Export Promotion

MAR 24

Mains   > Economic Development   >   Indian Economy and issues   >   External sector

WHY IN NEWS:

  • The government has readied a draft district-wise export promotion plan for 451 districts in the country after identifying products and services with export potential

STEPS TAKEN TO BOOST EXPORTS:

  • Foreign Trade Policy (FTP) 2015-20:
    • It provides a framework for increasing exports of goods and services as well as generation of employment and increasing value addition in the country, in line with the ‘Make in India’ programme.
    • This policy rationalised the earlier export promotion schemes and introduced two new schemes, namely Merchandise Exports from India Scheme (MEIS) for improving export of goods and ‘Services Exports from India Scheme (SEIS)’ for increasing exports of services.
  • Exports from India Scheme:
    • Merchandise Exports from India Scheme (MEIS)
      • Under this scheme, exports of notified goods or products to notified markets are granted freely transferable duty credit scrips.
      • Such duty credit scrips can be used for payment of basic custom duties for import of inputs or goods.
      • Since 1st Jan 2021 Remission of Duties and Taxes on Export Products (RoDTEP) replaced the existing MEIS
      • RoDTEP will ensure that the exporters receive the refunds on the embedded taxes and duties previously non-recoverable.
    • Service Exports from India Scheme (SEIS)
      • Service providers of notified services are eligible for freely transferable duty credit scrip at 5% of net foreign exchange earned.
  • Duty exemption and remission schemes:
    • These schemes enable duty free import of inputs for export production with export obligation.
    • These scheme consists of:
      • Advance Authorization Scheme
        • Under this scheme, duty free import of inputs are allowed, that are physically incorporated in the export product with minimum 15% value addition
      • Interest Equalization Scheme
        • Interest Equalization Scheme on pre and post shipment rupee export credit was introduced from 2015 providing interest equalisation at 3% for labour intensive or MSME sectors
  • District wise export promotion:
    • Commerce Ministry has asked States to prepare an annual ‘export ranking index’ of districts on export competitiveness with the assistance of the Directorate General of Foreign Trade (DGFT).
    • Draft District Export Action Plans have been prepared by regional DGFT authorities
    • District Export Promotion Committees have been notified in the districts of all the States
  • Trade Facilitation:
    • With an aim to reduce trade barriers caused by inefficient and overly burdensome regulatory administrative procedures, the Trade Facilitation Agreement (TFA), negotiated at WTO, came into force in 2017.
    • A National Committee on Trade Facilitation (NCTF) was, accordingly, constituted in India
  • Export Promotion Capital Goods (EPCG) scheme:
    • Under this scheme import of capital goods at zero custom duty is allowed for producing quality goods and services to enhance India’s export competitiveness.
  • The production linked incentive (PLI) scheme
    • PLI scheme introduced by the government across the 10 key specific sectors is aimed at making manufacturers globally competitive and attract investment in the areas of core competency.
    • The scheme is targeted at making the country an integral part of the global supply chain
  • Towns of Export Excellence (TEE)
    • Selected towns producing goods of Rs. 750 crores or more are notified as TEE on potential for growth in exports and provide financial assistance
  • Market Access Initiative (MAI) Scheme:
    • Under the Scheme, financial assistance is provided for export promotion activities such as setting up warehouse, participation in international trade fairs, brand promotion etc
  • Status holder scheme:
    • Upon achieving prescribed export performance, status recognition is accorded to the eligible applicants
    • Such Status Holders are eligible for various non-fiscal privileges as prescribed in the Foreign Trade Policy.
  • Initiatives to improve customs regime:
    • 24X7 customs clearance
    • Single window in customs
    • Self-assessment of customs duty
    • Prior filing facility of shipping bills
  • Improving logistics efficiency:
    • Logistics Planning and Performance Monitoring Tool (LPPT)
      • It shall allow real-time monitoring of operational performance and asset utilization of various logistics infrastructure such as ports, airports etc.
    • A new Logistics Division was created in the Department of Commerce for integrated development of the logistics sector.
    • Reduction in waiting time for inter-state border crossing due to GST
    • Revision in axle load norms for heavy vehicles leading to better carrying capacity
    • Introduction of paperless EXIM trade process through E-Sanchit
    • Faceless assessment by ‘Turant Customs’ by Central Board of Indirect Taxes and Customs (CBIC)
    • Installation of scanners at major ports
    • Radio Frequency Identification (RFID) tagging of all EXIM containers for track and trace
    • Mandatory electronic toll collection system (FASTag) for reducing time loss at time toll plaza
  • Infrastructure initiatives:
    • Trade Infrastructure for Export Scheme (TIES)
      • It aims to assist creation of appropriate infrastructure for growth of exports from the States.
    • Bharatmala Pariyojana:
      • It is a new umbrella program for the highways sector that envisages building more than 80,000 Km of roads, highways, greenfield expressways, bridges etc.
    • Sagarmala:
      • It aims at Port Modernization and New Port Development, Port Connectivity Enhancement, Port-linked Industrialization, Coastal Community Development and giving impetus to Coastal Shipping.
    • Multi-Modal Logistics Parks
      • It shall act as hubs for freight movement enabling freight aggregation, distribution and multi-modal transportation.
      • They would provide modern mechanized warehousing space and value-added services such as customs clearance with bonded storage yards, warehousing management services, etc.
    • Dedicated Freight Corridors (DFCs)
      • It aims at reduction in unit cost of transportation with higher speed of freight trains and better turnaround of wagons.
      • Around 70 per cent of freight is expected to shift to DFC, freeing up capacity on Indian Railways.
  • Digital initiatives for improving logistics:
    • India Logistics Platform (iLOG):
      • iLOG integrates several IT-based solutions deployed by government over the years such as Single Window Interface for Trade (SWIFT),  Port Community System (PCS), Freight Operations Information System (FOIS),  VAHAN (National Vehicle Registration System) etc.
    • Online issuance of Importer Exporter Codes (IEC) has been started.
  • Agricultural exports:
    • ‘Agriculture Export Policy’
      • A comprehensive ‘Agriculture Export Policy’ was launched in 2018 to provide an impetus to agricultural exports.
    • Transport and Marketing Assistance (TMA)
      • It has been launched for mitigating disadvantage of higher cost of transportation for export of specified agriculture products.
  • Gold Card Scheme:
    • Introduced by the RBI in 2004.
    • The scheme provides for automatic renewal of credit limit, additional 20% limit to meet sudden need of exports, relaxed norms for security and collateral etc

CONCERNS:

  • Low level of participation in Global Value Chains (GVCs):
    • India’s participation in GVCs has been low compared to the major exporting nations in East and Southeast Asia.
    • On the contrary, export growth of capital intensive products from China has been mainly driven by its participation in the GVCs.
    • China’s export promotion policies since the 1990s have relied heavily on a strategy of integrating its domestic industries within the GVCs.
    • India’s decision to not to join the Regional Cooperation of Economic Partnership (RCEP) will further worsen the situation
  • Low market penetration in high-income countries:
    • Low participation in GVCs have resulted in a disproportionate shift in India’s geographical direction of exports from traditional rich country markets to other destinations like African countries.
  • Logistics issues:
    • Highly fragmented ownership
    • Few large players
    • Lack of consolidation in operations
    • Sub-optimal modal share with freight movement highly skewed towards road sector
    • Lack of an integrated approach by user sectors (multiple line ministries and agencies)
    • Absence of consistent policies and regulations
  • Specialization versus diversification:
    • Indian exports are characterized by high diversification combined with low specialization in exports.
    • This implies that India is spreading its exports thinly over many products and partners, leading to its lackluster performance compared to countries like China.
  • Regulatory hurdles:
    • The factors like complex land, labour and tax regulations have impeded the creations of conditions for Indian companies to compete in global markets.

SUGGESTIONS:

  • Trade liberalization:
    • For increasing its share in the world trade, India need greater trade liberalization >> It will require signing of more free trade agreements.
    • If India wants to access world markets, it should be willing to open its markets also.
    • For example, in the context of trade with Europe, it still imposes high duties on India’s exports which disadvantage India. Europe will only be willing to sign such an agreement if India is willing to open its markets like automotive.
  • Decentralized approach:
    • The district-specific approach that involves the States in identifying potential export sectors is suitable for Indian scenario
  • Improving ease of doing business:
    • Export success will also require genuine easing of costs of trading and doing business in India.
    • Thus, a more appropriate policy response is to focus on boosting competitiveness - building infrastructure, ensuring cheap power, reforming land and labour markets, and creating conditions for companies to compete in global markets.
  • Integrating with Global Value Chains:
    • India should join in the trade groupings such as RCEP, Eurasian Economic Union etc. >> to embed itself in global value chains.
  • Stability in export policies:
    • In the post Covid world, multinational companies in order to hedge against supply chain disruptions will look to shift away from China.
    • Therefore, in order to attract GVCs India should provide policy stability.

PRACTICE QUESTION:

Q.COVID pandemic crisis has constituted an intense shock, with a sharp decline in global trade. In this context discuss various initiatives undertaken by the government to promote exports?