With a view to make India a significant player in World trade the Government of India unveiled its Foreign Trade Policy on April 1st. It sets a very ambitious target to double exports by 2020 to $900 billion. India’s total exports were $465.9 billion in the 2013/14 fiscal year that ended on March 31, 2014. At present its share in global exports in under 2%. India’s share in global trade (overall) languishes much behind other big economies. It stands at about 2.07 % for the year 2013. India’s exports have not grown in the recent years.
The slowdown in EU and US, has accounted for this stagnation. USA has fared better, but European Union which is a big partner has slowed down. The turmoil in the Middle East also has compounded the problems. European Union, Japan, Russia and Middle East combined account for 20% of Indian exports.
India exported goods worth $312 billion in 2013-14. Here is a table showing the stagnation that has hit India’s overall trade with the world. Exports for the years 2014-15 are most likely to be in the same range.
Talking about the new policy, 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 new policy will focus on sectors like defence, pharmaceuticals, green goods, e-commerce, hi-technology products and project exports.
How it is going to happen
The Foreign Trade Policy (2015-20) is supposed to focus on tasks that will make it easier to do business in India and reduce bottlenecks. It will seek to change the perception of India as a not so business friendly country by working in collaboration with Digital India campaign making full use of technology.
- It proposes to develop online procedures to upload digitally signed a document by Chartered Accountant/Company Secretary/Cost Accountant to be developed.
- No need to repeatedly submit physical copies of documents available on Exporter Importer Profile.
- Inter-ministerial consultations to be held online for the issue of various licenses.
India followed the SEZ model (Special Exports Zone), however, it hasn’t quite worked as expected. Out of formally approved 566 SEZs, only 185 are in operation. SEZs contribute to about 25% of our exports. 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.
It has reduced Export Obligation (EO) (75%) for domestic procurement under EPCG scheme.
New Initiatives sector wise:
Defense: 352 defense related products including the core products, dual use products, general use products will be supported under the MEIS.
E-Commerce: The new policy will support exports of Leather products, handloom, books, toys, leather. The value of each consignment will have to be above 25000, it would have to be exported under courier regulations.
SEZs: The benefits of SEIS and MEIS have been exported to units located with in the SEZs.
Branding: To strengthen the Brand India, a branding campaign in the pharmaceutical and engineering products will begin soon. Also, a plan will be devised to improve the quality of Indian merchandise.
Strategies for different markets:
European Union: The focus will be on meeting the phytosanitary standards of EU. Also, India would focus on increasing the value the addition to the products which it exports to Europe, processed foods, services etc.
USA: The focus will be on resolving the Intellectual property rights issue, ensuring access to skilled professionals. All the employment generating sectors will continue to receive attention.
South Asia: Focus areas will be textiles, engineering goods, automobiles, and pharmaceuticals, plastic and leather products
Africa: Agro-processing, Mining, textiles, Mining, infrastructure, Development and construction projects.
Latin America: Large scale farming would a major focus area there, also exploiting the raw materials will be on the agenda too.
CIS (Kazakhstan, Uzbekistan and former Soviet Union states): Operationalizing the International North South Corridor.
China: Seeking access to Chinese markets in services, Pharmaceuticals, IT sectors. Removal of non-tariff barriers will also be on the agenda.
It provides a stable and sustainable policy environment for foreign trade. It seeks to diversify India’s foreign exports basket, strengthening Brand India and giving a boost to merchandise and services exports. It would be reviewed after two and a half years. It also mainstreams the states and union territories by establishing a Council for Trade Development and Promotion which will have representatives from the states and UTs.
The policy is very well calibrated to strengthen the Indian economy’s links with the global economy.