36 Foreign Trade Promotion Measures

Manpreet Arora

1.  Learning Outcome:

After completing this module the students will be able to:

• To know about India’s Foreign Trade policy
• To understand various initiatives taken by DGFT to promote foreign trade of India
• To gain knowledge about various export promotion schemes prevalent currently

2.  Introduction 

India’s foreign trade policy statement explains the foreign trade policy for a period of five years. This policy statement describes all types of market and product strategies that will be followed for promotion of exports and enhancing trading activities. Presently Foreign Trade Policy for the period of 2015-2010 is operational. It states all the foreign trade promotional measures which the government will take in the form of various schemes and incentives. It states various types of advantages available to the exporters and importers if they trade for stated products and services under the relevant scheme. Foreign trade these days plays a considerable part in every developing economy. That is why it becomes important to play special focus and attention to foreign trade policy. Considerable steps are taken time and again to boost foreign trade by initiating various schemes which are generally stated down in foreign trade policy. In the current foreign trade policy of 2015-20 the focus and the vision is to make India a major participant in the world trade by 2020. According to the current policy government aims to enhance India’s exports of merchandise and services approx to USD 900 billion ny 2019-20. It also aims to increase India’s share in world exports from 2 % to 3.5%.

The foreign trade policy for 2015-20 aims to create a sustainable development in foreign trade by various initiatives and flagship programs of government like “make IN India”, “Digital India” “Skills India”, etc to promote and diversify India’s export basket.

3.  The Foreign Trade Policy 

Foreign trade policy is set of guidelines which are established by Directorate general of foreign trade to regulate control and mange foreign trade of India. The foreign trade policy of India is regulated by Foreign Trade Development and Regulation Act, 1992. The main thrust of Foreign Trade (Development and Regulation) Act is to provide regulations and provisions to encourage, facilitate and support foreign trade. It aims at creating self sufficiency and increasing exports.

Ministry of commerce and Industry administers foreign trade of India, which includes exports to and imports from all the countries. Foreign trade plays a pivotal role in the economic development of the country. That is why it becomes pertinent to take all requisite and important steps to promote and foster trade with all possible countries in the world.

4.  Trade facilitation schemes and role of DGFT in foreign trade 

Ministry of commerce and Industry has attached one office Directorate General of Foreign Trade (DGFT) for regulation and promotion of foreign trade. This office is headed by Director General of Foreign Trade. Since 1991, this institution is involved in regulation, promotion and inducing foreign trade through regulation. DGFT is acting as a facilitator of increasing and augmenting exports by taking care of liberalised and globalised market conditions. After liberalisation in 1991, the major shift in the policy of foreign trade was to promote and give a competitive environment for increasing exports of the country. Earlier there were many controls and prohibitions in doing foreign trade.

To make Indian exports competitive in the global market it is indispensible to cut transaction costs. That is why various provisions of foreign trade policy aim at facilitating the various stakeholders of imports and exports. DGFT is the key facilitator of exports and imports. Its main thrust is on good governance and it tries to build up a transparent and efficient system of foreign trade.

A.  EXPORT PROMOTION SCHEMES 

Foreign trade policy 2015-20 has made provisions in certain manners to boost India’s Exports. Its basic thrust lies on offsetting inefficiencies hindering export promotion. The following are certain schemes which are either initiated or improved upon to boost India’s exports.

1. “Niryat Bandhu- Hand Holding Scheme for new export / import entrepreneurs”.

DGFT is going ahead with a scheme for mentoring, counselling, training and outreaching new and potential traders. This scheme is called as “Niryat Bandhu- Hand Holding Scheme for new export / import entrepreneurs”. The scheme was started under the Foreign Trade Policy 2009-14 on 13th October 2011. The basic thrust of this scheme was to focus on coaching, mentoring and inculcating skills in first generation entrepreneurs in the field of international trade. Under this scheme various outreach programmes are organised with the support of “Export Promotion Councils, industry partners, knowledge partners from academia.”

This scheme is considered to be strategically significant in generation of employment opportunities especially in small and medium scale enterprises. To boost exports from small and medium scale enterprises “108 export clusters” have been identified they are chosen on the basis of their export potential of the products. DGFT is making considerable effort in these clusters for focussed interventions. In addition to this under the outreach interventions 35 “Towns of Excellence “ have been chosen for direct interventions under Niryat Bandhu Scheme.

2.  Merchandise Exports from India Scheme 

In the new foreign trade policy of 2015 to 2020 five different schemes which were prevalent earlier have been merged into one single scheme which is regarded as Merchandise Export from India Scheme (MEIS). The earlier schemes were Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri Infrastructure Incentive Scrip. The main Objective of Merchandise Exports from India Scheme (MEIS) (FTP 2015-20) is to offset infrastructural inefficiencies which could hinder foreign trade. It also aims at reducing the effect of associated costs which are involved in export of goods/products, which are produced or manufactured in India. It tries to cover those items especially which have high export intensity, and have high employment generation potential and thereby enhancing and inducing India’s export competitiveness. In this scheme various good or products have been notified for exports with ITC [HS] codes, to notified markets which will be rewarded under MEIS. The notified list also lists the rate(s) of rewards on various notified products [ITC (HS) code wise]. “The basis of calculation of reward would be on realized FOB value of exports in free foreign exchange, or on FOB value of exports as given in the Shipping Bills in free foreign exchange, whichever is less, unless otherwise specified.”(As per official website of DGFT)

3.  Service Exports from India Scheme (SEIS) 

Service Exports from India Scheme has replaced the earlier prevalent scheme of Served From India Scheme in current FTP. SEIS present rewards to all Service providers of notified services, who are providing services from India, regardless of the constitution or profile of the service provider. Under the said scheme rate of reward will be based on net foreign exchange earned. The reward will be issued in the form of duty credit scrip. This reward will be now freely transferable and can be used for all types of goods and service tax debits payable on procurement of goods or services.

B.  DUTY EXEMPTION & REMISSION SCHEMES 

The duty exemption and remission schemes enable duty free imports for export production but they have export obligation. This means whatever is imported under this scheme should be used to produce or manufacture the goods which will be later exported. These schemes consist of the following:

1.  Advance Authorization Scheme 

In this scheme the duty free import of those inputs is allowed which will be physically incorporated later in the export product with value addition of minimum fifteen percent. For the resultant products Advance Authorisation is allowed on the self declaration basis. The validity period of Advance Authorisation ranges from 12 months for making imports to 18 months for fulfilment of Export obligation.

2.  Advance Authorization for annual requirement 

Those exporters who have at least two years of experience of exporting goods will be entitled to receive the benefits of Advance Authorization for Annual requirement.

3.  Duty Free Import Authorization (DFIA) Scheme 

Duty free Import Authorization is a scheme which allows duty free inputs, where minimum of twenty percent value addition is the requirement. Basic custom duty will be exempted for DFIA for certain notified products.

4.  Duty Drawback of Customs or Central Excise Duties or Service TAX 

In this scheme those products which are produced out of the duty paid inputs are at the first instance exported and later on the refund of duty is made at the industry rates or brand rates. These rates are scheduled timely by department of revenue.

C.  EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME 

To facilitate exports from India capital goods is the basic necessity. To facilitate the import of capital goods required in the production of exports following schemes have been initiated:

1.  Zero duty EPCG scheme 

In this scheme import of those capital goods at zero custom duty is allowed which will be used in producing products for exports. The goods thus produced will enhance the competitiveness of India’s exports in the world market. This scheme aims at producing better quality goods with the use of modern technology machines or other capital goods which can be imported from rest of the world. This scheme creates an obligation of exporting goods worth six times of duty saved in the past six years.

2.  Post Export EPCG Duty Credit Scrip Scheme 

Those exporters who want to import capital goods by doing full payment of duty in cash can take advantage of post export EPCG Duty Credit Scrip Scheme.

D.  PROVIDING THE POSITION OF “STATUS HOLDERS” 

In the new foreign trade policy of 2015 to 2020 those business men who have achieved excellence in international trade and have contributed immensely in the foreign trade of India are proposed to be given the position of “Status Holders”. In order to save their time, transaction costs and facilitate export activities they will be given special treatment. Now they will be given the status of one, two, three, four or five Star Export house. Earlier they were given the certificate of Export House, Star Export House, Trading House, Star Trading House, Premier Trading House.

Further, the producers or the manufactures who have achieve the position of Status Holders are entitled to self certify their manufactured goods so as to qualify for preferential treatment under different Preferential Trading Agreements [PTAs], Free Trade Agreements [FTAs], Comprehensive Economic Cooperation Agreements [CECAs] and Comprehensive Economic Partnerships Agreements [CEPAs].

E.  PROMOTING AND BOOSTING “ MAKE IN INDIA” 

In order to promote domestic capital goods and manufacturing industry the specific export obligation under EPCG scheme has been reduced to seventy five percent. Those export products which have high domestic content and value addition will receive higher rewards under MEIS scheme.

F.  TRADE FACILITATION THROUGH PAPERLESS TRADE 

Though DGFT provides the facility of online filing of various applications but certain documents have to be submitted physically. In order to provide ease of doing business, twenty four hours, further it is proposed in this FTP to provide paperless facility of processing various rewards. The exporters will be benefitted immensely if they are allowed to submit their various documents online.

Documents like certificate from CA’s, applications for availing schemes etc can be filed online. This would not only save paper but will also save cost and time of exporters. It is also proposed to generate online inter ministerial consultations for certain approvals, norms fixations etc. As a result exporters will not have to submit hard copies of various documents. DGFT is also working towards having a better communication with exporters by providing them facility of uploading their important details and information in the IEC data base. Other e governance initiatives have also been undertaken by DGFT to facilitate trade which are following:

1. Creating a message exchange mechanism for exchange of export reward scrips from DGFT to Customs.
2. It is also working in the direction of creating exchange mechanism for transmission of import details from customs to Directorate General of Foreign Trade.
3. Export Obligation Discharge Certificate will be issued online soon.
4. Creating a message exchange mechanism with Ministry of Corporate Affairs for CIN and DIN.
5. Online payment of fees by using debit or credit cards.

G.  ANOTHER NEW INITIATIVES 

EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS (STPs) SCHEME AND BIO-TECHNOLOGY PARKS (BTPs) will be allowed to share and use their infrastructural facilities among themselves. This effort sis initiated in order that these units are able to utilise their facilities in optimum manner and duplication of efforts is minimised. Further inter unit transfer of goods and services are allowed among these units. It will help in reducing cost of transportation and other related costs and it will result in maintaining effective supply chain. Export oriented houses have also been allowed to set up their warehouses near the port of export. It aims at reducing and lowering down the lead time for delivery of goods which ultimately brings efficiency in exports. EOUs/EHTP/STPI units are also allowed to relocate capital goods to other EOUs, EHTPs, STPs, SEZ units. Now a provision has been made that if such transferred capital goods are abandoned by the recipient, then the same can be returned to the supplying unit, without payment of duty.

In addition to the above stated schemes the following measures are undertaken under new foreign trade policy to promote foreign trade and facilitate ease of trade-

1. Various Outreach programmes will be organised/conducted at several locations to create/generate awareness among various stakeholders who can ultimately contribute towards increasing foreign trade of country.
2. Handloom products, books / periodicals, leather footwear, toys and customized fashion garments, which have FOB value up to Rs.25000 per consignment shall be now eligible for benefits under FTP
3. Increasing the periphery of trade facilitation Calicut Airport, Kerala and Arakonam ICD, Tamil Nadu have been notified as registered ports for import and export.
4. India has extended duty free tariff preference to 33 Least Developed Countries (LDCs) across the globe. This is being notified under FTP.
5. In an effort to determine and resolve quality complaints and trade disputes, between exporters and importers, a new chapter, namely, Chapter on Quality Complaints and Trade Disputes has been incorporated in the Foreign Trade Policy.
6. 33 towns were earlier recognised as export excellence towns by the government in order to boost trade. It has been decided to add Vishakhapatnam and Bhimavaram in Andhra Pradesh as towns of export excellence.
7. Higher rewards have been decided to be granted for the following category of products:
   • Agricultural and Village industry products,
   • Value added and packaged products.
   • Eco-friendly and green products which can create wealth out of waste from agricultural and other waste products
   • Labour intensive Products with large employment potential and Products with large number of producers and /or exporters.
8. The policy aims at providing global support to the following category of goods:
   • Fruits, Flowers, vegetables
   • Tea Coffee, Spices
   • Cereals preparation, shellac, Essential oils
   • Processed foods
   • Eco Friendly products that add value to waste
   • Marine Products
   • Handloom, Coir, Jute, products and Technical Textiles, Carpets Handmade.
   • Other Textile and Readymade garments
   • Handicraft, Sports Goods
   • Furniture, wood articles

4. Summary:

In the globalised world it is mandatory that there will be is mutual interdependence of the various national economies. Today it is very tough to sustain in a closed door economy. All economies of the world have become open and operate in dependence with one another in one way or another. But the degree of openness as well as dependence varies from country to country. With the growing demand of product and easy accessibility of the resources worldwide no country is completely self-sufficient. Foreign Trade plays very important and pertinent role in the economic development of any country. Foreign trade encourages the manufacturer/ producer to boost/ increase the investment to produce more goods and services. Foreign trade increases the scale of production and national income of the country. Therefore it becomes very important for a developing nation like India to pay special focus on Foreign Trade Policy and encourage exporters to boost foreign trade. The present Foreign Trade policy is very exporter friendly and is providing immense benefits/ schemes/ rewards to the stakeholders. Various old schemes have been revitalised to get their proper benefits. Due care has been taken in this policy to support small exporters. This policy also aims at better utilisation of idle resources availbele to various units. Paperless facilities and online transactions will surely help in ease of doing business and reducing the burden of procedural formalities on the exporters. Since its inception DGFT is playing a crucial role in boosting foreign trade of India. The incentives and rewards under various schemes help to give confidence to small and budding entrepreneur. The make in India campaign will undoubtedly give more strength to the manufacturing sector of the country. Proper, well planned and a thoughtful foreign trade policy of the country will indeed play a pivotal role in encouraging exports of the country. A healthy and competitive environment helps to induce efficiency in production and ultimately not only the consumer but the economy benefits from economies of scale and better quality product as a whole.

Suggested Readings

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