Assignment on foreign trade policy
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The document summarizes key aspects of India's new Foreign Trade Policy for 2015-2020, which was announced on April 1, 2015. Some of the main points include: - It introduces two new schemes, the Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS), which provide rewards/duty credits for exporting specified goods and services. - It aims to boost exports and ease of doing business through various incentives and simplification of processes. Special focus is given to sectors like defense, hi-tech, and MSME clusters. - Export benefits are now extended to units located in Special Economic Zones. Self-certification is enabled for manufacturers to qualify
Assignment on foreign trade policy
- 1. IBE Page 1 Assignment - 6 India’s Foreign Trade Policy Date of Submission: 2 November, 2015 Submitted by: Sonali Class: BBA Roll No: BBA/13/913 Email:snlkkrj000@gmail.com
- 2. IBE Page 2 1 Introduction India‟s Foreign Trade Policy (FTP) has, conventionally, been formulated for five years at a time and reviewed annually. The focus of the FTP has been to provide a framework of rules and procedures for exports and imports and a set of incentives for promoting exports. Fifteen years ago India occupied a very small space on the global trade canvas. As various sectors of the Indian economy became more competitive globally, exports began to grow remarkably. India‟s merchandise exports recorded a Compound Annual Growth Rate (CAGR) of 15.9 percent over the period 2004-05 to 2013-14. Similarly, as the economic growth rate of the country picked up, so did imports, which grew at a CAGR of 16.8 percent over the same period. Today, foreign trade has begun to play a significant part in the Indian economy reflecting its increasing globalisation. At the same time, the growing merchandise trade deficit, resulting in a persistently high current account deficit, has set alarm bells ringing. This policy, therefore, aims at promoting exports along with making imports more focussed and rational. The trade performance of a country is so closely and inextricably linked with its overall economic performance that trade policy cannot be treated as a simple matter of manoeuvring the export or import of a product. Foreign trade policy has a direct connect with domestic economic policies. Exports constitute the last segment of long sectoral value chains. A foreign trade policy that addresses only the front-end of exports without recognising the characteristics of the back-end is incomplete and, likely to be unworkable. At the same time, the development of an appropriate ecosystem for the front-end can create a pull effect for the sector in question. In each case, action lies in several departments and stakeholder institutions. The biggest challenge, therefore, is to properly anchor the elements of the foreign trade policy in the overall economic policy and to ensure that the framework of rules, procedures and incentives for trade is contextualised within a composite approach to economic development. Government of India has, in the last few months, initiated several measures to re-energise the economy particularly through initiatives such as “Make in India”, “Digital India”, “Skills India” etc. As these initiatives start showing results, India will become more competitive in several product areas which would, in turn, open up better export prospects. The FTP for 2015-2020, therefore, endeavours to build synergies with such initiatives necessitating, thereby, a “whole-of-Government” approach to foreign trade policy. It first describes a vision with its attendant goals and objectives followed by the strategies and actions identified as necessary to achieve that vision, and, finally, sets out a framework of incentives.
- 3. IBE Page 3 2 Foreign Trade Policy 2015-2020 International Trade Policy of India 2015-20 foreign Trade Policy of India 2015-20 (FTP 2015-20) announced on 01st April 2015 to support manufacturers and service sectors with special emphasis to improve ease of doing business. This five year foreign trade policy introduces new schemes for exporters of India called MEIS, Merchandise Exports from India Scheme and SEIS, Service Exports from India Scheme. Special focus on trade facilitation also is one of the features of Foreign Trade Policy of India 2015-20. Two NewSchemes – “Merchandise Exports From India Scheme” And “Services Exports From India Scheme” Introduced The much awaited Foreign Trade Policy 2015-20 was unveiled today by Minister of Commerce & Industry Mrs. Nirmala Sitharaman, at Vigyan Bhawan. The new five year Foreign Trade Policy, 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, in keeping with the “Make in India” vision of Prime Minister. The focus of the new policy is to support both the manufacturing and services sectors, with a special emphasis on improving the ‘ease of doing business’. During her address Mrs. Sitharaman stated that there were various forces shaping India and its equation with the rest of the world. She urged the Government and industry to work in tandem to deal with the challenges posed. The release of Foreign Trade Policy was also accompanied by a FTP Statement explaining the vision, goals and objectives underpinning India's Foreign Trade Policy, laying down a road map for India’s global trade engagement in the coming years. The FTP Statement describes the market and product strategy and measures required for trade promotion, infrastructure development and overall enhancement of the trade eco system. It seeks to enable India to respond to the challenges of the external environment, keeping in step with a rapidly evolving international trading architecture and make trade a major contributor to the country’s economic growth and development. She promised to have regular interactions with all stakeholders, including State Governments to achieve the national objectives. FTP2015-20. introduces two new schemes, namely “Merchandise Exports from India Scheme (MEIS)” for export of specified goods to specified markets and “Services Exports from India Scheme (SEIS)” for increasing exports of notified services, in place of a plethora of schemes earlier, with different conditions for eligibility and usage. There would be no conditionality attached to any scrips issued under these schemes. Duty credit scrips issued under MEIS and SEIS and the goods imported against these scrips are fully transferable. 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%. Measures have been adopted to nudge procurement of capital goods from indigenous manufacturers under the EPCG scheme by reducing specific export obligation to 75% of the normal export obligation. This will promote the domestic capital goods manufacturing industry. Such flexibilities will help exporters to develop their productive capacities for both local and global consumption. Measures have been taken to give a boost to exports of defense and hi-tech items. At the same time e-
- 4. IBE Page 4 Commerce exports of handloom products, books/periodicals, leather footwear, toys and customized fashion garments through courier or foreign post office would also be able to get benefit of MEIS (for values upto 25,000 INR). These measures would not only capitalize on India's strength in these areas and increase exports but also provide employment. Commerce Minister stated that although exports from SEZs had seen phenomenal growth, significantly higher than the overall export growth of the country, in recent times they had been facing several challenges. In order to give a boost to exports from SEZs, government has now decided to extend benefits of both the reward schemes (MEIS and SEIS) to units located in SEZs. It is hoped that this measure will give a new impetus to development and growth of SEZs in the country. Trade facilitation and enhancing the ease of doing business are the other major focus areas in this new FTP. One of the major objective of new FTP is to move towards paperless working in 24x7 environment. Recently, the government has reduced the number of mandatory documents required for exports and imports to three, which is comparable with international benchmarks. Now, a facility has been created to upload documents in exporter/importer profile and the exporters will not be required to submit documents repeatedly. Attention has also been paid to simplify various ‘Aayat Niryat’ Forms, bringing in clarity in different provisions, removing ambiguities and enhancing electronic governance. Manufacturers, who are also status holders, will now be enabled to self certify their manufactured goods in phases, as originating from India with a view to qualifying for preferential treatment under various forms of bilateral and regional trade agreements. This “Approved Exporter System” will help these manufacturer exporters considerably in getting fast access to international markets. A number of steps have been taken for encouraging manufacturing and exports under 100% EOU/EHTP/STPI/BTP Schemes. The steps include a fast track clearance facility for these units, permitting them to share infrastructure facilities, permitting inter unit transfer of goods and services, permitting them to set up warehouses near the port of export and to use duty free equipment for training purposes. Considering the strategic significance of small and medium scale enterprise in the manufacturing sector and in employment generation, ‘MSME clusters’ 108 have been identified for focused interventions to boost exports. Accordingly, ‘Niryat Bandhu Scheme’ has been galvanized and repositioned to achieve the objectives of ‘Skill India’. Outreach activities will be organized in a structured way at these clusters with the help of EPCs and other willing “Industry Partners” and “Knowledge Partners”.
- 5. IBE Page 5 3 Market Strategy India‟s future bilateral/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 optimizing applied customs duties on inputs for India‟s manufacturing sector. 4 25 salient features from new Foreign Trade Policy to push up India's exports With an aim to make India a significant partner in global trade by 2020, the government on Wednesday unveiled a new Foreign Trade Policy (FTP Talking about the new policy, which aims at boosting India's exports, Commerce Minister Nirmala Sitharaman said that PM Narendra Modi's pet projects, 'Make in India' and 'Digital India' will be integrated with the new Foreign Trade Policy. The government is pitching India as a friendly destination for manufacturing and exporting goods, and the new policy is being seen as an important step towards realising that goal. Some key features of the new Foreign Trade Policy: > India to be made a significant participant in world trade by 2020 > Merchandize exports from India (MEIS) to promote specific services for specific Markets Foreign Trade Policy > FTP would reduce export obligations by 25% and give boost to domestic manufacturing > FTP benefits from both MEIS & SEIS will be extended to units located in SEZs > FTP 2015-20 introduces two new schemes, namely "Merchandise Exports from India Scheme (MEIS)" and "Services Exports from India Scheme (SEIS)". The 'Services Exports from India Scheme' (SEIS) is for increasing exports of notified services. These schemes (MEIS and SEIS) replace multiple schemes earlier in place, each with different conditions for eligibility and usage. Incentives (MEIS & SEIS) to be available for SEZs also. e-Commerce of handicrafts, handlooms, books etc., eligible for benefits of MEIS. > Agricultural and village industry products to be supported across the globe at rates of 3% and 5% under MEIS. Higher level of support to be provided to processed and packaged agricultural and food items under MEIS. > Industrial products to be supported in major markets at rates ranging from 2% to 3%. > Served From India Scheme (SFIS) will be replaced with Service Export from India Scheme (SEIS). > Branding campaigns planned to promote exports in sectors where India has traditional Strength. > SEIS shall apply to 'Service Providers located in India' instead of 'Indian Service Providers'.
- 6. IBE Page 6 > Business services, hotel and restaurants to get rewards scrips under SEIS at 3% and other specified services at 5%. > Duty credit scrips to be freely transferable and usable for payment of customs duty, excise duty and service tax. > Debits against scrips would be eligible for CENVAT credit or drawback also. > Nomenclature of Export House, Star Export House, Trading House, Premier Trading House certificate changed to 1,2,3,4,5 Star Export House. > The criteria for export performance for recognition of status holder have been changed from Rupees to US dollar earnings. > Manufacturers who are also status holders will be enabled to self-certify their manufactured goods as originating from India. > Reduced Export Obligation (EO) (75%) for domestic procurement under EPCG scheme. > Online procedure to upload digitally signed document by Chartered Accountant/Company Secretary/Cost Accountant to be developed. > Inter-ministerial consultations to be held online for issue of various licences. > No need to repeatedly submit physical copies of documents available on Exporter Importer Profile. > Validity period of SCOMET export authorisation extended from present 12 months to 24 months. > Export obligation period for export items related to defence, military store, aerospace and nuclear energy to be 24 months instead of 18 months > Calicut Airport, Kerala and Arakonam ICDS, Tamil Nadu notified as registered ports for import and export. > Vishakhapatnam and Bhimavarm added as Towns of Export Excellence. > Certificate from independent chartered engineer for redemption of EPCG authorisation no longer required.
- 7. IBE Page 7 5 India’s Trade Performance Despite the global slowdown, India‟s merchandise exports increased from USD 83.5 billion in 2004- 05 to USD 314.4 billion in 2013-14. The cumulative value of imports in 2013-14 was USD 450.1 billion as against USD 490.7 billion during the previous year registering a decline of 8.3 percent. Coupled with the moderate growth in exports, this resulted in a decline in India‟s trade deficit from USD 190.3 billion in 2012-13 to USD 137 billion in 2013-14, contributing to a lower Current Account Deficit (CAD). India‟s two-way merchandise trade crossed USD 760 billion in 2013-14 or 44.1 percent of the GDP. If services trade is added, India‟s trade reached nearly USD 1 trillion. This has been achieved despite the global contraction and is indicative of India‟s resilience and increasing integration with the global economy. According to the WTO, in merchandise trade, India was the 19th largest exporter in the world with a share of 1.7 percent and the 12th largest importer with a share of 2.5 percent in 2013. In commercial services, India was the 6th largest exporter in the world with a share of 3.2 percent and the 9th largest importer with a share of 2.8 percent.