The National Democratic Alliance (NDA) government’s maiden foreign trade policy (2015-20) has co-opted states as direct stakeholders in export promotion, vowed to honour World Trade Organisation commitments on export subsidy reduction, brought export of services into focus and amalgamated the assorted reward schemes for exporters to just two: One for the merchandise segment and another for services.

Announcing the policy on Wednesday, commerce minister Nirmala Sitharaman set a target to grow the country’s exports of goods and services at a compounded annual rate of 11.5%, a pace that will take its exports to $900 billion in FY20, nearly double the level in FY14. Correspondingly, India’s share in world exports could rise from around 2% now to 3.5% in FY20.

The new policy is unveiled at a time when the exports are contracting (merchandise exports contracted 15% in February, reporting negative growth for the third consecutive month) and world trade is expected to grow 4% in 2015, compared with 3.1% in 2014.

E-commerce, value-added and labour-intensive exports and hi-tech and eco-friendly exports have been given a boost. While duty-credit scrips are made freely transferable, the exporters could also use them for paying customs duty, excise and service tax. In tune with the government’s ‘Make in India’ drive, export obligations under the EPCG scheme has been reduced to 75% from 90% to encourage domestic manufacturing of capital goods and machinery.

Hailing the policy, exporters said simplification of schemes, acceptance of self-declaration by certain status-holders, online filing of applications and online inter-ministerial consultation were in line with the government’s Digital India and Ease of Doing Business initiatives.

Stating that the foreign trade policy recognised the global challenges faced by exporters and also identified potential sectors that could emerge as best performers in the next five years, Federation of Indian Export Organisations (FIEO) president SC Ralhan said the proposed inter-ministerial coordination would help unleash the potential of the sector.

Exporters from some sectors like textiles and clothing (T&C) were, however, a worried lot as they feared their subsidies could hit the WTO wall.

Sitharaman said the current WTO rules and 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 the future, that is, towards more fundamental systemic measures rather than incentives and subsidies alone, she said.

To address the prevailing high cost of credit, the government will separately provide 3% interest subvention to select sectors; a sum of Rs 1,625 crore has been allocated towards the subvention for the current year.

To encourage exports from special economic zones, where investor interest has dwindled after the imposition of MAT and DDT, the commerce ministry has extended the benefits of the two new reward schemes — Merchandise Exports from India Scheme (MEIS) and Services Exports From India Scheme (SEIS) — to units in those zones as well.

MEIS — which subsumes five schemes including Focus Product, Focus Market and Market Linked Focus Product schemes — has no conditionality attached to the scrips issued under it. SEIS replaces the Served From India Scheme. The reward for sectors under MEIS are duty credit scrips with rates ranging from 2-5%. Under SEIS, the selected services would be rewarded at the rates of 3-5%. Among incentives, e-commerce exports of handloom products, books/periodicals, leather footwear, toys and customised fashion garments through courier or foreign post office will get the benefit of MEIS (for values up to Rs 25,000).

Trade sources said the immediate impact of removal of incentives is likely to be felt in textiles as items from the sector are hit by a WTO rule that when the share of a developing country — with per capita income below $1,000 a year — in global exports touches 3.25% in any product category for two straight years, it has to phase out export subsidies for the items eight years from the second year of breach. Countries like the US had argued that India’s T&C exports first breached the threshold in 2005 and remained above the level in 2006 also and it should, therefore, end its export subsidies for these items by January 2015.

Total shipments during April-February 2014-15 were $286.58 billion, an increase of just 0.88% from $284.07 billion during the same period a year earlier. Though the year-end target is $340 billion, exporters say shipments are likely to reach only around $325 billion.