Blog Details

Author - Associate Megha Motwani

The policy

India’s Foreign Trade Policy (FTP) is formulated for five years at a time and reviewed annually. The focus of the FTP is on to provide a framework for rules and procedures for exports and imports and a set of incentives for promoting exports. The FTP for 2015-2020 endeavors to achieve the objectives given below:

• To make the policy environment for foreign trade stable and sustainable in merchandise and service;
• To increase exports of goods and services;
• To provide for ways in which India can become self-sufficient and reduce its reliance on imports and thereby, reduce trade imbalance. So, basically the FTP must control imports to India ;
• To provide an infrastructure for India’s global trade with a view to expanding its market engagements.
• To provide support for the success of ‘Make in India’ initiative of the government.

History

India’s history shows that in ancient times the Indian goods had great demand in outside world. In so much so that exports were bigger than imports. The payments were in gold and silver. This was the period when India got a title "Sone Ki Chiriya". Foreign trade got hike during the Mongal regime. After the English established base here, foreign trade’s structure was changed entirely. The British policy was slowly moving the wealth of Indian's in the hands of its own officers and resulted in the closure of country's small and large industries, which  converted India into a primarily "Agricultural country". The country started exporting raw material to its imperial rulers and importing finished products from England. Thus, the features of foreign trade in the then India was:

a. Export of raw materials was done to get a finished product.

b. The exports were greater than imports so thereby, keeping the balance of trade in our favor.

c. The foreign trade also got accelerated due to the construction of the Suez Canal and therefore leading into development of transport facilities.

The major amendments made in Foreign Trade Policy

1. Merchandise export from India scheme (MEIS) reward limit for export made by post or courier.
   Maximum value to be considered for reward under this scheme for any export made through courier, foreign post office with respect to export handicraft, handloom or leather footwear etc. was taken to be Rs. 25,000 per consignment. Thus, if in any case the value of product/consignment raises the reward was still allowed on the maximum amount of Rs. 25,000 only.

Amendment – after the amendment the value to be taken for calculation of reward now will be Rs. 5,00,000. Similarly, if the value of the product/consignment exceeds Rs. 5,00,000 then reward will be calculated on Rs. 5,00,000 only.

2. Export Promotion Limit

The objective of this is to increase exports to its maximum. Thus, the annual limit for free of cost export for the export promotions for status holder was:

-  2% of annual average export realization in 3 years; or

-  Rs. 1 crore

(Whichever is lower)

(Status Holder are business leaders who have excelled in international trade and have successfully contributed  to country’s foreign trade.)

Amendment – seeing the limit imposed in no way encouraging exports, the amendment was brought. The amendment removed the limit of Rs. 1 crore thereby, the exporters who were exporting for instance: the products amounting to Rs. 200 crore were now allowed to export products amounting to 4 crore (2% of 200 crore) free of cost.

However, for export of gems and jewelry there is no amendment and same limit i.e. 2% of annual average export realization in 3 years; or Rs. 1 crore (Whichever is lower) will be imposed.

3. Exemption for IGST and compensation cess

IGST and compensation cess exemption under Advance Authorization Scheme, Export Promotion Capital Goods Scheme, EOU Scheme is provided the cut off date of which is 1 October 2018.

Amendment – the amendment just extended the date to 31 March 2019.

Impact of change

The impact of the policy and the changes introduced thereunder are:

i. Promote exports

The focus of government on providing various incentives with a motive to increase exports, the tax rebates and lowering of tariff will certainly help in promoting the exports.

ii. Generate employment

The policy by the creation of various foreign trade opportunities provides for acceleration of exports which in turn generates employment in both manufacturing and services.

iii. Easement in doing business

The initiative of government like simplification of procedures/processes, digitalization, e-governance will definitely improve ease of doing business.