New trade policy is a departure from the past

The new trade policy announced by the Commerce Minister Ms Nirmala Sitharaman has certain new features compared to the previous ones.

First, the policy clubs both goods and service trade. This is for the first time that the Trade Policy makes a combined target. As per the new policy, the government aims to realize an export target of $900 billion by 2020.  

All existing incentives to the export sector has been put under two schemes –Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) for goods and services respectively.

Export incentives which are usually expressed as the duty or tax credits given to the exporters in terms of their export volume has been limited to three tiers – two percent, three percent and five percent.

Another major feature of the policy is it tries to make trade policy WTO combatable. Here, the export incentives should be limited to the WTO requirements.  Reduction of maximum duty credit to five percent is to meet the WTO norms.

Transferability of duty incentives is perhaps the most attractive one for exporters. This means an exporter can sell his duty credit like an import duty reduction right to some other person (for example to an importer). Another feature of the duty incentive flexibility is that the incentive can be used to exempt from any indirect taxes like customs and excise.

The policy extends the benefits of the two schemes MEIS and SEIS to Special Economic Zones also. Now, the SEZs will get more energy as export focusing infrastructure.

Another deviation in the new policy is that the government will come out with changes only in once- that is at two and a half years from now. This is a change from given the practice of long term EXIM Policies (Trade policies) since the launch of economic reforms. India is having long term EXIM Policies since the first one in 1985-88 and the first five year EXIM policy in 1992-97.

The combined export target of $900 billion for 2020 means doubling of export revenue realization as the present exports from goods and services exports is nearly $465 billion.


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