Policy

New trade policy aims to double exports to $900 b

| Updated on: Apr 01, 2015
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Five-year policy streamlines incentives; Centre opts for mid-term review

The long-awaited five-year Foreign Trade Policy (FTP) announced on Wednesday unrolled two new incentive schemes for goods and services exports with a focus on labour-intensive and high-potential sectors. To ensure stability in the policy regime, the Centre has opted for a mid-term review instead of an annual one.

The schemes — Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) — will replace a plethora of existing ones and reward exporters on the basis of the importance attached to the exported items and the targeted market. The quantum of incentives — fixed at two, three and five per cent of the value of exports — is, however, lower or at best at the same levels as the existing schemes for most items.

“The new five-year FTP provides a framework for export of goods and services as well as generation of employment and increasing value addition in the country, in view of the ‘Make in India’ vision of our Prime Minister,” Commerce and Industry Minister Nirmala Sitharaman said at a press conference.

“There will only be a mid-term review of the five-year policy at the end of two-and-a-half years. Besides, given the WTO requirements there is need to look beyond subsidies and subvention,” the Minister said.

Although the FTP has not set an annual export target for the new fiscal, it has fixed a long-term target of exporting goods and services worth $900 billion annually by 2020, which is almost double the current level.

Combined target “We have set a combined target as services exports could rise faster,” Commerce Secretary Rajeev Kher said. Exports of goods in 2014-15, at around $314 billion, are almost at the same level as the previous year because of contracting global demand. Services exports during the fiscal are likely to be $151 billion, Kher said.

The policy also spells out measures for increased digitisation of exports and imports with the aim to gradually move towards a paperless office and self-certification by established exporters and importers.

Special Economic Zones (SEZs), suffering from a loss of investor interest after the imposition of Minimum Alternate Tax and Dividend Distribution Tax on developers, too have been extended benefits under the MEIS and SEIS schemes.

“After the introduction of MAT and DDT, SEZs were at a disadvantage vis-à-vis units in rest of the country. Now there will be a level-playing field,” an official dealing with SEZs told BusinessLine .

To give a fillip to e-commerce, online exports of certain items such as handicraft, leather, footwear and toys will also be eligible for incentives. The Minister refused to divulge the total outlay of all incentive schemes put together, but said that the Commerce and Finance Ministries were on the same page.

“We were in total agreement. I can’t say more than that,” she said when asked to specify the amount. The highest level of incentive in services exports is for sectors such as health, education and tourism at 5 per cent, while for the rest it is 3 per cent or 2 per cent.

For goods, labour-intensive sectors such as carpets, handicrafts, toys, sports, floriculture and agriculture items are eligible for the 5 per cent incentive. “In the existing schemes, priority sectors such as carpets and handicrafts were eligible for 7 per cent benefit,” a Delhi-based exporter pointed out.

Freely transferable On the brighter side, the ‘duty free’ incentive schemes that will be given to exporters will be freely transferable and can be used to pay all kinds of taxes, including excise and customs duties, and can also be sold.

To incentivise exporters to take advantage of the Free Trade Agreements, the highest bracket of sops have been offered for exports to these markets.

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Published on January 23, 2018

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