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Scrip, VKGUY) for rewarding merchandise exports with different kind of duty structure with varying conditions have now been replaced by a single scheme called Merchandise Export from India Scheme (MEIS).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.