SECRETARIA DE INFRAESTRUCTURA, VIVIENDA Y MOVILIDAD INFRAESTRUCTURA

CURRENT FOREIGN TRADE POLICY OF INDIA Dr. R. G. Rasal

Head Dept. of Economics, Vice Principal, Padmashri Vikhe Patil College of Arts, Science and Commerce, Pravaranagar,Tal-Rahata, Dist-Ahmednagar , Maharashtra, (India)

Introduction: Foreign Trade Policy (FTP) is the set of guidelines or the procedures which are being formulated by the government to incorporate in the economy and being followed so as to attain maximum amount of Foreign Trade. Due to uneven distribution of natural resources and the theory of comparative cost, some countries are more suitable place to produce some goods more economically than other countries which encourages foreign trade. Policies enacted by the government sector of a domestic economy to discourage imports from, and encourage exports to, the foreign sector. The three most common foreign trade policies are tariffs, import quotas, and export subsidies. Tariffs and import quotas are designed to discourage imports and export subsidies are designed to encourage exports. The general goal of these foreign trade policies is to create or increase a country's balance of trade surplus, that is, to increase net exports. By increasing net exports (and creating a more "favorable" balance of trade), the domestic production of a nation increases, which then increases domestic income and employment. While foreign trade policies can be beneficial to the aggregate domestic economy they tend to be most beneficial, and thus most commonly promoted by, domestic firms facing competition from foreign imports. Domestic firms benefit with higher sales, greater profits, and more income to resource owners. However, by increasing domestic prices and restricting accessing to imports, foreign trade policies also tend to be harmful to domestic consumers.

The Meaning of Foreign Trade: Foreign trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries. All countries need goods and services to satisfy wants of their people. Production of goods and services requires resources. Every country has only limited resources. No country can produce all the goods and services that it requires. It has to buy from other countries what it cannot produce or can produce less than its requirements. Prior to the 1991 economic liberalization, India was a closed economy due to the average tariffs exceeding 200 percent and the extensive quantitative restrictions on imports. Foreign investment was strictly restricted to only allow Indian ownership of businesses. Since the liberalization, India's economy has improved mainly due to increased foreign trade

Foreign Trade Policy 2015-20: FTP2015-20. introduces two new schemes, namely ―Merchandise Exports from India Scheme (MEIS)‖ for export of specified goods to specified markets and ―Services Exports from India Scheme (SEIS)‖ for increasing exports of notified services, in place of a plethora of schemes earlier, with different conditions for eligibility and usage. There would be no conditionality attached to any scrips issued under these schemes. Duty credit scrips issued under MEIS and SEIS and the goods imported against these scrips are fully transferable. For grant of rewards under MEIS, the countries have been categorized into 3 Groups, whereas the rates of rewards under MEIS range from 2% to 5%. Under SEIS the selected Services would be rewarded at the rates of 3% and 5%. Measures have been adopted to nudge procurement of capital goods from indigenous manufacturers under the EPCG scheme by reducing specific export obligation to 75% of the normal export obligation. This will promote the domestic capital goods manufacturing industry. Such flexibilities will help exporters to develop their productive capacities for both local and global consumption. Measures have been taken to give a boost to

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exports of defense and hi-tech items. At the same time e-Commerce exports of handloom products, books/periodicals, leather footwear, toys and customized fashion garments through courier or foreign post office would also be able to get benefit of MEIS (for values upto 25,000 INR). These measures would not only capitalize on India's strength in these areas and increase exports but also provide employment. Commerce Minister stated that although exports from SEZs had seen phenomenal growth, significantly higher than the overall export growth of the country, in recent times they had been facing several challenges. In order to give a boost to exports from SEZs, government has now decided to extend benefits of both the reward schemes (MEIS and SEIS) to units located in SEZs. It is hoped that this measure will give a new impetus to development and growth of SEZs in the country. Trade facilitation and enhancing the ease of doing business are the other major focus areas in this new FTP. One of the major objective of new FTP is to move towards paperless working in 24x7 environment. Recently, the government has reduced the number of mandatory documents required for exports and imports to three, which is comparable with international benchmarks. Now, a facility has been created to upload documents in exporter/importer profile and the exporters will not be required to submit documents repeatedly. Attention has also been paid to simplify various ‗Aayat Niryat‘ Forms, bringing in clarity in different provisions, removing ambiguities and enhancing electronic governance. Manufacturers, who are also status holders, will now be enabled to self certify their manufactured goods in phases, as originating from India with a view to qualifying for preferential treatment under various forms of bilateral and regional trade agreements. This ―Approved Exporter System‖ will help these manufacturer exporters considerably in getting fast access to international markets. A number of steps have been taken for encouraging manufacturing and exports under 100% EOU/EHTP/STPI/BTP Schemes. The steps include a fast track clearance facility for these units, permitting them to share infrastructure facilities, permitting inter unit transfer of goods and services, permitting them to set up warehouses near the port of export and to use duty free equipment for training purposes. Considering the strategic significance of small and medium scale enterprise in the manufacturing sector and in employment generation, ‗MSME clusters‘ 108 have been identified for focused interventions to boost exports. Accordingly, ‗Niryat Bandhu Scheme‘ has been galvanized and repositioned to achieve the objectives of ‗Skill India‘. Outreach activities will be organized in a structured way at these clusters with the help of EPCs and other willing ―Industry Partners‖ and ―Knowledge Partners‖.

Objectives of Foreign Trade Policy (2015-20)

Goals and objectives are specified in para 43 of the "Vision, Mission & Objectives" in the executive summary. It states the following: The FTP for 2015-20 seeks to achieve the following:-

1) To provide a stable and sustainable policy environment for foreign trade in merchandise and services; ii) To link rules, procedures and incentives for exports and imports with other initiatives such as "Make in India", Digital India and Skill India to create an ‗Export Promotion Mission‘ for India;

iii) To promote the diversification of India‘s export by helping various sectors of the Indian economy to gain global competitiveness with a view to promote exports;

iv) To create an architecture for India‘s global trade engagement with a view to expanding its markets and better integrating with major regions, thereby increasing the demand for India‘s product and contributing to the government‘s flagship "Make in India" initiative;

v) To provide a mechanism for regular appraisal in order to rationalise imports and reduce the trade imbalance.

Highlights of Foreign Trade Policy 2015-20:

The Foreign Trade Policy (FTP) 2015-20 was unveiled by Ms Nirmala Sitharaman, Minister of State for Commerce & Industry (Independent Charge), Government of India on April 1, 2015. Following are the highlights of the FTP:

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I. FTP 2015-20 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.

II. The Policy aims to enable India to respond to the challenges of the external environment, keeping in step with a rapidly evolving international trading architecture and make trade a major contributor to the country‘s economic growth and development.

III. FTP 2015-20 introduces two new schemes, namely ‗Merchandise Exports from India Scheme (MEIS)‘ for export of specified goods to specified markets and ‗Services Exports from India Scheme (SEIS)‘ for increasing exports of notified services.

IV. Duty credit scrips issued under MEIS and SEIS and the goods imported against these scrips are fully transferable.

V. For grant of rewards under MEIS, the countries have been categorized into 3 Groups, whereas the rates of rewards under MEIS range from 2 per cent to 5 per cent. Under SEIS the selected Services would be rewarded at the rates of 3 per cent and 5 per cent.

VI. Measures have been adopted to nudge procurement of capital goods from indigenous manufacturers under the EPCG scheme by reducing specific export obligation to 75per cent of the normal export obligation.

VII. Measures have been taken to give a boost to exports of defense and hi-tech items.

VIII. E-Commerce exports of handloom products, books/periodicals, leather footwear, toys and customised fashion garments through courier or foreign post office would also be able to get benefit of MEIS (for values up to INR 25,000).

IX. Manufacturers, who are also status holders, will now be able to self-certify their manufactured goods in phases, as originating from India with a view to qualifying for preferential treatment under various forms of bilateral and regional trade agreements. This ‗Approved Exporter System‘ will help manufacturer exporters considerably in getting fast access to international markets. X. A number of steps have been taken for encouraging manufacturing and exports under 100 per cent

EOU/EHTP/STPI/BTP Schemes. The steps include a fast track clearance facility for these units, permitting them to share infrastructure facilities, permitting inter unit transfer of goods and services, permitting them to set up warehouses near the port of export and to use duty free equipment for training purposes.

XI. 108 MSME clusters have been identified for focused interventions to boost exports. Accordingly, ‗Niryat Bandhu Scheme‘ has been galvanised and repositioned to achieve the objectives of ‗Skill India‘.

XII. Trade facilitation and enhancing the ease of doing business are the other major focus areas in this new FTP. One of the major objective of new FTP is to move towards paperless working in 24x7 environment.

Foreign Trade Policy 2015 – 2020: A step towards the “Make in India” initiative

The Foreign Trade Policy (FTP) 2015 – 2020 released by the Ministry of Industry and Commerce seeks to provide a stable and sustainable policy environment for export ofgoods and services. The Policy has been formulated to promote ‗Make In India‘ and ‗Digital India‘initiative of the Government of India.

The Policy revamped various export incentives available for export of goods and services under Chapter 3 of FTP and merged various schemes mainly into two schemes i.e. Service Exports from India Scheme and Merchandise Export from India Scheme.

Service Exports from India Scheme (SEIS)

I. The existing Served from India Scheme (SFIS) has been replaced with a new scheme called ―Service Exports from India Scheme‖.

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II. In order to avoid confusion, the Policy states that all service providers will be eligible for benefit under SEIS scheme; irrespective of the fact whether the service is provided under an Indian brand or an overseas brand.

III. The amount received in Indian Rupees for export of specified services will be deemed to be received in free foreign exchange and will be eligible for the benefits under SEIS scheme. This puts an end to the conflicting views taken by the authorities in cases where the export proceeds are received Indian Rupees.

IV. The duty credit scrip and goods imported under SEIS scheme will be freely transferable and there will be no restriction on the nature of goods that can be imported under the scheme, other than the prohibited goods.

V. The significant benefit to service industry is that: SEIS scrip can be used for payment of customs duty, excise duty and service tax. Furthermore, service tax and excise duty (including CVD) paid through SEIS scrip will also be eligible as CENVAT Credit to service provider. Thus, the service industry will now enjoy the tangible benefit under SEIS scheme, as opposed to the SFIS scheme, under which the benefit were only theoretical available to service industry.

VI. On the flip side, the entitlement under this scheme has been reduced from existing 10% to 3% - 5% of Net Foreign Exchange earned (NFE), which may negatively impact the bottom line of service industry especially capital intensive service sector (i.e. port/ infrastructure etc.).

VII. Earlier service provider providing services from its office located outside India was eligible for benefit under the SFIS scheme; however, such benefits now specifically stand withdrawn under the new regime.

Merchandise Export from India Scheme (MEIS).

For Merchandise exports, earlier there were five different schemes where there were different conditions attached to these schemes. Now there shall be a single scheme, namely Merchandise Export from India Scheme. The benefit under the MEIS shall however vary based on products, destination of goods etc. Under the existing EPCG Scheme, if import of goods is substituted by local procurement of goods, the export obligation would be reduced by 10%. In the revised policy, this benefit of reduction in export obligation has been increased from 10% to 25%. The Policy provides much needed clarity about the export incentive schemes and thereby reducing the potential litigations. On the other side, the new policy will have significant impact on the capital intensive export of services (e.g. port, infrastructure etc.) as their fiscal incentive will be reduced by fifty percent which may eventually push up the project cost. Conclusion: Foreign trade in India has been one of the most important determinants of economic development in India. A new Foreign Trade Policy gives a boost to make in India vision of the government. The focus of the policy is on building the India Brand and increasing share of Export Market of India, Exports infrastructure. It emphasized on „Make in India, Skill India, and Ease of Doing Business‟ and also provides the mechanism of review. It affirms consistent policy mechanism for five years with the review mechanism after two and half years. It aims at improving India‘s exports by providing ample working space to the exporters, through easing norms, doing away with redundant policies and reducing red tapism. The unveiling of trade facilitation measures, simplified procedures, reduced interface between the authorities and industry shall motivate the exporter to do the business with more vigor, in a more transparent environment. The new policy also encourages exploration of new markets and product diversification and is designed to complement the long term vision of the government of prioritizing the importance of trade for growth of Indian economy. The foreign trade policy pitches for increasing exports by connecting it to the objectives and vision of the Make-in-India initiative.

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REFERENCES

Bikky Khosla,„How to prevent exports downfall?‟ SME TIMES June 23, 2015

Chandrajit Banerjee, „FTP 2015-20: Pushing exports and imports in sync‟,Business Standard April 7, 2015 12:48 a.m.

Giri Pratibha (2017) ―Contribution of Foreign Trade Policy (2015-2020) in enhanching India‟s export competitiveness‖ International Journal of Trade and Global Business Perspectives (A Referred Quarterly Journal) April- June, 2017 ISSN: 2319-9059 (PRINT) ISSN: 2319-9067 (ONLINE).

Jayanta Roy, Pritam Banerjee and Ankur Mahanta (n.a), ―The Evolution of Indian Trade

Nayanima Basu, „New foreign trade policy to stress manufacturing exports‟,Business Standard, New Delhi March 28, 2015 Last Updated at 23:20 IST.

Ritesh Kumar Singh,„Exporters need more policy support‟, Business Line April 19, 2015.

Government to reintroduce interest subvention scheme to help SME exporters‟, SME Times News Bureau, July 18, 2015.

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Sadikshya Pandey (157-161)

FACTORS AFFECTING CUSTOMER LOYALTY IN INSURANCE COMPANIES OF