India’s Foreign Trade and Policy

Commerce Ministry releases Foreign Trade Policy 2015-2020

New foreign trade policy: $900 bn exports by FY20
 the target to double India’s exports in goods and services over the next five
years (from $465 billion to $900 billion) and upping the Indian share of the world
exports pie from the current 2 percent to 3.5 percent over the same period.
 Exports through Make in India underlined in FTP: Commerce Minister Nirmala
Sitharaman

Introduction

What does Darjeeling Tea, Basmathi Rice, Indian Carpet, Kancheepuram Silk, Mysore
Sandalwood Oil, Indian Garments, Indian Software, Surat Diamonds to name a few
have in common. They represent the modern symbols of Indian foreign trade.

On 1st April 2015, the new Foreign Trade Policy (FTP) for the period 2015-20 was
announced which replaces the 2009-14 FTP which expired on 31st March 2014. With
the announcement of new policy, exporters’ one-year wait for new FTP has come to
end.

India's Foreign Trade Policy also known as Export Import Policy (EXIM) in general,
aims at developing export potential, improving export performance, encouraging
foreign trade and creating favorable balance of payments position. Foreign Trade
Policy is prepared and announced by the Central Government (Ministry of
Commerce). Foreign Trade Policy or EXIM Policy is a set of guidelines and
instructions established by the DGFT (Directorate General of Foreign Trade) in
matters related to the import and export of goods in India.

The foreign trade policy, has offered more incentives to exporters to help them tide
over the effects of a likely demand slump in their major markets such as the US and
Europe.

Foreign trade is exchange of capital, goods, and services across international borders
or territories. In most countries, it represents a significant share of gross domestic
product (GDP). While international trade has been present throughout much of
history, its economic, social, and political importance has been on the rise in recent
centuries.

The Foreign Trade Policy of India is guided by the Export Import in known as in short
EXIM Policy of the Indian Government and is regulated by the Foreign Trade
Development and Regulation Act, 1992.

DGFT (Directorate General of Foreign Trade) is the main governing body in matters
related to EXIM Policy. The main objective of the Foreign Trade (Development and
Regulation) Act is to provide the development and regulation of foreign trade by
facilitating imports into, and augmenting exports from India. Foreign Trade Act has
replaced the earlier law known as the imports and Exports (Control) Act 1947.

Indian EXIM Policy contains various policy related decisions taken by the government
in the sphere of Foreign Trade, i.e., with respect to imports and exports from the
country and more especially export promotion measures, policies and procedures
related thereto.

Objectives Of The FTP (EXIM) Policy: -

The main objectives are:
To accelerate the economy from low level of economic activities to high level of
economic activities by making it a globally oriented vibrant economy and to derive
maximum benefits from expanding global market opportunities.
To stimulate sustained economic growth by providing access to essential raw
materials, intermediates, components,' consumables and capital goods required for
augmenting production.
To enhance the techno local strength and efficiency of Indian agriculture, industry and
services, thereby, improving their competitiveness.
To generate employment.
Opportunities and encourage the attainment of internationally accepted standards of
quality.
To provide quality consumer products at reasonable prices.
In the light of the above mentioned objectives , there are two broad aspects of the
FTP(EXIM) Policy; the import policy which is concerned with regulation and
management of imports and the export policy which is concerned with exports not
only promotion but also regulation. The main objective of the Government's EXIM
Policy is to promote exports to the maximum extent. Exports should be promoted in
such a manner that the economy of the country is not affected by unregulated
exportable items specially needed within the country. Export control is, therefore,
exercised in respect of a limited number of items whose supply position demands
that their exports should be regulated in the larger interests of the country.

Governing Policy – Institutions

The Government of India notifies the foreign trade Policy for a period of five years (for
example 2015 -20) under Section 5 of the Foreign Trade (Development and Regulation
Act), 1992. The current Export Import Policy covers the period 2015-2020. The FTP is
updated every year on the 31st of March and the modifications, improvements and
new schemes become effective from 1st April of every year.
All types of changes or modifications related to the EXIM Policy is normally
announced by the Union Minister of Commerce and Industry who co-ordinates with
the Ministry of Finance, the Directorate General of Foreign Trade and network of DGFT
Regional Offices.
FTP 2015-2020

Some highlights of the present Foreign Trade Policy 2015-2020

 India to be made a significant participant in world trade by 2020
 Commerce Minister announced two new schemes in Foreign Trade Policy
2015-2020Two New Schemes announced in FTP Are MEIS & SEIS. FTP 2015-20
introduces two new schemes, namely "Merchandise Exports from India Scheme
(MEIS)" and "Services Exports from India Scheme (SEIS)". These schemes (MEIS
and SEIS) replace multiple schemes earlier in place, each with different conditions
for eligibility and usage.
 Merchandize exports from India (MEIS) to promote specific services for
specific Markets Foreign Trade Policy
 For services, all schemes have been replaced by a 'Services Export from India
Scheme'(SEIS), which will benefit all services exporters in India.
 FTP would reduce export obligations by 25% and give boost to domestic
manufacturing
 Incentives (MEIS & SEIS) to be available for SEZs also. FTP benefits from both
MEIS & SEIS will be extended to units located in SEZs. – Both MEIS and SEIS firms
and service providers can now get subsidized office spaces in SEZ (Special
Economic Zones), along with other benefits. With a view to boost the Special
Economic Zones, Government has decided to extend both the incentive schemes
for export of goods and services to units in SEZs.
 e-Commerce of handicrafts, handlooms, books etc., eligible for benefits of
MEIS. e-Commerce exports up to Rs.25000 per consignment will get SFIS benefits.
 e-Commerce Exports Eligible For Services Exports From India Scheme. – As
part of Digital India vision, mobile apps would be created to ease filing of taxes and
stamp duty, automatic money transfer using Internet Banking have been proposed.
> Online procedure to upload digitally signed document by Chartered
Accountant/Company Secretary/Cost Accountant to be developed.
 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%.
 Branding campaigns planned to promote exports in sectors where India has
traditional Strength.
 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. – Some major
 overhauling of nomenclature and naming have been done. For instance, Export
House, Star Export House, Trading House, Star Trading House, Premier Trading
House certificate has been changed to One, Two, Three, Four, Five Star Export
House. The allocation of the status will now be based on US dollars, instead of
Indian Rupees
 The criteria for export performance for recognition of status holder have been
changed from Rupees to US dollar earnings. – A new position called ‘Status Holder’
have been formulated, which will recognize and reward those entrepreneurs who
have helped India to become a major export player. All IT and ITeS firms,
Outsourcing companies and KPOs can rejoice.
 Manufacturers who are also status holders will be enabled to self-certify their
manufactured goods as originating from India. – Tax and duty on Indian
manufacturers have been reduced, to boost Make in India vision
 Reduced Export Obligation (EO) (75%) for domestic procurement under EPCG
scheme.
 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(Inland Container Depots), 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.

Now let us understand how this achieves the desired objectives of the nation.

Impact on the Economy:

According to some experts the focus in this FTP has been “Simplicity And Stability”.
Accordingly, the policy on the one hand seeks to realign the multiple schemes with
the objective of reducing complexities. On the other had it want to promote the
increased use of technology to reduce the transaction cost and manual compliances.

Supporters have given their verdict for this new FTP, stating it as ‘progressive’, ‘path
breaking’ and ‘development friendly’ as exports of books, handicraft, handlooms, toys,
textiles, defence and ecommerce platforms would be easier and faster.According to
them, a big step is cleaning up the plethora of export promotion schemes and
clubbing them under two schemes, one for goods (Merchandise Exports from India
Scheme) and one for services (Services Exports from India Scheme).The duty scrips
under these schemes come without conditions and can be freely transferred.

One significant announcement in the policy is that it will move away from relying
largely on subsidies and sops. Critics however point out that, this is prompted by
World Trade Organisation (WTO) requirements that export promotion subsidies
should be phased out, but according to some experts there are ways of getting
around it and other countries are doing it all the time.

There has been talk of boosting services exports for quite a few years now, but
information technology and information technology-enabled services (IT/ITES)
dominated the basket. The share of this segment in the overall export basket is 50
percent and 90 percent in the services export basket.

More importantly, this sector was overly dependent on western markets and,
consequently, extremely vulnerable to even the smallest of developments there. The
policy, fortunately, turns its attention to other sectors where India has inherent
advantages – healthcare, education, R&D, logistics, professional services,
entertainment, as well as services incidental to manufacturing.

By extending benefits under EPCG on domestic procurements and offering them

more products under MEIS, the policy further seeks to incentives the exports. Right
direction.

According to the Commerce Minister Nirmala Sitaraman, It's a focused policy, one in
which exports through Make in India is underlined by looking at sectors that give
greater employment and have high-tech value addition. That is because the intention
is to join the global value chain and above all, the environment part, where you are
looking at eco-friendly systems and producing wealth out of waste. So, the priority
areas are technology-driven, labour-intensive-driven and environment-driven. You are
also looking at traditional markets, emerging markets and diversifying into new
markets.

History of trade Policy of India

Even though the popular view is that India’s export promotion started with the
economic reforms post nineties. A study foreign trade policy shows that efforts have
been made to make our trade competitive even before that. To understand this, we
need to know the background history and evolution of foreign trade in India.

India is looked upon as a country with immense resources available through its length
and breadth. India was famed for her fabulous wealth ever since the ancient times till
the establishment of the British Empire. Indian trade history reflects that despite the
frequent political upheavals during the 12th to the 16th centuries, the country was still
prosperous. Descriptions of the wide variety of excellent goods sold in the Indian
markets of those days are found in the records of foreign travellers. India was well
known for its textiles one of the chief items of export. Textiles from Gujarat were sent
to the Arab countries and to South-east Asia. Trade history of India also shows
hardwood furniture, embellished with inlay work was a very popular item for expert.
Although the expensive carvings and inlays were inspired by the ornate Mughal style,
the furniture was modelled on the European design. Carpets were used both in
ancient and medieval India. But the skill of carpet weaving touched new heights
during the 16th century. A larger variety of ornamental work in cut stones, ivory, pearl
and tortoise shells were produced in South India. Pearl fishing was a major industry
here. Indian arts and crafts patronized by Indian rulers, were unmatched for their
beauty and skill and were very popular in the European countries. River routes also
promoted trade between different parts of the country. India’s exports were seen too
far exceed her imports both in the number of items as well as in volume. Arab traders
shipped Indian goods to European countries through the Red Sea and the
Mediterranean ports. With huge earnings from her exports of various commodities,
the state coffers were amply stocked with gold and silver.

India today stands as a trillion economy. Darjeeling tea, Indian khadi cotton, Kashmiri
carpets, Indian spices and dry fruit are just a few of the famous gifts India has given
to the world. The economic levels have improved in the urban and semi-urban areas.
Literacy is penetrating deep in to even the far reach areas, thus creating awareness
and to higher consumption patterns for all kinds of goods across all sections of the
society. Promoting the availability of goods from different parts of the world has seen
a rise in more trade with other countries.

Indian trade history is remarkable. Indian trade has benefited and so has the world.
The country has realized that at the end of the day, maximizing use of one’s own
resources is what makes all the difference.

India’ Trade Policy Philosophy: Theoretical Background

On analytical grounds, trade policy can be broadly divided into two groups –
 Inward oriented and (b) Outward oriented.
 Inward – oriented policy:- An inward oriented strategy is the one in which trade
and industrial incentives are biased in favour of production for domestic market
over the export market. Thus, an inward oriented policy is often designated as the
import substitution strategy.
 Outward – oriented policy : - On the contrary, an outward oriented strategy is
the one in which trade and industrial policies do not discriminate between
production for domestic goods and foreign goods. Thus, an outward oriented
strategy is often designated as the export promotion strategy.

As remarked by World Bank in its World Development Report (1987) – “Inward –

oriented regimes are generally characterized by high levels of protection for
manufacturing, direct controls on imports and investments, and overvalued exchange
rates. By contrast, outward orientation links the domestic economy to the world
economy.” The solution to the problem of BOP for a country depends on the trade
policy / export – import policy of the country. Hence, a systematic study of BOP of a
country should take into account the changes in the trade policy of a country over a
period of time.

Trade Policy Evolution

In a broader sense, after independence for almost forty years or so India adopted
inward oriented strategy. The basic rationale behind it was that it would help rapid
industrialization through import substitution and at the same time save valuable
foreign exchange. This strategy covers the period from First Five Year Plan (1951 –
56) to the Seventh Five Year Plan (1985 – 90). This period is considered as the period
of “Licence – Quota Raj” wherein there was a controlled and restrictive environment.
However, the decade of 1990 is marked with a near U turn as India adopted gradually
a path of economic liberalization. It followed the policy of Liberalization, Privatization
and Globalization (LPG) to solve its BOP and related problems. A series of economic
reforms were introduced in various sectors to tackle the BOP and other problems.
Hence, the Indian economy which was a closed economy for almost forty years now
became relatively more open posing challenges for macroeconomic management.
Thus, from 1990 onwards India adopted an outward oriented strategy which can be
considered as a significant turnaround from the earlier period. The adoption of
outward oriented strategy was a major departure from the relatively protectionist
trade policies pursued in earlier years.
There is no doubt that in the broader sense of the term India followed an inward -
oriented trade policy after independence till 1990. However, an in depth analysis of
India’s trade policy shows that there were certain shifts in policy stance from time to
time. Taking this into account trade policy of India can be broadly divided into the
following phases

Phase I – Import Restriction and Import Substitution (From 143 1950’s to 1970s),
Phase II – Export Promotion & Import Liberalisation (From 1970s to 1990s), and
Phase III – Outward Orientation – (From 1990 onwards).

Economic (Trade) Reforms in India:

In order to understand the evolution of the Foreign trade policy (EXIM policy) over
time we need to understand the larger framework and evolution of Macroeconomic
policy in India before and after the liberalisation in the 90’s. The subsequent trade
policies were developed keeping in view this larger framework and in sequence to it.

In the early eighties, the Government of India appointed a special EXIM Policy
Committee to review the government previous export import policies. The committee
was later on approved by the Government of India. Mr. V. P. Singh, the then Commerce
Minister and announced the EXIM Policy on April, 1985. Initially the EXIM Policy was
introduced for the period of three years with main objective to boost the export
business in India

Now, let us understand the history and evolution of foreign trade policy in India we
need to understand it under different phases

Policy in Practice: Trends in Foreign Trade Policy

1950 -1990:

India entered into planned development era in 1950’s and at that time Import
Substitution was a major element of India’s trade and industrial policy. In 1950 India’s
share in the total world trade was 1.78% which reduced to 0.6% in 1995. During 2003-
04 India’s share in the global trade was 0.8%, in 2005 it was 1.0%.

The PC Alexander Committee (1978) was the first committee to review and
recommend on Import –Export Policies and Procedures. This committee
recommended the simplification of the Import Licensing procedure and provided a
framework involving a shift in the emphasis from “control to development”. In 1980
Tandon Committee gave recommendations on export strategies in eightees.In the
Export Import policy of 1978-79, for the first time in India’s History decentralization of
some licensing functions took place and the powers of regional licensing authorities
was enhanced.
Export Oriented Units were set up under the EOU scheme introduced in early 1981.
The export and Import Bank of India (website) was set up in 1982 to take over the
operations of international finance wing of the IDBI. Other major objectives was to
provide financial assistance to exporters and importers.

In the Trade Policy of 1985-88 some measures were taken based upon the
recommendation of Abid Husain Committee 1984. This committee envisaged
“Growth Led Exports, rather than Export Led Growth”. The recommendation of this
committee stressed upon the need for harmonizing the foreign trade policies with
other domestic policies. This committee recommended announcement of foreign
trade policies for longer terms.

The export import pass book scheme was introduced in 1985 as per recommendation
of Abid Hussain Committee. In 1985 Vishvanath pratap Singh Government developed
a 3 year exim policy.Tax Reform Committee chaired by Raja J Chelliah suggested
minimizing the role of quantitative restrictions and reducing the tariff rates
substantially. Export Processing Zones were set up to push up exports. They are now
SEZ
Main Features of Trade Policies- Era of reforms (next phase of reforms since
nineties)

As discussed the massive trade liberalisation measures adopted after 1991 mark a
major departure from the relatively protectionist trade policies pursued in earlier
years. Accordingly, Substantial simplification and liberalisation has been carried out
in the reform period. Foreign Trade Policy (FTP) or Export Import Policy (EXIM) is
believed to be an important step towards the economic reforms of India. In order to
liberalize imports and boost exports, the Government of India for the first time
introduced the Indian EXIM Policy on April I, 1992.

In the light of the reform policy objectives successive governments have been taking
various trade reforms. Successive annual Union Budgets have also extended a
number of tax benefits and exemptions to the exporters. These include reduction in
the peak rate of customs duty to 15 per cent; significant reduction in duty rates for
critical inputs for the Information Technology sector, which is an important export
sector; grant of concessions for building infrastructure by way of 10-years tax holiday
to the developers of SEZs; Facilities and tax benefits to exporters of goods and
merchandise; reduction in the customs duty on specified equipment for ports and
airports to 10 per cent to encourage the development of world class infrastructure
facilities, etc. A number of tax benefits have also been announced for the three
integral parts of the ‘convergence revolution’ the Information Technology sector, the
 Telecommunication sector, and the Entertainment industry.

In order to bring stability and continuity, the Export Import Policy was made for the
duration of 5 years. However, the Central government reserves the right in public
interest to make any amendments to the trade Policy in exercise of the powers
conferred by Section-5 of the Act. Such amendment shall be made by means of a
Notification published in the Gazette of India.

Prior to 2004, the Foreign Trade Policy was called EXIM Policy. Each FTP will be
having objectives and set guidelines to achieve those objectives. After the
introduction of liberalisation in Indian economy, 1992-97 policy was the first EXIM
Policy which aimed to dismantle the protectionist and regulatory policy towards a
globally oriented economy.

 Commerce Ministry releases Foreign Trade Policy 2015-2020

 New foreign trade policy: $900 bn exports by FY20
 the target to double India’s exports in goods and services over the next five
years (from $465 billion to $900 billion) and upping the Indian share of the world
exports pie from the current 2 percent to 3.5 percent over the same period.
 Exports through Make in India underlined in FTP: Commerce Minister Nirmala
Sitharaman

Introduction

What does Darjeeling Tea, Basmathi Rice, Indian Carpet, Kancheepuram Silk, Mysore
Sandalwood Oil, Indian Garments, Indian Software, Surat Diamonds to name a few
have in common. They represent the modern symbols of Indian foreign trade.

On 1st April 2015, the new Foreign Trade Policy (FTP) for the period 2015-20 was
announced which replaces the 2009-14 FTP which expired on 31st March 2014. With
the announcement of new policy, exporters’ one-year wait for new FTP has come to
end.

India's Foreign Trade Policy also known as Export Import Policy (EXIM) in general,
aims at developing export potential, improving export performance, encouraging
foreign trade and creating favorable balance of payments position. Foreign Trade
Policy is prepared and announced by the Central Government (Ministry of
Commerce). Foreign Trade Policy or EXIM Policy is a set of guidelines and
instructions established by the DGFT (Directorate General of Foreign Trade) in
matters related to the import and export of goods in India.
The foreign trade policy, has offered more incentives to exporters to help them tide
over the effects of a likely demand slump in their major markets such as the US and
Europe.

Foreign trade is exchange of capital, goods, and services across international borders
or territories. In most countries, it represents a significant share of gross domestic
product (GDP). While international trade has been present throughout much of
history, its economic, social, and political importance has been on the rise in recent
centuries.

The Foreign Trade Policy of India is guided by the Export Import in known as in short
EXIM Policy of the Indian Government and is regulated by the Foreign Trade
Development and Regulation Act, 1992.

DGFT (Directorate General of Foreign Trade) is the main governing body in matters
related to EXIM Policy. The main objective of the Foreign Trade (Development and
Regulation) Act is to provide the development and regulation of foreign trade by
facilitating imports into, and augmenting exports from India. Foreign Trade Act has
replaced the earlier law known as the imports and Exports (Control) Act 1947.

Indian EXIM Policy contains various policy related decisions taken by the government
in the sphere of Foreign Trade, i.e., with respect to imports and exports from the
country and more especially export promotion measures, policies and procedures
related thereto.

Objectives Of The FTP (EXIM) Policy: -

The main objectives are:
To accelerate the economy from low level of economic activities to high level of
economic activities by making it a globally oriented vibrant economy and to derive
maximum benefits from expanding global market opportunities.
To stimulate sustained economic growth by providing access to essential raw
materials, intermediates, components,' consumables and capital goods required for
augmenting production.
To enhance the techno local strength and efficiency of Indian agriculture, industry and
services, thereby, improving their competitiveness.
To generate employment.
Opportunities and encourage the attainment of internationally accepted standards of
quality.
 To provide quality consumer products at reasonable prices.

In the light of the above mentioned objectives , there are two broad aspects of the
FTP(EXIM) Policy; the import policy which is concerned with regulation and
management of imports and the export policy which is concerned with exports not
only promotion but also regulation. The main objective of the Government's EXIM
Policy is to promote exports to the maximum extent. Exports should be promoted in
such a manner that the economy of the country is not affected by unregulated
exportable items specially needed within the country. Export control is, therefore,
exercised in respect of a limited number of items whose supply position demands
that their exports should be regulated in the larger interests of the country.

Governing Policy – Institutions

The Government of India notifies the foreign trade Policy for a period of five years (for
example 2015 -20) under Section 5 of the Foreign Trade (Development and Regulation
Act), 1992. The current Export Import Policy covers the period 2015-2020. The FTP is
updated every year on the 31st of March and the modifications, improvements and
new schemes become effective from 1st April of every year.
All types of changes or modifications related to the EXIM Policy is normally
announced by the Union Minister of Commerce and Industry who co-ordinates with
the Ministry of Finance, the Directorate General of Foreign Trade and network of DGFT
Regional Offices.
FTP 2015-2020

Some highlights of the present Foreign Trade Policy 2015-2020

 India to be made a significant participant in world trade by 2020

 Commerce Minister announced two new schemes in Foreign Trade Policy
2015-2020Two New Schemes announced in FTP Are MEIS & SEIS. FTP 2015-20
introduces two new schemes, namely "Merchandise Exports from India Scheme
(MEIS)" and "Services Exports from India Scheme (SEIS)". These schemes (MEIS
and SEIS) replace multiple schemes earlier in place, each with different conditions
for eligibility and usage.
 Merchandize exports from India (MEIS) to promote specific services for
specific Markets Foreign Trade Policy
 For services, all schemes have been replaced by a 'Services Export from India
Scheme'(SEIS), which will benefit all services exporters in India.
 FTP would reduce export obligations by 25% and give boost to domestic
manufacturing
 Incentives (MEIS & SEIS) to be available for SEZs also. FTP benefits from both
MEIS & SEIS will be extended to units located in SEZs. – Both MEIS and SEIS firms
and service providers can now get subsidized office spaces in SEZ (Special
Economic Zones), along with other benefits. With a view to boost the Special
Economic Zones, Government has decided to extend both the incentive schemes
for export of goods and services to units in SEZs.
 e-Commerce of handicrafts, handlooms, books etc., eligible for benefits of
MEIS. e-Commerce exports up to Rs.25000 per consignment will get SFIS benefits.
 e-Commerce Exports Eligible For Services Exports From India Scheme. – As
part of Digital India vision, mobile apps would be created to ease filing of taxes and
stamp duty, automatic money transfer using Internet Banking have been proposed.
> Online procedure to upload digitally signed document by Chartered
Accountant/Company Secretary/Cost Accountant to be developed.
 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%.
 Branding campaigns planned to promote exports in sectors where India has
traditional Strength.
 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. – Some major
overhauling of nomenclature and naming have been done. For instance, Export
House, Star Export House, Trading House, Star Trading House, Premier Trading
House certificate has been changed to One, Two, Three, Four, Five Star Export
House. The allocation of the status will now be based on US dollars, instead of
Indian Rupees
 The criteria for export performance for recognition of status holder have been
changed from Rupees to US dollar earnings. – A new position called ‘Status Holder’
have been formulated, which will recognize and reward those entrepreneurs who
have helped India to become a major export player. All IT and ITeS firms,
Outsourcing companies and KPOs can rejoice.
 Manufacturers who are also status holders will be enabled to self-certify their
manufactured goods as originating from India. – Tax and duty on Indian
manufacturers have been reduced, to boost Make in India vision
 Reduced Export Obligation (EO) (75%) for domestic procurement under EPCG
scheme.
 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(Inland Container Depots), 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.

Now let us understand how this achieves the desired objectives of the nation.

Impact on the Economy:

According to some experts the focus in this FTP has been “Simplicity And Stability”.
Accordingly, the policy on the one hand seeks to realign the multiple schemes with
the objective of reducing complexities. On the other had it want to promote the
increased use of technology to reduce the transaction cost and manual compliances.

Supporters have given their verdict for this new FTP, stating it as ‘progressive’, ‘path
breaking’ and ‘development friendly’ as exports of books, handicraft, handlooms, toys,
textiles, defence and ecommerce platforms would be easier and faster.According to
them, a big step is cleaning up the plethora of export promotion schemes and
clubbing them under two schemes, one for goods (Merchandise Exports from India
Scheme) and one for services (Services Exports from India Scheme).The duty scrips
under these schemes come without conditions and can be freely transferred.

One significant announcement in the policy is that it will move away from relying
largely on subsidies and sops. Critics however point out that, this is prompted by
World Trade Organisation (WTO) requirements that export promotion subsidies
should be phased out, but according to some experts there are ways of getting
around it and other countries are doing it all the time.

There has been talk of boosting services exports for quite a few years now, but
information technology and information technology-enabled services (IT/ITES)
dominated the basket. The share of this segment in the overall export basket is 50
percent and 90 percent in the services export basket.

More importantly, this sector was overly dependent on western markets and,
consequently, extremely vulnerable to even the smallest of developments there. The
policy, fortunately, turns its attention to other sectors where India has inherent
advantages – healthcare, education, R&D, logistics, professional services,
entertainment, as well as services incidental to manufacturing.

By extending benefits under EPCG on domestic procurements and offering them

more products under MEIS, the policy further seeks to incentives the exports. Right
direction.

According to the Commerce Minister Nirmala Sitaraman, It's a focused policy, one in
which exports through Make in India is underlined by looking at sectors that give
greater employment and have high-tech value addition. That is because the intention
is to join the global value chain and above all, the environment part, where you are
looking at eco-friendly systems and producing wealth out of waste. So, the priority
areas are technology-driven, labour-intensive-driven and environment-driven. You are
also looking at traditional markets, emerging markets and diversifying into new
markets.

History of trade Policy of India

Even though the popular view is that India’s export promotion started with the
economic reforms post nineties. A study foreign trade policy shows that efforts have
been made to make our trade competitive even before that. To understand this, we
need to know the background history and evolution of foreign trade in India.

India is looked upon as a country with immense resources available through its length
and breadth. India was famed for her fabulous wealth ever since the ancient times till
the establishment of the British Empire. Indian trade history reflects that despite the
frequent political upheavals during the 12th to the 16th centuries, the country was still
prosperous. Descriptions of the wide variety of excellent goods sold in the Indian
markets of those days are found in the records of foreign travellers. India was well
known for its textiles one of the chief items of export. Textiles from Gujarat were sent
 to the Arab countries and to South-east Asia. Trade history of India also shows
hardwood furniture, embellished with inlay work was a very popular item for expert.
Although the expensive carvings and inlays were inspired by the ornate Mughal style,
the furniture was modelled on the European design. Carpets were used both in
ancient and medieval India. But the skill of carpet weaving touched new heights
during the 16th century. A larger variety of ornamental work in cut stones, ivory, pearl
and tortoise shells were produced in South India. Pearl fishing was a major industry
here. Indian arts and crafts patronized by Indian rulers, were unmatched for their
beauty and skill and were very popular in the European countries. River routes also
promoted trade between different parts of the country. India’s exports were seen too
far exceed her imports both in the number of items as well as in volume. Arab traders
shipped Indian goods to European countries through the Red Sea and the
Mediterranean ports. With huge earnings from her exports of various commodities,
the state coffers were amply stocked with gold and silver.

India today stands as a trillion economy. Darjeeling tea, Indian khadi cotton, Kashmiri
carpets, Indian spices and dry fruit are just a few of the famous gifts India has given
to the world. The economic levels have improved in the urban and semi-urban areas.
Literacy is penetrating deep in to even the far reach areas, thus creating awareness
and to higher consumption patterns for all kinds of goods across all sections of the
society. Promoting the availability of goods from different parts of the world has seen
a rise in more trade with other countries.

Indian trade history is remarkable. Indian trade has benefited and so has the world.
The country has realized that at the end of the day, maximizing use of one’s own
resources is what makes all the difference.

India’ Trade Policy Philosophy: Theoretical Background

On analytical grounds, trade policy can be broadly divided into two groups –
 Inward oriented and (b) Outward oriented.
 Inward – oriented policy:- An inward oriented strategy is the one in which trade
and industrial incentives are biased in favour of production for domestic market
over the export market. Thus, an inward oriented policy is often designated as the
import substitution strategy.
 Outward – oriented policy : - On the contrary, an outward oriented strategy is
the one in which trade and industrial policies do not discriminate between
production for domestic goods and foreign goods. Thus, an outward oriented
strategy is often designated as the export promotion strategy.
As remarked by World Bank in its World Development Report (1987) – “Inward –
oriented regimes are generally characterized by high levels of protection for
manufacturing, direct controls on imports and investments, and overvalued exchange
rates. By contrast, outward orientation links the domestic economy to the world
economy.” The solution to the problem of BOP for a country depends on the trade
policy / export – import policy of the country. Hence, a systematic study of BOP of a
country should take into account the changes in the trade policy of a country over a
period of time.

Trade Policy Evolution

In a broader sense, after independence for almost forty years or so India adopted
inward oriented strategy. The basic rationale behind it was that it would help rapid
industrialization through import substitution and at the same time save valuable
foreign exchange. This strategy covers the period from First Five Year Plan (1951 –
56) to the Seventh Five Year Plan (1985 – 90). This period is considered as the period
of “Licence – Quota Raj” wherein there was a controlled and restrictive environment.
However, the decade of 1990 is marked with a near U turn as India adopted gradually
a path of economic liberalization. It followed the policy of Liberalization, Privatization
and Globalization (LPG) to solve its BOP and related problems. A series of economic
reforms were introduced in various sectors to tackle the BOP and other problems.
Hence, the Indian economy which was a closed economy for almost forty years now
became relatively more open posing challenges for macroeconomic management.
Thus, from 1990 onwards India adopted an outward oriented strategy which can be
considered as a significant turnaround from the earlier period. The adoption of
outward oriented strategy was a major departure from the relatively protectionist
trade policies pursued in earlier years.
There is no doubt that in the broader sense of the term India followed an inward -
oriented trade policy after independence till 1990. However, an in depth analysis of
India’s trade policy shows that there were certain shifts in policy stance from time to
time. Taking this into account trade policy of India can be broadly divided into the
following phases

Phase I – Import Restriction and Import Substitution (From 143 1950’s to 1970s),
Phase II – Export Promotion & Import Liberalisation (From 1970s to 1990s), and
Phase III – Outward Orientation – (From 1990 onwards).

Economic (Trade) Reforms in India:

In order to understand the evolution of the Foreign trade policy (EXIM policy) over
time we need to understand the larger framework and evolution of Macroeconomic
policy in India before and after the liberalisation in the 90’s. The subsequent trade
policies were developed keeping in view this larger framework and in sequence to it.

In the early eighties, the Government of India appointed a special EXIM Policy
Committee to review the government previous export import policies. The committee
was later on approved by the Government of India. Mr. V. P. Singh, the then Commerce
Minister and announced the EXIM Policy on April, 1985. Initially the EXIM Policy was
introduced for the period of three years with main objective to boost the export
business in India

Now, let us understand the history and evolution of foreign trade policy in India we
need to understand it under different phases

Policy in Practice: Trends in Foreign Trade Policy

1950 -1990:

India entered into planned development era in 1950’s and at that time Import
Substitution was a major element of India’s trade and industrial policy. In 1950 India’s
share in the total world trade was 1.78% which reduced to 0.6% in 1995. During 2003-
04 India’s share in the global trade was 0.8%, in 2005 it was 1.0%.

The PC Alexander Committee (1978) was the first committee to review and
recommend on Import –Export Policies and Procedures. This committee
recommended the simplification of the Import Licensing procedure and provided a
framework involving a shift in the emphasis from “control to development”. In 1980
Tandon Committee gave recommendations on export strategies in eightees.In the
Export Import policy of 1978-79, for the first time in India’s History decentralization of
some licensing functions took place and the powers of regional licensing authorities
was enhanced.

Export Oriented Units were set up under the EOU scheme introduced in early 1981.
The export and Import Bank of India (website) was set up in 1982 to take over the
operations of international finance wing of the IDBI. Other major objectives was to
provide financial assistance to exporters and importers.

In the Trade Policy of 1985-88 some measures were taken based upon the
recommendation of Abid Husain Committee 1984. This committee envisaged
“Growth Led Exports, rather than Export Led Growth”. The recommendation of this
committee stressed upon the need for harmonizing the foreign trade policies with
other domestic policies. This committee recommended announcement of foreign
trade policies for longer terms.

The export import pass book scheme was introduced in 1985 as per recommendation
of Abid Hussain Committee. In 1985 Vishvanath pratap Singh Government developed
a 3 year exim policy.Tax Reform Committee chaired by Raja J Chelliah suggested
minimizing the role of quantitative restrictions and reducing the tariff rates
substantially. Export Processing Zones were set up to push up exports. They are now
SEZ
Main Features of Trade Policies- Era of reforms (next phase of reforms since
nineties)

As discussed the massive trade liberalisation measures adopted after 1991 mark a
major departure from the relatively protectionist trade policies pursued in earlier
years. Accordingly, Substantial simplification and liberalisation has been carried out
in the reform period. Foreign Trade Policy (FTP) or Export Import Policy (EXIM) is
believed to be an important step towards the economic reforms of India. In order to
liberalize imports and boost exports, the Government of India for the first time
introduced the Indian EXIM Policy on April I, 1992.

In the light of the reform policy objectives successive governments have been taking
various trade reforms. Successive annual Union Budgets have also extended a
number of tax benefits and exemptions to the exporters. These include reduction in
the peak rate of customs duty to 15 per cent; significant reduction in duty rates for
critical inputs for the Information Technology sector, which is an important export
sector; grant of concessions for building infrastructure by way of 10-years tax holiday
to the developers of SEZs; Facilities and tax benefits to exporters of goods and
merchandise; reduction in the customs duty on specified equipment for ports and
airports to 10 per cent to encourage the development of world class infrastructure
facilities, etc. A number of tax benefits have also been announced for the three
integral parts of the ‘convergence revolution’ the Information Technology sector, the
Telecommunication sector, and the Entertainment industry.

In order to bring stability and continuity, the Export Import Policy was made for the
duration of 5 years. However, the Central government reserves the right in public
interest to make any amendments to the trade Policy in exercise of the powers
conferred by Section-5 of the Act. Such amendment shall be made by means of a
Notification published in the Gazette of India.

Prior to 2004, the Foreign Trade Policy was called EXIM Policy. Each FTP will be
having objectives and set guidelines to achieve those objectives. After the
introduction of liberalisation in Indian economy, 1992-97 policy was the first EXIM
Policy which aimed to dismantle the protectionist and regulatory policy towards a
globally oriented economy.