India's Trade Overview

INDIA'S TRADE POLICY

SECTOR-FOCUSSED EXPORT INITIATIVES

The Department of Commerce has taken a number of sector-focussed export initiatives over the past few years to cater to segments that need support or where India has a huge potential. There has been a consistent thrust over the years on MSMEs and labour intensive sectors. Two of the major sectors where the government has launched a comprehensive vision and action plan are agri-products and services, especially considering the untapped potential in these sectors.

The Government of India has been particularly cognizant of the needs of MSMEs and labour intensive sectors, due to the critical role they play in the economy. The NSSO survey in 2015-16 revealed that India has around 6.3 crore MSMEs that employ over 111 million people. Moreover, MSMEs in India account for 45% of total industrial production, 40% of total exports and contribute 30% to India’s GDP.

For certain sensitive sectors like textiles and apparel, the government has instituted special incentives like the Special Advance Authorisation Scheme for exports of articles of Apparel and Clothing Accessories introduced in 2016. Under this, exporters are entitled for an authorisation for fabrics including inter lining on pre-import basis and Duty Drawback for non-fabric inputs on the exports.

Some of the measures undertaken for MSMEs include:

• Adequate flow of credit from financial institutions/banks;
• Support for technology upgradation and modernization;
• Integrated infrastructural facilities;
• Modern testing facilities and quality certification;
• Access to modern management practices;
• Entrepreneurship development and skill upgradation through appropriate training facilities;
• Support for product development, design intervention and packaging;
• Welfare of artisans and workers;
• Assistance for better access to domestic and export markets
• Cluster-wise measures to promote capacity-building and empowerment of the units and their collectives

Under various government schemes, MSMEs have been given additional benefits.

• Export incentives under MEIS were increased by 2% across the board for labour intensive, MSME sectors, ready-made garments and made ups.
• Government has launched Micro Units Development & Refinance Agency Ltd (MUDRA) as a wholly owned subsidiary of Small Industries Development bank of India (SIDBI). Presently, MUDRA has an authorized capital of Rs 1,000 crore and paid up capital of Rs 750 crore. It has been set up to support finance Institutions in the business of lending to micro/small business entities engaged in manufacturing, trading and service activities.
• For ease of doing business, the Ministry of MSMEs has introduced Udyog Aadhaar Memorandum, a one-page document for an MSME to self-certify its existence, bank account details, promoter/owner Aadhaar details, etc. Return under eight labour laws and 10 Union regulations has to now be filed just once annually.
• GST-registered MSMEs get the benefit of 2% interest subvention on fresh or incremental loans
• Interest equalization rate has been increased from 3% to 5% for MSME exporters under the Interest Equalisation Scheme.
• ECGC is being given Rs 2,000 crore over three years with focus on MSMEs exploring new and risky markets.
• Government has implemented Niryaat Bandhu scheme to reach out to new and potential exporters, and mentor them on key aspects of foreign trade.

Some of the long-term measures planned by the Ministry for MSMEs to boost exports from the sector include:

• Skilling on basic nuances of exports – local and global trade scenarios, advantages of exporting products and services by MSMEs, role of DGFT, customs & excise, taxation, etc.
• Sector-based training – packaging/branding/barcoding standards, product testing, certifications, Govt. schemes and incentives, regulatory requirements, etc.
• National Resource Centre is planned for MSME exporters that will conduct research and enhance the existing knowledge base. Its scope will include market research & competitive analysis, product mapping, country-specific knowledge papers, mapping of financial instruments, analysis of trade agreements, etc.
• Export facilitation centres will handhold exporters on benefits of schemes, end-to-end documentation, identifying and targeting the right markets for their products and services, linking them with financial institutions, guiding them on manufacturing technologies, legal assistance, etc.
• Helping MSMEs with access to latest technology and management advisory
• Facilitating access to finance for MSMEs.

The Government of India approved the Agri-Export Policy in 2018, with the recognition that agricultural exports will play a major role in its objective of doubling farmer’s incomes by 2022. It aims to integrate Indian farmers and high quality agricultural products with global value chains. The major objectives of the policy are:

• To double agricultural exports from present US$ 30+ billion to US$ 60+ billion by 2022 and reach US$ 100 billion in the next few years thereafter, with a stable trade policy regime.
• To diversify India’s export basket, destinations and boost high value and value added agricultural exports including focus on perishables.
• To promote novel, indigenous, organic, ethnic, traditional and non-traditional agri products exports.
• To provide an institutional mechanism for pursuing market access, tackling barriers and deal with sanitary and phyto-sanitary issues.
• To strive to double India’s share in world agri exports by integrating with global value chain at the earliest.
• Enable farmers to get benefit of export opportunities in overseas market.

The salient features of Government’s plan to promote exports of agricultural products are

(i) maintaining a long term, stable, and by-default ‘open’ export policy
(ii) effective handling of sanitary and phytosanitary standards (SPS) and technical barriers to trade (TBT) issues in domestic and destination markets
(iii) Creating cold chain and transport logistics

Table 8.1 Framework of Agri-exports policy

Strategic Policy measures
Infrastructure and Logistics Support
Holistic Approach to boost exports
Greater involvement of State Governments in Agri Exports
Operational Greater involvement of State Governments in Agri Exports
Promoting Value added exports
Marketing and promotion of “Brand India”
Attract private investments into production and processing
Establishment of Strong Quality Regimen
Research & Development

The government has identified clusters across the country for the promotion of agri-exports. For instance, six clusters have been identified in Maharashtra for grapes, mango, pomegranate, banana, oranges and onion. For successful implementation, FPO’s and co-operatives need to be linked with the farmers and exporters. Many countries in the Middle East region are open to investing in facilities like cold chain and warehousing in India for import of agro and processed food products.

Agriculture and horticulture production in India is estimated at around 600 million tonnes per year. But around 30% of fresh horticulture produce is wasted. It is necessary that this wastage is addressed, quality and health standards are adhered to and international markets are  actively explored.

As part of the policy, shrimps, meat, basmati & non-basmati rice, grapes, bananas, pomegranate, vegetables including potatoes, processed / value added products, cashew, plant parts/medicinal herbs in value added form, including herbal medicines, food based nutraceuticals, aromatics, spices (cumin, turmeric, pepper), ethnic & organic food have been identified as potential sectors.

The Government of India has identified 12 champion sectors for focused support to help them realise their potential. These include information technology & information technology enabled services (it & ites), tourism and hospitality services, medical value travel, transport and logistics services, accounting and finance services, audio visual services, legal services, communication services, construction and related engineering services, environmental services, financial services and education services.

A dedicated fund of Rs 5,000 crore has been proposed to support action plans for these sectors. The share of services in GVA was 53% in 2015-16 (61% including construction services). The government plans to raise it to 60% by 2022 (67% including construction services).

Subscribe To Newsletter

Get to know of latest happening in TPCI & in the world of trade and commerce