Kick starting India’s 2020 Motorbike: Foreign Trade Policy 2015-2020
Traders can finally breathe a sigh of relief, trade policymakers finally have their work charted out and trade analysts can finally start putting their heads together to get a sense of the upcoming trade scenario. After a long wait of about 7 months, the new foreign trade policy (FTP) has finally been unveiled. The word �finally� is pertinent in this case for reasons more than one. Not only the wait has been long, but the efficacy of the policies under the FTP will also decide if this is the much needed big push for foreign trade in India. Amidst much fanfare, the FTP has been released with a bonus �Foreign Trade Policy Statement� highlighting the vision, mission and goals of FTP in the backdrop of India�s engagement in the world trade and scope for improvement.
Ignition to the engine: Focus on Export Competitiveness:
A natural reaction is to compare the new FTP with the older FTP to gauge the value addition. It seems this year�s FTP consists of an amalgamation of the schemes introduced in the previous FTPs adding to it greater incentives for traders. The Merchandise Exports from India Scheme (MEIS) and the Services Exports from India Scheme (SEIS) are the focal points of the trade policy under the ambit of the government�s Make in India policy. The MIES is a merger of 5 different schemes (Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, Vishesh Krishi Gram Upaj Yojana (VKGUY)) that has provided for duty scrips with no conditions and a categorization of
countries with highest rates for traditional partners, next for emerging market economies (including ASEAN) and lower for other countries. Traders can now utilize these duty scrips for payment of custom duty, excise duty and service tax. The SIES has replaced the Served from India Scheme (SFIS) that provides for rewards to all Service providers of notified services, who provide services from India, regardless of the constitution or profile of the service provider. Among services, the highest admissible rate of 5% has been allotted for business services (such as professional services, research and development, educational services and construction etc.). This is a welcome step to incentivize exporters to enhance their exports, particularly in areas of R&D services on natural and social sciences, advertising services, technical testing and analytical services etc., in which India has developed substantial human capital. Apart from these two main policies, the government has not shied away from bringing the defence, aerospace and nuclear energy sectors into the �Make in India� programme. The FTP lays down provisions for facilitating and encouraging defence exports� by extending a 24 month export obligation period, instead of a normal 18 month time period for from the date of issue of authorization.
The wheels and tires: Trade facilitation and ease of doing business
The FTP 2015-20 is a forward looking policy document which also focuses on specific aspects of trade facilitation and ease of doing business. With forthcoming e-Governance initiatives such as mobile applications for FTP and online issue of certificates, the government has tried to make sure that digitization eases the problems of traders. Traders will easily be able to file applications online (without providing for hard copies), saving time and cost and ensuring transparency at the same time. There is also a provision for online inter-ministerial consultations to reduce time for official approvals. Such new initiatives will prove to be significant confidence building measures for traders, who have been vying for simplified trade procedures. The FTP has also carried forward the institutional mechanism of setting up a Board of Trade (BOT) with a renewed focus on providing an advisory role and offering a platform for discussion and consultation. Another institutional mechanism which will be set up is the Council for Trade Development and Promotion. This Council will be a community of Central Government and various States and UT Governments. This way, the government will be able to bring together the states also in the implementation of trade policies and procedures.
Transmission: Looking Towards Regional Integration:
The FTP statement clearly states that enhancing trade relations with its neighbours in the South Asian region with a view to participate in the regional value chains will be a key focus area. In the past, India has indicated its willingness to take on asymmetrical trade responsibilities in the region in order to promote greater regional and economic integration. It already provides zero duty market access to all Least Developed Countries (LDCs) of SAARC, for all tariff lines, except 25 lines of liquor and tobacco. To ease hurdles related to transport and stringent business regulations, it has been decided to prepare a 5-year plan for South Asian integration by identifying specific value chains which will include textiles, leather, tourism, automotive components, chemicals and healthcare. The setting up of a National Trade Facilitation Committee will go a long way in addressing issues related to customs procedures and high transaction costs faced by traders.
On the whole, the policies in the FTP 2015-20 are promising and the FTP Statement is a visionary document. The policies, if implemented prudently will certainly give the desired results of providing a stable and sustainable policy environment for foreign trade in both
merchandise and services. For this to happen, it is to be seen how the two main stakeholders- the traders and the government will steer the handlebars of this �motorbike� in the coming times, spurring India to assume a position of leadership in the international trade discourse by 2020.
1) Foreign Trade Policy 2015-2020, Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India
2) Foreign Trade Policy Statement, Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India
3) Highlights of the Foreign Trade Policy 2015-2020, Government of India, Department of
Commerce, Ministry of Commerce and Industry