Narendra Modi govt unveils its first trade policy, targets doubling of exports at $900 bn

Aiming to nearly double India’s exports of goods and services to US dollar 900 billion by 2020, the government announced several incentives…

Narendra Modi govt unveils its first trade policy, targets doubling of exports at $900 bn

Aiming to nearly double India’s exports of goods and services to $900 billion by 2020, Narendra Modi government announced several incentives in the five-year Foreign Trade Policy (FTP) for exporters and units in the Special Economic Zones.

Unveiling the first trade policy of the National Democratic Alliance (NDA) government, Commerce Minister Nirmala Sitharaman said the FTP (2015-20) will introduce Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) to boost outward shipments.

Besides, higher level of incentives will be provided for export of agriculture products under the Foreign Trade Policy (FTP), which seeks to integrate with Make In India and Digital India initiatives of the government.

“FTP lays down a roadmap for India’s global trade engagement in the coming years…India (will become) a significant participant in world trade by 2020,” Sitharaman said.

“The government aims to increase India’s exports of merchandise and services from USD 465.9 billion in 2013-14 to approximately USD 900 billion by 2019-20 and to raise India’s share in world exports from 2 percent to 3.5 per cent,” Commerce Secretary Rajeev Kher said.

The FTP also seeks to establish an Export Promotion Mission to provide an institutional framework to work with State Governments to boost India’s exports.

“Senior officials have been appointed as designated focal points for exports and imports in several Central Government departments,” said a release on the FTP.

Unlike the annual reviews of the past, the FTP will be reviewed after two-and-half years to ensure continuity in the trade policy.

Sitharaman said that export obligation would be reduced by 25 per cent and incentives available under the MEIS and SEIS would be extend to the units in the SEZs to make them more attractive for investors.

SEZs has lost their sheen after imposition of the minimum alternate tax (MAT) and dividend distribution tax (DDT) in 2012.

The duty credit scrips would be made freely transferable and usable for payment of customs duty, excise duty and service tax, she said, adding “debits against scrips would be eligible for CENVAT credit or drawback.”

Further business services, hotel and restaurants would get rewards scrips under SEIS at the rate of 3 per cent and other specified services at the rate of 5 per cent.

SEIS would be applied to ‘Service Providers located in India’ instead of ‘Indian Service Providers’. Served From India Scheme (SFIS) replaced with SEIS.

Under MEIS, the main sectors to be provided support includes processed, packaged agricultural and food items, agricultural and village industry goods.

“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 added

The nomenclature for export houses is being changed to 1, 2, 3, 4, 5 star export house.


Following are the highlights of the Foreign Trade Policy 2015-20 announced by Commerce & Industry Minister Nirmala Sitharaman today:

Increase exports to USD 900 billion by 2019-20, from USD 466 billion in 2013-14.

Raise India’s share in world exports from 2 per cent to 3.5 per cent.

Merchandise Export from India Scheme (MEIS) and Service.

Exports from India Scheme (SEIS) launched.

Higher level of rewards under MEIS for export items with high domestic content and value addition.

Chapter-3 incentives extended to units located in SEZs.

Export obligation under EPCG scheme reduced to 75% to promote domestic capital goods manufacturing.

FTP to be aligned to Make in India, Digital India and Skills India initiatives.

Duty credit scrips made freely transferable and usable for payment of custom duty, excise duty and service tax.

Export promotion mission to take on board state governments.

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

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

FTP to promote eCommerce cos focusing on job creation

Under the new five-year Foreign Trade Policy (FTP), the government will provide incentives to eCommerce companies exporting products from sectors that create jobs.

Presenting the policy, Commence and Industry Minister Nirmala Sitharaman said government will provide incentives to eCommerce firms that export products from sectors on which the government is focusing on job creation.

Under the new five-year Foreign Trade Policy (2015-20) the government has introduced two new schemes – Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) to promote exports.

Firms that export goods through courier or foreign post office using e-commerce of FOB (Freight on Board) value up to Rs 25,000 per consignment will be entitled for rewards under MEIS.

The objective of MEIS is to offset infra inefficiencies and associated costs involved in export of goods, which are manufactured in India and especially those having high export intensity, employment potential and can enhance India’s export competitiveness.

If the value of exports using e-commerce platform is more than Rs 25,000 per consignment then MEIS reward would be limited to FOB value of Rs 25,000 only.

The goods entitled for benefit under the scheme are handloom, books & periodicals, leather footwear, toys and customised fashion garments.

“Export of such goods under courier regulations shall be allowed manually on pilot basis through airports at New Delhi, Mumbai and Chennai…Department of Revenue shall fast track the implementation of EDI mode at courier terminals,” the policy said.

FTP proposes new institutions to boost global trade

The new Foreign Trade Policy unveiled today proposed setting up of a host of institutions, including Trade Council and National Committee on Trade Facilitation, to improve India’s share in global trade and implement of WTO obligations.

The country aims at increasing its share in world exports from 2 per cent to 3.5 per cent by 2020.

Pursuant to the WTO agreement on trade facilitation, the policy has proposed setting up National Committee on Trade Facilitation. That pact is aimed at easing customs procedure to reduce transactions cost for traders.

The policy said several initiatives are under way for the simplification of procedures and digitization of various processes involved in trade transactions.

Steps are being taken by various ministries and departments to simplify administrative procedures and reduce transaction costs based on the recommendations of two task forces constituted by the Directorate General of Foreign Trade.

The implementation of these recommendations is being actively pursued, the policy said.

Commerce Secretary Rajeev Kher said that India is committed to implement the WTO’s Trade Facilitation Agreement (TFA).

A National Committee on Trade Facilitation is being constituted for domestic coordination and implementation of the TFA, he said.

The Secretary also said an important consideration while framing the policy was aligning FTP with both India’s interests as well its obligations and commitments under various WTO agreements has

In the ongoing Doha Round of trade negotiations, he said, India will continue to work towards fulfilling its objectives and to work with like-minded members to remove any asymmetries in the multilateral trade rules which place a developing country at a disadvantage, such as the rules relating to public stock-holding for food security purposes.

“The current WTO rules as well as those under negotiation envisage the eventual phasing out of export subsidies. This is a pointer to the direction that export promotion efforts will have to take in future, i.e. towards more fundamental systemic measures rather than incentives and subsidies alone,” he said.

He also said that specific measures will be taken to facilitate the entry of new entrepreneurs and manufacturers in global trade through extensive training programmes.

“The Niryat Bandhu scheme will be revamped to achieve these objectives and also further dovetailed with the ongoing outreach programmes,” Kher said, adding capacity development efforts will focus on export promotion councils and commercial missions.

Further, a new institution – Centre for Research in International Trade – is being established not only to strengthen India’s research capabilities in the area of international trade, but also to enable developing countries to articulate their views and concerns from a well-informed position of strength.

The policy also said that two institutional mechanisms are being put in place for regular communication with stakeholders – the Board of Trade and the Council for Trade Development (CTD) and Promotion.

While the Board of Trade will have an advisory role, the CTD would have representation from State and UT governments.

“The CTD will be an institution between the Centre and the states with the objective of internalising the thinking and the processes and the participation of state government into central government policy making, implementation and monitoring,” Kher said.

‘India needs to gear up to face challenges of mega trade pacts’

Expressing concerns over two mega free trade agreements TPP and TTIP, the government today said the Indian industry needs to gear up to meet challenges that would emerge from these pacts.

While India is participating in the Regional Comprehensive Economic Partnership (RCEP) agreement, it is not part of Trans Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (TTIP).

Commerce Secretary Rajeev Kher said that these pacts would add a completely new dimension to the global trading system.

“The mega agreements are bound to challenge India’s industry in many ways, for instance, by eroding existing preferences for Indian products in established traditional markets such as the US and EU and establishing a more stringent and demanding framework of rules.

“Indian industry needs to gear up to meet these challenges for which the government will have to create an enabling environment,” Kher said.

He said India’s future bilateral and regional trade engagements will be with regions and countries that are not only promising markets, but also major suppliers of critical inputs and have complementarities with the Indian economy.

“The focus of India’s future trade relationship with its traditional markets in the developed world would be on exporting products with a higher value addition, supplying high quality inputs for the manufacturing sector in these markets and optimising applied customs duties on inputs for India’s manufacturing sector,” he added.

The TPP is a proposed trade agreement under negotiation among 12 countries — Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam. TTIP is between the European Union and the US.

The 16-member RCEP comprises 10 Asean members and its six FTA partners namely India, China, Japan, Korea, Australia and New Zealand.

The Secretary said signing an FTA is just a beginning and not the end of the process as it would give benefit to traders.

“Recognising that it is important to review whether the concessions under these agreements are being gainfully utilised and have resulted in meaningful market access gains, an ‘Impact Analysis’ of FTAs has been instituted,” he said.

There is a need to simplify and ease rules of origin criteria to position India effectively in global and regional value chains.

“The likelihood of duty inversions will continue to be closely monitored to ensure that industry is not put to any disadvantage. A system for capturing preferential data will be put in place at the earliest,” he said.

Indian industry has raised concerns over these FTAs saying that it is benefiting more to the partner countries with which India has implemented such pacts.

The lack of information about India’s FTAs was also a common complaint flagged by industry. To address this, an intensive FTA outreach programme has been launched.

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