Indian trade history is phenomenal. Since ancient times, Indian trade has benefitted the world in many ways. Its dazzling wealth and abundance of gold, pearls and spices attracted not only travelers and treasure hunters, but also invaders from across the world. Had Christopher Columbus not been fascinated by the riches of India, America would not have been discovered. Despite frequent political upheavals starting from 12th century onwards, the country remained prosperous and its trade flourished.
However, under the British rule, India’s foreign trade suffered a setback. The British exploited the country’s resources for their benefits. They discouraged the production of final products. Therefore, raw materials were exported from India and finished products imported from England which ultimately, led to the decline of Indian industries.
After independence, the Indian government followed a protectionist economic strategy by closing the Indian economy to the outside world. The Government believed that India needed to rely on internal markets for development, not international trade. In 1991, when the Indian economy had undergone deep crisis with rising inflation and widening fiscal deficit, the process of economic reforms was started by then Finance Minister, Dr. Manmohan Singh. The three tenets of economic reforms were liberalization, privatization and globalization. The importance of international trade for survival of Indian economy was realized and hence, it was made an important part of economic strategy.
The reform process which started in 1991, hasn’t stopped even now as Indian government coalitions have been advised to continue liberalization. Over the years, the foreign trade policies have been reflective of this ongoing process. The Foreign Trade Policy (FTP) 2015-2020 unveiled on April, 2015 also aims to achieve the same. By launching FTP 2015-2020, the Government has made an attempt to achieve the following:
- To increase participation of India in world trade
The policy aims at making India a significant participant in world trade and doubling its exports to $ 900 million by 2020.
- To promote ‘Make in India’
For integrating ‘Make in India’ with the policy, following steps have been taken:
- A new Merchandize Exports from India Scheme (MEIS) has been introduced, which has replaced 5 different schemes. Export items with high domestic content and value addition would attract higher rewards under MEIS.
- Export obligation for domestic procurement has been reduced from 90% to 75%.
- To encourage service exports
In order to boost export of services from India, Service Exports from India Scheme (SEIS) has been introduced. It has replaced Served from India scheme. The new scheme will apply to all services providers in India instead of Indian Service Providers.
- To recognize status holders for special incentives
Business leaders who have excelled in exports will be recognized as Status holders and will be given special treatment and incentives. The criteria for export performance for recognition of status holder have been changed from Rupees to US dollar earnings.
- To provide incentives to Special Economic Zones under the new schemes
The benefits of FTP from both MEIS & SEIS will be extended to units located in SEZs.
- To promote ‘ease of doing business’, ‘Digital India’ and ‘e-governance’
For this, the following steps have been taken:
- Paperless processing of reward schemes to be developed to upload digitally signed documents by Chartered Accountant/Company Secretary/Cost Accountant.
- Nomenclature of Export House, Star Export House, Trading House, Premier Trading House certificate has been changed to 1,2,3,4,5 Star Export House.
- Inter-ministerial consultations would be held online for issuing various licenses.
- The duty credit scrip issued under both MEIS and SEIS will be made freely transferable and can be used for payment of customs duty /excise duty/service tax.
Apart from above changes, the new policy has added Calicut Airport, Kerala and Arakonam ICDS, Tamil Nadu to the list of registered ports for import and export and Vishakhapatnam and Bhimavarm to the list of ‘Towns of Export Excellence’.
It is important to note that the new FTP was launched at a time when Indian exports were already dwindling due to global economic crisis. Therefore, it was expected that the Government would take drastic measures to boost the exports.
Undoubtedly, the new FTP is different from the previous policies in many ways. It has taken a holistic view of the situations prevailing in the domestic market as well as global economy. It is appreciable that the new trade policy has not only dealt with global economy and domestic challenges, but has also undertaken region wise and country wise SWOT analysis. It has given a detailed analysis of market strategy for specific markets and also of the current status of WTO (World Trade Organization), TRIPs (Agreement on Trade-Related Aspects of Intellectual Property Rights) and other WTO based agreements, and their potential impacts on India’s exports. According to some experts, unlike earlier Trade Policies, this policy demonstrates the wisdom dawning in India to handle global challenges with mature and erudite leadership.
The Government also decided to rope in States and Union Territories in the process of international trade, which is a welcome move. A Council for Trade Development and Promotion will be set up comprising of representatives from States and Union Territories. The new policy will be reviewed after two-and-a-half years and not annually as was the practice earlier.
The Prime Minister has already taken a lot of initiatives to develop a personal rapport with the heads of all the leading global economies and has entered into multiple trade agreements with them. He has focused on improving ties with oil rich countries like UAE in order to secure energies for the energy-consuming manufacturing sector of the country. The new policy reflects his vision towards realizing this goal. Moreover, by integrating Make in India with the new policy, the government has made an attempt to portray India as a friendly destination for manufacturing and exporting goods with an aim to integrate it into Global Value Chain.
It can be concluded that the new policy has been prepared after analyzing several aspects of the world trade. It is a good policy which can be beneficial only if it is implemented effectively.