India’s foreign trade policy 2015-20 : a brief analysis

February 24, 2021

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This‌ ‌article‌ ‌has‌ ‌been‌ ‌written‌ ‌by‌ ‌‌Arpita‌ ‌Tripathy‌,‌ ‌ ‌from KIIT‌ ‌School‌ ‌of‌ ‌Law.‌ ‌This is an exhaustive ‌article ‌which‌ deals‌ with‌ India’s foreign trade policy 2015-20 and its brief analysis.

Table of Contents

Introduction

On 4th April 2015, the Commerce and Industry Minister, Govt of India, Mrs Nirmala Sita Raman, announced the Indian Foreign Trade Policy for 2015-20. The Foreign Trade Policy has been formulated for 5 years. It looks into, regulates and laws are enacted for the export and import of goods. The introduction of the Foreign Trade Policy is integrated with the vision of the Honourable Prime Minister of India on ‘Make in India’, ‘Digital India’, and ‘Skills India’. The government of India has formulated the trade policy as a way to improve ‘ease of doing business’. Improving export and import will help India in being a contributor to the present era of globalization. The authorised body of Foreign Trade Policy is Directorate General of Foreign Trade (DGFT).

Legal framework

According to Section 5 of the Foreign Trade (Development and Regulation) Act 1992, the government of India can from time to time formulate laws relating to Foreign Trade Policy. This section also specifies that the laws made should have special provisions or exceptions should be included for Special Economic Zones. This trade policy will remain in force for 5 years, that is, 31st March 2020 (now extended up to 31 March 2021). The Central Government also has the power to amend the trade policy if it is in the public interest. The provisions under Foreign Trade Policy are special provisions and would prevail over general ones. If any benefits have been provided before the date of commencement of the Foreign Trade Policy then it will continue.
Directorate General of Foreign Trade (DGFT) works to help import and export in the country. It makes sure that the whole system of export and import is transparent and efficient. DGFT has always focussed on good governance. In order to facilitate international trade, DGFT consults various Export Promotion Councils as well as Trade and Industry bodies from time to time. DGFT is implementing the Niryat Bandhu Scheme for mentoring new and potential exporters on the intricacies of foreign trade through counselling, training.
DGFT has been assisting the clients by giving them time schedules. It has also provided email id, phone number, a website for the stakeholders to communicate and to facilitate them. Further, help desks have also been established in different zones. DGFT has also been modernized by allowing an online complaint system. The online complaint system allows users to register complaints and see its status.
The trading, export, import, development, multilateral and bilateral relations by Special Economic Zone is also looked after by the Department.
The National Committee on Trade Facilitation has been constituted in the year 2016 after India ratified the World Trade Centre Agreement on Trade Facilitation. After India ratified the Trade Facilitation Agreement, it was mandatory for India to set up the National Committee on Trade Facilitation (NCTF). The Chairman of this committee would be the Cabinet Secretary. The NCTF is an inter-ministerial committee. The main objective of the National Committee on Trade Facilitation is to facilitate the implementation of the WTO Agreement on Trade Facilitation. The Committee also developed road maps for trade facilitation. India is not the only country to set up this committee. Many countries like the United Kingdom, Sweden and some developing countries have set up the Trade Facilitation Committees.

Trade facilitation

Directorate General of Foreign Trade works for developing the export and import in the country. For increasing transparency and greater efficiency, the Directorate General of Foreign Trade consults with Export Promotion Council and Trade and Industries bodies. The Directorate also initiated the Niryat Bandhu Scheme. Under this scheme, the people who are new to export and import are provided with knowledge about it. The scheme also attempts to uplift and improve export and import. For more research and for improving the schemes, associations have been formed with organizations that can improve research. An institution named Centre for Research in International Trade has also been set up for the promotion of research in the field.
A system of online complaint has also been formulated wherein the exporters can file online applications who are seeking to get their issues resolved. The Export Data Processing and Monitoring System has been started by the Reserve Bank of India to look into the exports.
The Central Government also took a major step towards ease of doing business and through Foreign Trade Policy reduced the mandatory number of documents for export. The transaction time and cost has also been reduced by creating an online portal where the importer and the exporter can directly upload the documents and do not need to travel every time to Regional Authority for submission of the same. Importer exporter code is mandatory for export or import in India. This code can now be generated electronically and will be sent within 2 working days. For this code, an application has to be made to the DGFT.
The Foreign Trade Policy also introduced the concept of Town of Export Excellence which recognizes towns that have a production of more than Rs. 750 Crore. These towns have the potential to increase quality export from the country. These towns which have been notified are being provided with financial support from the Central Government.
National Committee on Trade facilitation has also been constituted under the policy. This Committee has been constituted in pursuance of the World Trade Organization’s Trade Facilitation Agreement signed by India. The Committee implements the provisions which have been incorporated in the WTO Agreement of Trade Facilitation.

Whole of Government

The government of India has recognized the fact that international trade cannot be transformed only through the efforts of one department. The government understood that all the departments have to jointly play a role in developing international trade. It was suggested that the State Government can play a major role in making an efficient foreign trade policy. Many State Governments have also taken steps to formulate Export Commissioners. The Department of Commerce has also taken a step forward to help the State Government in formulating strategies relating to exports.

World Trade Organization

In 2018, the United States filed a complaint against India at the World Trade Centre. The complaint was regarding the policies which are promoting exports in the country. The United States claimed that policies to promote export are against the rules of the World Trade Centre. The United States claimed that the export subsidies cannot be maintained and is against the rules of WTO. A report was made after examining the complaint by the WTO Panel on this issue which said that the provisions of Foreign Policy of India which are promoting export by applying export subsidiaries are illegal.

The report released by the WTO panel might impact the export market of India. These promotional export subsidiaries had always been a stimulant for the exports. The subsidiaries have supported exports by reducing the cost of exports. This might hugely impact the various exporting sectors, given the current situation of the bad economic health of the country and uncertainty due to the trade war of the United States and China.

Stopping the promotion of export might lead to disastrous consequences in the export and import market of India. Therefore, the country should aim to formulate such foreign policies which are compatible with the policies of the World Trade Organization. The Government should carefully formulate

Vision and objectives

In this age of globalisation, the government of India visioned the Foreign Trade Policy to improve its standing in international trade. Exports have to be boosted and imports need to be rationalized. The vision was to make India a leader in global trade. The Foreign Trade Policy would also build good relationships with neighbouring countries. Through the policy, India can also keep a watch on bad quality products by instilling quality checks. India will also increase market access in foreign trade. The policy has also recognized the importance of branding and therefore, has formulated policies under FTP to have branding campaigns in fields in which India has been immensely and traditionally strong.

The FTP has also taken care of the digitalised world and has, therefore, digitized many procedures. For making the process simplified the number of documents required has also been reduced. Measures have been included to facilitate new entrepreneurs to enter the market. Programmes for training new entrepreneurs have been undertaken. The FTP has also attempted to include the State Governments in its mission to become a leader in foreign trade. It should be a unified attempt of not only one department of the government but also the State Government.

India’s Foreign Trade Policy has helped improve manufacturing, infrastructure, and India’s export competitiveness. It will also include the policies which will be the motive of the Government, ‘ Digital India’, ‘Make in India’, ‘Skills India’. The main focus of the policy is on increasing the export and import of goods. The Central Government has taken a step to increase ‘ease of doing business’ in the country.

The focus will remain on both service and the manufacturing sector. The Foreign Trade Policy wants to build a brand of India which is free of defects and has high-quality products. The products should be such that it can face international competition.

Highlights

Anti-dumping

Anti-dumping can be understood through an example. If let’s say, China has a huge production of steel but there is no demand for the steel then China would sell the steel at a price lower than the price it was being sold in their own country. This is called dumping. This is done so that the international market can be captured. For prevention of this, anti-dumping duty will be imposed on such transactions. Firstly, the Directorate General of Anti Dumping and Allied Duties (DGAD) looks into the transaction and analyzes if it is the case of dumping. If affirmative, it forwards the same to the Commerce Ministry which imposes Anti Dumping tax under the Custom Tariff Act, 1975.

Duty scrip schemes

Before the Foreign Trade Policy 2015-20, there were 5 different schemes in the country. The schemes included the Focus Product Scheme, Focus Market Scheme, Market Linked Focus Product Scheme, Agricultural Infrastructure Incentive Scheme, Vishesh Krishi. These schemes were abolished and under the policy, only 2 schemes have been maintained. Merchandise Export From India Scheme (for goods) and Service Exports from India Scheme (for services).

Service Exports from India Exports Scheme (SEIS) and Merchandise Export from India Scheme (MEIS)

SEIS

Service Export from India Export Scheme (SEIS) is a scheme introduced under India’s Foreign Trade Policy to promote service exports. Under the scheme, the service providers will be awarded rewards for the service exports.

MEIS

The Merchandise Export from India Scheme (MEIS) has been introduced under the Foreign Policy to promote the export of merchandise which has been notified and is manufactured in India. Earlier there were different schemes to reward the export of goods, but MEIS has consolidated those rewards under one head.

Conclusion

India has efficiently formulated the Foreign Trade Policy to promote exports in the country. The Government in its policy has tried to increase the exports of those products which have a strong base in the domestic market. India is also trying to improve the export of other sectors. India has also been one of the most sought after foreign investment destinations. The MEIS and SEIS are great initiatives to enhance the export of goods and services and has consolidated the various schemes which existed before. Around 70% of India’s exports constitute products that have just a 30% share in global trade.