The good part about the policy is that it has laid a long-term roadmap and has focused on clearing the hurdles in the way. At the same time, it has worked on providing jobs to the economy and promotes entrepreneurship by standing behind the exporter to explore new markets.
Under pressure from falling exports and the panic caused by the implementation of Goods and Service Tax (GST) the government came out with a market-friendly Foreign Trade Policy (FTP). The move was announced after the 14-month positive growth streak was broken in October on account of confusions in the implementation of GST.
Though the FTP was expected to be announced in July 2017 along with GST, it was wisely delayed to accommodate feedback from the exporters.
On Tuesday the government announced incentives worth Rs 8,450 crore to boost exports of goods and services. The policy was clearly targeted at job creation, mainly at jobs that are generated from the smaller enterprise. FTP’s measures are aimed at labour-intensive segments and the Micro, Small and Medium Enterprises (MSME) which will help increase employment generation and value-addition in the country.
FTP was announced with an ambitious export target of USD 900 billion of India’s exports of goods and services by 2019-2020 and to increase India’s share in world exports from 2 percent to 3.5 percent.
The incentives given are for goods exports to the tune of Rs 4,567 crore, and for services exports is Rs 1,140 crore. These incentives are over and above those announced by the government recently for the ready-made garments sector.
Sector-wise incentives to the tune of Rs 749 crore is given to leather and footwear, Rs 1354 crore for agriculture and related items, Rs 759 crore for marine exports, Rs 369 crore for telecom and electronic items, Rs 921 crore for handmade carpets, Rs 193 crore for medical and surgical equipment, Rs 1140 crore for textiles and ready-made garments.
Export incentives under Merchandise Exports from India (MEIS) have been increased by 2 percent for labour-intensive MSME sectors leading to an additional annual incentive of Rs 4,567 crore. This is in addition to the already announced increase in MEIS incentives from 2 percent to 4 percent for ready-made garments with an additional annual incentive of Rs 2,743 crore.
Further, incentives under Services Exports from India Scheme (SEIS) have also been increased by 2 percent, leading to an additional annual incentive of Rs 1,140 crore. The FTP now covers 8,000 of the total 12,000 lines of items.
The policy continues to restore the earlier benefits under various export promotion schemes of duty-free imports like Export Promotion Capital Goods (EPCG) and 100 percent Export Oriented Units (EOUs) and advanced authorization which will help resolve the working capital problem that arose post roll-out of GST.
An important feature of the FTP is the new scheme of self-assessment based duty-free procurement of inputs required for exports. This will help improve the speed of processing and improve the ease of doing business for the manufacturers.
Further, in a boost to tap new markets and old ones with new products, the government has decided to extend support to Export Credit Guarantee Corporation (ECGC) which is also being enhanced to increase insurance cover to exporters, particularly MSMEs, for exploring new or difficult markets.
In addition, the validity period of Duty Credit Scrips – an export incentive, to import duty-free has been increased from 18 to 24 months and GST rates on transfer/sale of scrips have been reduced to zero.
For jewelry exporters, the gold availability issue has been resolved by allowing specified nominated agencies to import gold without payment of IGST.
The good part about the policy is that it has laid a long-term roadmap and has focused on clearing the hurdles in the way. At the same time, it has worked on providing jobs to the economy and promotes entrepreneurship by standing behind the exporter to explore new markets.For more research articles, visit our Moneycontrol Research Page.