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Foreign Trade Policy 2015-2020

FTP 2015-20 provides a framework for increasing exports of goods and services as well as generation of employment and increasing value addition in the country. 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 percent.

The FTP for 2015-2020 seeks;

  • to provide a stable and sustainable policy environment for foreign trade in merchandise and services;

  • link rules, procedures and incentives for exports and imports with other initiatives such as Make in India, Digital India and Skills India to create an Export Promotion Mission to promote the diversification of India’s export basket by helping various sectors of the Indian economy to gain global competitiveness;

  • create an architecture for India’s global trade engagement with a view to expanding its markets and better integrating with major regions, thereby increasing the demand for India’s products and contributing to the “Make in India” initiative;

  • to provide a mechanism for regular appraisal in order to rationalize imports and reduce the trade imbalance.

Features of Foreign Trade Policy 2015-2020

Whole-of-Government Approach & Role of State/UT Governments

A major path-breaking initiative is to mainstream State and Union Territory (UT) Governments and various Departments and Ministries of the Government of India in the process of international trade. State/UT Governments can play a crucial role in promoting exports and rationalizing nonessential imports.

Many of the State Governments have nominated Export Commissioners. The Department of Commerce is also helping State Governments to prepare export strategies. An Export Promotion Mission will be constituted to provide an institutional framework to work with State Governments to boost India’s exports.

Addressing In-House Challenges

The biggest challenge, however, is to address constraints within the country such as infrastructure bottlenecks, high transaction costs, and complex procedures, constraints in manufacturing and inadequate diversification in our services exports.

Services Sector

The Services sector is an area of great potential. Efforts will be made to gain effective market access abroad through comprehensive economic partnership agreements with important markets. A Global Exhibition on Services will be held annually, which will provide a forum for showcasing India’s strengths in the Services sector.

Apart from it The Served from India Scheme has been replaced with the Service Exports from India Scheme (“SEIS“). SEIS is stated to apply to ‘Service Providers located in India’ instead of ‘Indian Service Providers’. Therefore, SEIS rewards to all service providers of notified services, who are providing services from India, regardless of the constitution or profile of the service provider.

Building the India Brand

A long term branding strategy has been conceptualized to enable India to hold its own in a highly competitive global environment and to ensure that Brand India becomes synonymous with high quality. Further, a programme to promote the branding and commercialization of products registered as Geographical Indications and to promote their exports will be initiated.

Institutional Mechanisms for Trade Promotion

Market Access Initiative (MAI) Scheme and the Market Development Assistance Scheme will continue. The present allocation for the MAI scheme is inadequate; efforts will be made to augment resources for the scheme.

Export Promotion Councils are being strengthened, both in terms of technical capabilities and management structures. Project exports will be encouraged in a big way, especially in the emerging markets with high infrastructure needs, through special lines of credit offered by the Ministry of External Affairs and the Buyers Credit Scheme of the Department of Commerce through EXIM Bank of India. This will, inter alia, enable Indian businesses to develop long term business relationships, facilitate easier acceptance of India’s exports and build visibility for Indian products.

Two institutional mechanisms are being put in place for regular communication with stakeholders, namely, a Board of Trade which will have an advisory role and a Council for Trade Development and Promotion which will have representation from State and UT Governments.

Trade Ecosystem

Several initiatives are underway or in the pipeline 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.

Specific measures will be taken to facilitate the entry of new entrepreneurs and manufacturers in global trade through extensive training programmes. The NiryatBandhu scheme will be revamped to achieve these objectives and also further dovetailed with the ongoing outreach programmes.

Multilateral Trading System and India

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.

The three mega agreements that are currently being negotiated namely the Trans Pacific Partnership, Trans-Atlantic Trade and Investment Partnership and the Regional Comprehensive Economic Partnership (RCEP) add a completely new dimension to the global trading system. India is a party to the RCEP negotiations.

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.

Product Strategy

The focus will be on promoting exports of high value products with a strong domestic manufacturing base, including engineering goods, electronics, drugs and pharmaceuticals. The challenges posed to the pharmaceuticals sector by NTBs in Japan and regulatory hurdles in China have to be addressed.

A composite programme for promotion of healthcare products and services will be conducted in various regions to showcase and market India’s unique strengths.

Other sectors

which require special attention, in light of India’s strengths and their contribution to employment generation, are leather, textiles, gems and jewellery and the sectors based on natural resources, which include agriculture, plantation crops, marine products and iron ore exports.

Revitalizing plantations, enabling a less controlled regime for agriculture and aiming at greater value addition and processing would help to increase the value of exports from these sectors. The NorthEastern States are a special focus area for organic product exports.

Goods

Earlier there were 5 different schemes (Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, VKGUY) for rewarding merchandise exports with different kinds of duty scrips with varying conditions attached to their use.

Some Other Features

Duty-free scrips are paper authorizations that allow the holder to import inputs which are used to manufacture products that are exported, or to manufacture machinery used for producing such goods, without paying duty equivalent to the printed value of the scrip. For instance, a duty-free scrip valued at Rupees 1 lakh allows the holder to import goods without paying duty of up to Rupees 1 lakh on the goods.

Under the new Foreign Trade Policy, all these schemes have been merged into a single scheme, namely the Merchandise Export from India Scheme (“MEIS“) and there is no conditionality attached to scrips issued under the MEIS.

Special Economic Zones

The policy outlines extended incentives for Special Economic Zones in India

Export Houses

The nomenclature of Export House, Star Export House, Trading House, Star Trading House, Premier Trading House certificate has been simplified and changed to One, Two, Three, Four and Five Star Export House.

Status Holders

Business leaders who have excelled in international trade and have successfully contributed to India’s foreign trade are proposed to be recognized as Status Holders and given special privileges to facilitate their trade transactions, in order to reduce their transaction costs and time.

Resolving Complaints

In an effort to resolve quality complaints and trade disputes between exporters and importers, a new chapter on Quality Complaints and Trade Disputes has been incorporated into the Foreign Trade Policy

  • There would be no conditionality attached to any scrips issued under these schemes.
  • For grant of rewards under MEIS, the countries have been categorized into 3 Groups, whereas the rates of rewards under MEIS range from 2% to 5%.
  • Under SEIS the selected Services would be rewarded at the rates of 3% and 5%.
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