian, Buddhist and other Minorities Community. For this, the government has increased the session of the Rajya Sabha.

Logic behind the Government's decision many political analysts are assessing the recent elections for the three state assemblies (Rajasthan, Madhya Pradesh and Chhatisgarh. The ruling BJP in the center believes that due to the anger of the upper castes, they lost in these elections; And this verdict is being seen as an attempt to turn the attitude of the upper caste to its own.

Reservation Policy in India :- It is form of alternative action where % of seats are for people belonging to socially and educationally backward community and SC, STs who are inadequately represented in institution of Government Job and education.

Rational Behind the Reservation Policy in India:

To provide equality and opportunity to section which has been discriminated over the years hence to correct the historical injustice and to give effect to redistributive agenda of state reservation was introduced.

Criteria for Economically Backwardness under general categories:

·         Family income less than 8 lakh rupees annually (Creamy Layer Concept of OBC)

·         Whose agricultural land less than 5 acres

·         Residential house with less than 1000 square feet

·         Plot less than 100 yards in notified municipality

·         Residential plot limit in non-notified municipal area is 200 yards

Current Moment of Reservation:

At present there is a provision of 49.5 percent reservation and its cant beyond as per Apex Court. In this, the Scheduled Castes (SC) are given 15 percent, Scheduled Tribe (ST), 7.5 percent and 27 percent reservation for OBC.

Legal Test of Bill: Required 124^th Constitutional Amendment (The bill must be passed in each houses by an absolute majority and a two third majority of members present and voting required as per article 368 of Constitution of India).

The government has proposed to amend the Article 15 and 16 of COI through 124th Constitution Amendment Bill.

Article 15 and 16 of the Constitution

Article 15 gives equal rights to all citizens. According to Article 15 (1), the State shall not make any difference against any citizen on the basis of religion, ethnicity, caste, gender, birthplace or any of them.

As per Article 15 (4) and 15 (5), special provision has been provided for social and educationally backward classes or Scheduled Castes and Scheduled Tribes. But here the economic term has not been used anywhere. Therefore, in order to give reservations to the upper castes, the government will need a constitution amendment to add economically weaker words to this article (Insert Article 15(6).

Article 16 talks about providing equal opportunities in government jobs and services. But in the 16(4) 16(4)(a), 16(4)(b) and Article 16(5), the state has been empowered to give reservation to any sections of backward people in government jobs. There is no mention of economic also here. Therefore, in order to give reservations to poor upper caste, the government has to amend these two paragraphs of the Constitution.

Facts about the reservation:

In 1979, the Central Government formed the 6-member Backward Class Commission Under the chairmanship of the former Bihar Chief Minister BP Mandal also known as Mandal Commission. This commission gave its report in 1980.

Commission take the help of 1931 caste census to form caste for reservation. It included 3743 castes and communities, which were given the status of OBC and suggested 27 percent reservation to OBC.

On the basis of the recommendations of the Commission on August 13, 1990 a notification for giving 27 percent reservation in government jobs to backward classes was issued. The matter reached the Supreme Court among all the protests, where the Constitutional Bench with 9 judges finally upheld the decision of the Mandal Commission's recommendations on November 16, 1992. After this, the Central Government issued notification of providing 27 percent reservation to the backward classes in the jobs of the Central Government on September 8, 1993.

The Supreme Court on reservation

MR Balaji (1963): In this case of 1963, the Supreme Court ruled that the classification of backward classes was unconstitutional. The person's caste can not be the only criterion for determining whether a particular class is a backward class or not. To determine this, financial condition, poverty, occupation, housing, etc. should also be addressed.

T. Devdasan (1963): In this regard, the Supreme Court dismissed an order of government in Balaji vs. Mysore State case more than necessary in 1963. It provided reservation of 68 percent for Scheduled Castes, Scheduled Tribes and Other Backward Classes. The Supreme Court gave the order that the total reservation limit should not exceed 50 per cent.

Indira Sahni (1992): On the issue of reservation, the judgment of the Supreme Court given in this case is considered as a milestone. Supreme Court upheld the implementation of separate reservation for other backward classes in central government jobs in this case.

In this case, it was arranged for the first time that reservation in promotion for Scheduled Castes, Scheduled Tribes officers and employees would not be permissible.

The Parliament considered this and amended 77th amendment in the Constitution. In this amendment the provision was made that the State Government and the Central Government have the right to give reservations in promotions. But this case again went to the Supreme Court. Then the court gave the arrangement that reservations can be made, but seniority will not be found. After this, the 85th Constitutional Amendment was amended and it was said that the consequential seniority would also be given. In this case, the Constitutional Bench of 11 judges in the Supreme Court did not consider reservation in promotion for government services for Scheduled Caste and Scheduled Tribe under Article 16 (4) of the Constitution and ordered that the reservation in promotions to these sections would be only next It is only for 5 years.

M. Nagraj (2006): In this matter, the 77th and 85th constitutional amendments in the Supreme Court were challenged. The court considered these constitutional amendments in its decision as right, but also said that if the government wants to give reservation to the Scheduled Castes and Scheduled Tribes in the promotion, then for this backwardness of these sections, inadequate representation in the state services and the government In order to influence the work efficiency of the work, the basis should be laid by mobilizing the data.

If the state government and the central government have to give reservations in the promotion, then three things have to be taken care of –

1.  Are the people of these classes still backward or not?

2.  Is the people of this class active in the services or not?

3. If reservation is given to Scheduled Castes, tribal officials and employees in promotions, then it has to be seen that the administration will not have adverse effects?

This is not new for the government to issue of reservation in government services to economically weaker section but this is the first time when economic status of a class has been linked to the reservation.  Indeed, reservations are considered as a 'tool' for empower and uplift the socially suppressed, discriminated Dalits, Adivasis and other backward classes and get them social status and better life. since 1951 government proposed reservation as demanded and required but situations of Now and Statistics of many International Organisations shows only providing  Reservation is never considered to be a 'tool' to eliminate economic backwardness. Now the Government has taken a new initiative in this direction, then this step will be considered as fulfilling the long standing demand of a large section of society almost 90 % of the Population.