Annual supplement to foreign trade policy comes exactly after a year from the last one in August 2009, which was in backdrop of a gloomy international trade scenario with economies facing slowdown and recession. Obviously, the objective then was to arrest and reverse the trend of falling exports.

Encouraged by the growth of exports by 32% in the first quarter of 2010-11, compared to last year, the government seems to be now showing a calibrated approach, focusing on fiscal consolidation while being conscious of the facts that there are few sectors which need to be incentivised more than others.

Extension of Duty Entitlement Passbook Scheme (DEPB) to June 30, 2011 comes as a major relief to industry. DEPB has been the most popular export scheme with exporters for the flexibility it offers in terms of transferability of scrip as well as the goods imported. As per ministry of commerce?s Annual Report 2008-09, the scrip worth Rs 5,129 crore were issued during the period April to November 2009, which is substantially more than the value of scrips issued for similar post export schemes.

Similarly, schemes like zero duty Export Promotion Capital Goods Scheme (EPCG) and Status Holder Incentive Scheme (which promotes investment in technology of some specified sectors) which have found favour with exporters have been extended by one more year.

EPCG with zero duty seems to be quite successful, as evident from the fact that 968 authorisations of value worth Rs 6,039 crore has been issued between August to November 2009. Now, the coverage of these schemes has been extended to include new sectors like paper, ceramic, glass, rubber and engineering products. Hopefully these measures would encourage additional investment in these sectors and would see more capacity creation over next one year or so.

Perhaps the most substantial benefit has been extended under Focus Product Scheme, by offering 2% additional incentive for select sectors, such as handicrafts and handlooms, leather products, engineering items, toys and sports goods. Further, the scope of the scheme has been extended to cover 256 new products, including several electronic and IT/ telecom products.

There was an expectation that exports to newer markets such as Russia, Ukraine, etc. would be added under the Focus Market Scheme, which has not been done. Continued focus on procedural simplification and reduction of transaction cost for exporters would be welcome by the industry. Facility of getting an Annual Authorisation for EPCG and strengthening of EDI system are steps in the right direction. Service providers availing incentive under Served from India Scheme would be allowed to import vehicles in the nature of professional equipment, which could benefit few sectors, such as media and healthcare.

The writer is senior manager, KPMG