FOREIGN TRADE POLICY STATEMENT (2015-2020)
Dated 1st April, 2015
FOREIGN TRADE POLICY STATEMENT (2015-2020)
Dated 1st April, 2015
Foreign Trade Policy Statement
EXECUTIVE SUMMARY .
SECTION 1: INTRODUCTION AND BACKDROP .
The Global Economy .
India’s Trade Performance .
Dynamic Global Context .
Domestic Challenges: Setting Our House in Order .
Vision and Mission .
Goals and Objectives .
Anchoring Trade Policy in the Domestic Policy Framework .
Focus of the FTP .
The Multilateral Trading System and India .
The Mega Agreements: Implications for India .
SECTION II: MARKET STRATEGY .
North America .
Australia and New Zealand .
South Asia .
South-East Asia .
North East Asia .
The West Asia & North Africa Region .
Latin American and Caribbean region .
The CIS Region.
Impact and Utilisation of FTAs .
India’s Initiatives for LDCs .
SECTION III: PRODUCT STRATEGY .
Engineering Exports .
Medical Devices/Equipment .
Light Manufacturing Sectors: leather products and textiles .
Gems & Jewellery Sector .
Natural Resource Based Exports .
Agricultural Products .
Plantation Products .
Defence Products .
Hi Tech Products .
Exports by medium, small and micro enterprises .
SECTION IV: THE SERVICES SECTOR - AN AREA OF GREAT POTENTIAL .
SECTION V: TRADE PROMOTION & INFRASTRUCTURE .
Towards World Class Products .
Building the India Brand .
Institutional Mechanisms for Trade Promotion.
Project Exports .
Mainstreaming Trade .
Export Infrastructure .
Special Economic Zones .
SECTION VI: TRADE ECOSYSTEM .
Digitisation and E-governance .
Ease of Doing Business .
Trade Facilitation .
Reduction of Transaction Costs .
Trade Remedial Measures .
Export Development and Outreach .
Capacity Development .
Strengthening the Commercial Wings in Indian Missions Abroad .
Centre for Research in International Trade .
Institutional Mechanism for Communication .
Monitoring and Review .
Vision, Mission and Objectives
The Foreign Trade Policy Statement explains the vision, goals and objectives
underpinning the Foreign Trade Policy for the period 2015-2020.
the market and product strategy envisaged and the measures required not just
The vision is to make India a significant participant in world trade by the year
2020 and to enable the country to assume a position of leadership in the
international trade discourse. Government aims to increase India‟s exports of
merchandise and services from USD 465.9 billion in 2013-14 to approximately
USD 900 billion by 2019-20 and to raise India‟s share in world exports from 2
percent to 3.5 percent.
The FTP for 2015-2020 seeks to provide a stable and sustainable policy
procedures and incentives for exports and imports with other initiatives such as
„Make in India‟, „Digital India‟ and „Skills India‟ to create an „Export Promotion
Mission‟; promote the diversification of India‟s export basket by helping various
sectors of the Indian economy to gain global competitiveness; 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 products and contributing to the „Make in India‟ initiative;
and to provide a mechanism for regular appraisal in order to rationalise imports
and reduce the trade imbalance.
„Whole-of-Government‟ Approach & Role of State/UT Governments
Foreign trade today plays a significant part in India‟s economy, so much so that
foreign trade policy deserves a special focus and dedicated attention as a key
constituent of India‟s economic policies.
Foreign trade policy can neither be
formulated nor implemented by any one department in isolation.
forward, a „whole-of-government‟ approach will be required.
A major path breaking initiative taken by the Department of Commerce, which
can have far reaching benefits if properly executed, is to mainstream State and
Union Territory (UT) Governments and various Departments and Ministries of
the Government of India in the process of international trade.
Governments can play a crucial role in promoting exports and rationalising non-
Many of the State Governments have nominated Export
Governments to prepare export strategies. An Export Promotion Mission will be
Governments to boost India‟s exports. Senior officials have been appointed as
designated focal points for exports and imports in several Central Government
Addressing In-House Challenges
The state of the external environment undoubtedly will be crucial and new
features of the global trading landscape such as mega regional agreements
and global value chains will profoundly affect India‟s trade.
challenge, however, is to address constraints within the country such as
constraints in manufacturing and inadequate diversification in our services
exports. We have to address these issues anyway despite the external factors,
many of which are imponderables outside our control.
Making export promotion schemes more focused while rationalizing imports
Winners and potential winners have been identified separately from amongst
industrial and agricultural products in order to make the export promotion
schemes more focused and effective. At the same time, an institutional
mechanism for continuous import appraisal has been put in place to ensure
coordinated and rational import policies in various sectors.
The Multilateral Trading System and India
The need to ensure that the FTP is aligned with both India‟s interests in the
negotiations, as well its obligations and commitments under various WTO
Agreements has been an important consideration in framing this Policy.
In the ongoing Doha Round of trade negotiations, India will continue to work
towards fulfilling its objectives and to work with like-minded members to remove
any asymmetries in the multilateral trade rules which place a developing
country at a disadvantage, such as the rules relating to public stockholding for
food security purposes.
10. The current WTO rules as well as those under negotiation envisage the
eventual phasing out of export subsidies. This is a pointer to the direction that
fundamental systemic measures rather than incentives and subsidies alone.
The Mega Agreements: Implications for India
The three mega agreements that are currently being negotiated namely the
Trans Pacific Partnership, Trans-Atlantic Trade and Investment Partnership and
the Regional Comprehensive Economic Partnership (RCEP) add a completely
new dimension to the global trading system. India is a party to the RCEP
negotiations. The mega agreements are bound to challenge India‟s industry in
many ways, for instance, by eroding existing preferences for Indian products in
established traditional markets such as the US and EU and establishing a more
stringent and demanding framework of rules. Indian industry needs to gear up
to meet these challenges for which the Government will have to create an
12. India‟s future bilateral/regional trade engagements will be with regions and
countries that are not only promising markets but also major suppliers of critical
inputs and have complementarities with the Indian economy.
The focus of
India‟s future trade relationship with its traditional markets in the developed
world would be on exporting products with a higher value addition, supplying
high quality inputs for the manufacturing sector in these markets and optimizing
applied customs duties on inputs for India‟s manufacturing sector.
13. The US is one of India‟s top trading partners and now that the US is back on a
growth path, future bilateral trade prospects are bright. Employment-generating
sectors such as textiles, agriculture, leather and gems & jewellery will continue
to receive major attention for promoting exports to the US market.
aspects of the India-US economic relationship for India include access for our
high skilled professionals in US markets, and increased investment. Regular
dialogue with the US
to make India‟s perspective clear on issues such as
intellectual property rights, immigration policies of the US Government, labour
and skill related policies of the US Government, will also be a key part of the
India-US economic relationship. Canada and Mexico are other important
trading partners in North America.
14. In the European Union, which is a highly discerning market, our exporters face
standards, a complex system of quotas and tariffs and trade remedial actions
against Indian products. The EU is a significant market for India‟s information
technology services but remains underutilised because of the data security
related constraints posed by EU regulations.
Increasingly, we will focus our
construction material, processed foods, as also services. Some of the non-EU
countries are promising markets for project exports from India and also offer
viable investment opportunities for Indian firms.
15. There is considerable scope to widen and deepen India‟s economic relations
with both Australia and New Zealand, underpinned by trade and investment
Cooperation/Partnership Agreements with both countries.
16. India‟s trade relations with its immediate neighbours in South Asia are a special
focus area for the government, with a larger goal of building regional value
chains in different sectors such as textiles, engineering goods, chemicals,
pharmaceuticals, auto components, plastic and leather products. An added
advantage of such integration will be an expanded role for North East India in
regional trade with its consequent development outcomes. A better connected
South Asia can provide additional trade routes to South East Asia and Central
17. Another focus area is South-East Asia. Trade integration with the CLMV
(Cambodia, Lao PDR, Myanmar and Vietnam) countries is an important part of
India‟s future regional trade strategy and the implementation of the Budget
2015-16 announcement of a Project Development Company to enable the
Indian private sector to set up manufacturing hubs in this region, will be actively
18. India‟s most important trading partner amongst the countries of North East Asia
is China. Engagement with China requires a comprehensive approach on trade,
investment and economic cooperation issues. India will,
, continue to
pursue market access issues and removal of Non-tariff Barriers on India‟s
exports of pharmaceuticals and agro commodities, seek to obtain market
access for Indian IT Services and encourage other service sectors such as
tourism, film and entertainment; and seek Chinese investment in boosting
India‟s manufacturing capacities, while remaining vigilant against any unfair
trade practices. Efforts to intensify outreach work on bilateral trade agreements
with Japan and Korea will also be an important element of India‟s engagement
in North-East Asia.
19. There is enormous untapped potential for enhancing India‟s economic relations
with the African continent, encompassing not just trade and investment but also
capacity development, technical assistance and provision of services such as
healthcare and education. Agro-processing, manufacturing, mining, textiles,
FMCG, infrastructure development and construction are highly promising areas
for Indian companies. India is engaging actively with countries and regional
groupings in Africa for trade agreements, project exports and capacity building
20. The West Asia & North Africa Region is a dynamically growing region with
concomitantly high absorptive capacity for exports and deserves greater focus.
India is negotiating two FTAs in the region, with Israel and with the six countries
comprising the Gulf Cooperation Council.
The plan for greater engagement with the Latin American and Caribbean region
arrangements as well as new ties. Efforts will also be made to diversify India‟s
exports to the region and to encourage project exports through easy access to
credit facilities. Another promising area to be explored is the potential for large-
scale farming by Indian companies/individuals in this region.
22. India‟s economic engagement
(Commonwealth of Independent States) region, except Russia, has been much
below its potential.
Therefore the focus of action should be to promote
International North South Transport Corridor; to promote export of products of
India‟s strength and to help facilitate investments in some of these countries to
build value chains, for example, in the pharmaceutical sector. The Indian
diamond industry stands to benefit from the Special Notified Zones proposed
for consignment import and export of rough diamonds.
Impact and Utilisation of FTAs
23. Signing an FTA is the beginning, not the end of the process. Recognising that it
is important to review whether the concessions under these agreements are
being gainfully utilised and have resulted in meaningful market access gains,
an „Impact Analysis‟ of FTAs has been instituted. Further, it is necessary to
simplify and ease rules of origin criteria to position India effectively in global and
regional value chains. The likelihood of duty inversions will continue to be
closely monitored to ensure that industry is not put to any disadvantage. A
system for capturing preferential data will be put in place at the earliest.
24. The lack of information about India‟s FTAs is a common complaint. To address
this, an intensive FTA outreach programme has been launched. In addition,
information has been provided on the website of the Department of Commerce,
including FAQs and a web portal on FTAs has been developed.
Initiatives for LDCs
India is committed to helping LDCs in various ways such as duty concessions,
capacity building, development assistance in specific sectors and market
access for products and services. Initiatives already taken include a Duty Free
Tariff Preference Scheme for LDCs; preferential treatment for LDCs in the
Services sector, technical assistance for the cotton sector in six African
countries and various other capacity-building initiatives.
26. The focus will be on promoting exports of high value products with a strong
domestic manufacturing base, including engineering goods, electronics, drugs
and pharmaceuticals. The challenges posed to the pharmaceuticals sector by
NTBs in Japan and regulatory hurdles in China have to be addressed.
and trace policy for all exports of medicinal products will be effective from 1
A composite programme for promotion of healthcare products and
services will be conducted in various regions to showcase and market India‟s
Other sectors which require special attention, in light of India‟s strengths and
their contribution to employment generation, are leather, textiles, gems and
jewellery and the sectors based on natural resources, which include agriculture,
plantations, enabling a less controlled regime for agriculture and aiming at
greater value addition and processing would help to increase the value of
exports from these sectors.
Export strategies for processed agricultural exports
and organic product exports will shortly be ready.
The North-Eastern States
are a special focus area for organic product exports.
A number of steps to
address the challenges faced by the plantations sector are on the anvil.
Further, Government aims to encourage and promote hi-tech products and, as
a first step, certain products have been identified for a special focus for the
duration of the policy. The potential of the MSME sector, the problems it faces
and its requirements have been kept in view while framing the FTP.
The Services Sector
29. The Services sector is an area of great potential.
The Department of
Commerce is working on an ambitious reform agenda, which is being pursued
through an inter-ministerial mechanism. Efforts will be made to gain effective
agreements with important markets.
A Global Exhibition on Services will be
held annually, which will provide a forum for showcasing India‟s strengths in the
Services sector. Efforts are also underway to improve the availability of data on
Towards World Class Products
30. Government is committed to transforming India into a manufacturing and
exporting hub. This is possible only if India‟s products are of world class
standard. A roadmap has been developed on measures required to protect
consumers, raise the quality of the merchandise produced and enhance India‟s
capacity to export to even the most discerning markets.
Building the India Brand
A long term branding strategy has been conceptualised to enable India to hold
its own in a highly competitive global environment and to ensure that „Brand
branding and commercialisation
Geographical Indications and to promote their exports will be initiated within
one year of this policy coming into force.
Institutional Mechanisms for Trade Promotion
The schemes for trade promotion under the Department of Commerce, namely,
the Market Access Initiative (MAI) Scheme and the Market Development
Assistance Scheme will continue. The present allocation for the MAI scheme is
inadequate; efforts will be made to augment resources for the scheme.
conventions in all major tier 1 and tier 2 States.
A major convention-cum-
exhibition centre will be developed at Pragati Maidan in Delhi replacing the
Export Promotion Councils are being strengthened, both
in terms of technical capabilities and management structures.
Project exports will be encouraged in a big way, especially in the emerging
markets with high infrastructure needs, through special lines of credit offered by
the Ministry of External Affairs
and the Buyers‟ Credit Scheme of
Department of Commerce through Exim Bank of India. This will,
enable Indian businesses to develop long term business relationships, facilitate
easier acceptance of India‟s exports and build visibility for Indian products.
infrastructure gaps through the ASIDE (Assistance to States for Developing
Export Infrastructure and Allied Activities) Scheme.
In the Budget for 2015-16,
the allocation for the ASIDE scheme has been severely curtailed in pursuance
Consequently, the ASIDE scheme would need to be restructured and, if
necessary, a new programme for supporting infrastructure development will
have to be formulated.
Special Economic Zones need to be strengthened. Restoring tax benefits is of
The Department of Commerce will take action to make
SEZs more competitive and better placed for manufacturing and services
As a first step, the FTP includes specific measures to revitalise SEZs.
Several initiatives are underway or in the pipeline for the simplification of
procedures and digitization of various processes involved in trade transactions.
Steps are being taken by various Ministries and Departments to simplify
recommendations of two Task Forces constituted by the Directorate General of
Foreign Trade. The implementation of these recommendations is being actively
37. India is committed to implementing the WTO‟s Trade Facilitation Agreement
(TFA). A National Committee on Trade Facilitation is being constituted for
domestic coordination and implementation of the TFA.
Specific measures will be taken to facilitate the entry of new entrepreneurs and
manufacturers in global trade through extensive training programmes.
Niryat Bandhu scheme will be revamped to achieve these objectives and also
further dovetailed with the ongoing outreach programmes.
Capacity development efforts will focus on EPCs and commercial missions. A
new institution, namely, the Centre for Research in International Trade, is being
established not only to strengthen India‟s research capabilities in the area of
international trade, but also to enable developing countries to articulate their
views and concerns from a well-informed position of strength.
Institutional Mechanisms for Communication, Monitoring and Review
40. Two institutional mechanisms are being put in place for regular communication
with stakeholders, namely, a Board of Trade which will have an advisory role
representation from State and UT Governments.
41. The FTP will be reviewed and evaluated at regular intervals.
SECTION 1: INTRODUCTION AND BACKDROP
India‟s Foreign Trade Policy (FTP) has, conventionally, been formulated for five
years at a time and reviewed annually. The focus of the FTP has been to provide a
framework of rules and procedures for exports and imports and a set of incentives
for promoting exports.
Fifteen years ago India occupied a very small space on the global trade
As various sectors of the Indian economy became more competitive
globally, exports began to grow remarkably. India‟s merchandise exports recorded a
Compound Annual Growth Rate (CAGR) of 15.9 percent over the period 2004-05 to
2013-14. Similarly, as the economic growth rate of the country picked up, so did
imports, which grew at a CAGR of 16.8 percent over the same period.
Today, foreign trade has begun to play a significant part in the Indian
economy reflecting its increasing globalisation.
At the same time, the growing
merchandise trade deficit, resulting in a persistently high current account deficit, has
set alarm bells ringing.
This policy, therefore, aims at promoting exports along with
making imports more focussed and rational.
The trade performance of a country is so closely and inextricably linked with
its overall economic performance that trade policy cannot be treated as a simple
matter of manoeuvring the export or import of a product. Foreign trade policy has a
direct connect with domestic economic policies.
Exports constitute the last segment of long sectoral value chains.
trade policy that addresses only the front-end of exports without recognising the
characteristics of the back-end is incomplete and, likely to be unworkable.
same time, the development of an appropriate ecosystem for the front-end can
create a pull effect for the sector in question. In each case, action lies in several
departments and stakeholder institutions. The biggest challenge, therefore,
properly anchor the elements of the foreign trade policy in the overall economic
policy and to ensure that the framework of rules, procedures and incentives for trade
is contextualised within a composite approach to economic development.
Government of India has, in the last few months, initiated several measures to
re-energise the economy particularly through initiatives such as “Make in India”,
“Digital India”, “Skills India” etc.
As these initiatives start showing results, India will
become more competitive in several product areas which would, in turn, open up
better export prospects.
The FTP for 2015-2020, therefore, endeavours to build synergies with such
initiatives necessitating, thereby, a “whole-of-Government” approach to foreign trade
policy. It first describes a vision with its attendant goals and objectives followed by
the strategies and actions identified as necessary to achieve that vision, and, finally,
sets out a framework of incentives.
The Global Economy
The Update of the World Economic Outlook (WEO) released in January 2015
by the IMF
puts global growth projection for 2015 at 3.5 percent and at 3.7 percent
Global growth will receive a boost from lower oil prices - a result mainly of
higher supply – but while the recovery in the United States was stronger than
expected, economic performance in all other major economies, particularly Japan,
fell short of expectations. The euro area growth projections are weaker and Japan is
in recession. In emerging market and developing economies, growth is projected to
remain broadly stable at 4.3 percent in 2015 and to increase to 4.7 percent in 2016.
According to the Update, slower growth in China will
have important regional
effects, which partly explains the downward revisions to growth in much of emerging
Asia. The growth forecast for India is broadly unchanged, with weaker external
demand expected to be offset by the boost to the terms of trade from lower oil prices
and a pickup in industrial and investment activity after policy reforms.
forecasts a world trade growth of 3.1 percent in 2014 and 4.0
percent in 2015. The WTO reports that Asia recorded the fastest export growth of
any region in the first half of 2014, with a 4.2 percent rise over the same period last
year. It was followed by North America (3.3 percent), Europe (1.2 percent), South
and Central America (-0.8 percent), and Other regions
(-2.0 percent). North America
led all regions on the import side with a growth of 3.0 percent, followed by Asia (2.1
percent), Europe (1.9 percent), Other regions (-0.4 percent) and South America (-3.4
Presenting a robustly optimistic outlook for India‟s growth, the Economic
Survey 2014-15 lists the factors that will boost growth, namely, reforms undertaken
or planned by the government, declining oil prices and increasing monetary easing
facilitated by the moderation in inflation, leading, in turn, to greater household
spending and a reduction in the debt burden of firms and finally forecasts of a normal
At the same time, however, the Survey of 2013-14 had identified certain
structural constraints on growth, which include a low manufacturing base and
inadequacy of required skills; these also impact India‟s export performance.
India’s Trade Performance
Despite the global slowdown, India‟s merchandise exports increased from
USD 83.5 billion in 2004-05 to USD 314.4 billion in 2013-14.
The cumulative value of imports in 2013-14 was USD 450.1 billion as against
USD 490.7 billion during the previous year registering a decline of 8.3 percent.
Coupled with the moderate growth in exports, this resulted in a decline in India‟s
trade deficit from USD 190.3 billion in 2012-13 to USD 137 billion in 2013-14,
contributing to a lower Current Account Deficit (CAD).
India‟s two-way merchandise trade crossed USD 760 billion in 2013-14 or
44.1 percent of the GDP.
If services trade is added, India‟s trade reached nearly
World Economic Outlook Update
, January 2015
World Trade Organization (2014),
World Trade 2013, Prospects for 2014
, Press Release Press/722, 23
Other regions comprise Africa, Commonwealth of Independent States and Middle East.
Economic Survey, 2014-15, Vol. I, Chapter 1
USD 1 trillion.
This has been achieved despite the global contraction and is
indicative of India‟s resilience and increasing integration with the global economy.
Chart 1: India's Foreign Trade
(in USD billion)
According to the WTO, in merchandise trade, India was the 19
exporter in the world with a share of 1.7 percent and the 12
largest importer with a
share of 2.5 percent in 2013.
In commercial services, India was the 6
exporter in the world with a share of 3.2 percent and the 9
largest importer with a
share of 2.8 percent.
Table 1: India’s Share in Global Trade
(Figures in USD billion)
India‟s Exports of Merchandise
India‟s Imports of Merchandise
India‟s Exports of Commercial Services
India‟s Imports of Commercial Services
Source: WTO’s World Trade Report, 2014
Both external and domestic factors have posed a challenge to export growth
fluctuations and non-tariff barriers imposed by India‟s trading partners and
competitiveness in many product areas. The inherent limitations of manufacturing in
India, the lack of diversity and focused efforts on services exports, the under
achievement of the potential of SEZs, high transaction costs, high cost of trade
finance and infrastructural bottlenecks are the domestic challenges to be overcome.
The heavy dependence on imports of essential commodities including crude oil, gas,
coal, pulses, edible oils, fertilizers and electronics has kept India‟s trade deficit at a
While there has been a gradual shift in India‟s exports away from the
advanced economies of the European Union and North America, the United States
of America continues to be the topmost destination for India‟s exports with a share of
12.4 percent in 2013-14 followed by the United Arab Emirates (9.7 percent) and
China (4.7 percent) in 2013-14 .The IMF WEO update presents a mixed picture for
these key markets for India‟s exports.
Chart 2: India's Export Destinations
Dynamic Global Context
Change has been a constant in the global economy, not least in the
international trading landscape. Industrial country growth rates have slowed but the
US is back on a growth path, a development which has enormous implications for
global trade, given the size of the US economy. As brought out by the IMF, the
slowdown in China will have important regional effects. Developments in these two
countries, both top trading partners of India, will have significant repercussions on
Global value chains (GVCs) are a prominent feature of the international trade
landscape today. Intermediate goods and services from several countries are
combined through integrated production networks to produce the final goods and
India participates in manufacturing GVCs,
, in sectors such as
Chemicals, Electrical Equipment and Jewellery, in general by way of sourcing
intermediates from abroad. India also has a high participation in services sectors, in
particular, business services, mainly driven by the use of Indian intermediates in the
exports of other countries. The share of imported inputs and intermediate goods in
exports is higher in mining, textiles, machinery, and services sectors such as
distribution, transport and telecom.
sub-optimal connectivity with global
requirements that cause long delays at
ports and customs, are some of the serious
obstacles to participation by Indian producers in GVCs. In all these areas, they are at
a disadvantage as compared to producers in the ASEAN countries and East Asia.
For India to successfully integrate into value chains – regional or global – we
need to strengthen trade-related physical infrastructure, implement an appropriate
regulatory regime for transport services, improve efficiency and predictability in
border procedures, undertake policy reforms in logistics services markets (logistics
quality and competence, tracing and tracking etc.) and reduce coordination failures -
especially those of public agencies active in border control - facilitate imports of parts
and components by,
, optimising tariff policy, enhance design capabilities
within the country and address issues relating to our rules of origin. Also required is
an enabling environment for industry to be able to both scale up and scale down
their operations in response to demand.
Mega-regional trading arrangements are the other new features of the
international trading landscape with the potential to bring about enormous changes
in world trade dynamics, given their coverage and scope. They go well beyond trade
in goods and services into areas such as investment, competition (including state-
procurement, transparency, regulatory coherence and dispute settlement.
The Economic Survey 2014-15 describes another challenge in the trading
environment i.e. the decline in the buoyancy of Indian exports with respect to world
growth. In other words, not only do we have to contend with a slowdown in world
growth which will reduce Indian exports; but also, for any given world growth, export
growth will be even lower because of the
declining responsiveness of trade.
A key macro-economic variable critical to competitiveness and prospects for
export growth is the exchange rate.
There are two aspects that merit particular
First, if the nominal exchange rate stays steady and the rate of inflation in
India is higher than that in the rest of the world (as has been the case for the last
decade) the real exchange rate appreciates.
The competitiveness of exports is
eroded by the effective exchange rate appreciation of the rupee.
And, for exporters,
this exchange rate is, in effect, entirely exogenous viz. it is an outcome of fiscal and
monetary policies over which they have no control.
Secondly, the last 7 to 8 years
have witnessed the phenomenon of Quantitative Easing (QE).
increase in money supply has meant that dollars (from the QE in the US)
sought higher rates of return in markets outside.
This, in turn, resulted in real
exchange rate appreciation in many emerging markets.
Leading economists have
referred to this as a “beggar thy neighbour” policy because QE works by artificially
depreciating the currency where the QE is undertaken vis-à-vis other currencies.
The ECB has recently announced QE for Europe.
The Euro has already depreciated
The adverse implications on Indian exporters‟ competitiveness are
Macroeconomic adjustments that affect either the nominal exchange rate or the real
exchange rate will have a significant impact on the realization of export goals.
past years it has been seen that the influx of foreign currencies and regulatory action
have led to an erosion of competitiveness.
The realization of FTP objectives will
clearly require some intervention at appropriate junctures if the exchange rate turns
excessively volatile and/or displays a trend of steady appreciation.
Domestic Challenges: Setting Our House in Order
The changing dynamics will profoundly affect India‟s trade and we will have to
grapple with important questions in the near future around issues such as whether or
India should integrate into new forms of trading arrangements and the pace and
extent of such integration.
Be that as it may, the biggest challenges that
India‟s foreign trade faces today are from within the
There will always be external challenges but
there is no gainsaying the fact that without addressing
the challenges that lie within the country, we cannot
possibly tackle the external ones effectively.
window of opportunity to set its house in order and face
the challenges thrown up by an ever changing global
Studies show that
products exported by
products have been losing their competitiveness. This
has been attributed to mainly two kinds of reasons. The
first kind relates to the state of infrastructure, factor
policies, ease of doing business, facilitation at the
borders and the system of taxation.
The other reasons are that:
India is relatively less integrated into regional
and global supply chains;
Existing trade architecture has not been used to
its full potential; and
There is relatively less focus on value-added
arrangements for positioning Indian products at
Long-term interventions are needed to address
many of these inadequacies. But there are also short
and medium term measures that can improve foreign
Many of these would be in the
domain of multiple departments and institutions in the
This policy therefore attempts to mainstream
exports and imports into overall and sector-specific
Vision and Mission
Policy for 2015-2020 is to make India a significant
participant in world trade by the year 2020 and to
enable the country to assume a position of leadership
in the international trade discourse.
Strong trade relations will help India to forge
stronger relationships in its immediate neighbourhood
Box 1: Some Findings of a Study
by the Centre for WTO Studies
important in the process of
trade. Internet use in India
inflating the final price of the
exported product and making
it less price competitive.
Indian exporters significantly.
harmonization of the indirect
tax regime of the country will
reduce the cost of production
thereby making Indian trade
(iii) Labour regulations play a
critical role in determining the
trade and investment climate
Government and some State
laws must be taken to their
logical conclusion in order to
which will, in turn, contribute
and in new directions, both bilaterally as well as through regional forums.
The policy of market diversification which has stood India in good stead during
the global economic downturn will continue to be a key determinant of the country‟s
trade policy, together with product diversification.
High quality products are their own best advertisement. Recognising the
increasing role of standards in global trade and the steps India needs to take both to
strengthen its own standards as well as to meet the challenges posed to its exports,
a roadmap has been developed on measures required to protect consumers, raise
the quality of the merchandise produced and greatly enhance India‟s capacity to
export to discerning markets.
The increasing challenge of Non-Tariff Measures (NTMs) used by various
countries cannot be wished away. India will have to adopt a multi-pronged strategy
to deal with NTMs and to increase overseas market access.
Equally, there is a need
to put in place measures to keep out sub-standard products by strengthening
monitoring and surveillance systems.
Further, in an increasingly competitive world, branding plays an indispensable
role in global positioning and the FTP addresses this issue as well. Branding
campaigns are being planned for promoting exports from sectors such as services,
services in which India has traditional strengths, such as handicrafts and yoga.
Efforts at the operational level include the simplification of procedures and
digitization of various processes.
Specific measures will be taken to facilitate the
entry of new entrepreneurs and manufacturers in global trade through extensive
While the Government of India is responsible for policy on foreign trade, much
of the activity at the ground level takes place in the States.
State Governments can
play a crucial role in promoting exports and
rationalising non-essential imports.
international obligations and this consideration has fully informed the Policy.
Goals and Objectives
A vision is best achieved through measurable targets. Government aims to
increase India‟s exports of merchandise and services from USD 465.9 billion in
2013-14 to approximately USD 900 billion by 2019-20 and to raise India‟s share in
world exports from 2 percent to 3.5 percent.
The FTP for 2015-2020 seeks to achieve the following objectives:
To provide a stable and sustainable policy environment for foreign trade in
merchandise and services;
To link rules, procedures and incentives for exports and imports with other
initiatives such as „Make in India‟, „Digital India‟ and „Skills India‟ to create an
„Export Promotion Mission‟ for India;
To promote the diversification of India‟s export basket by helping various
sectors of the Indian economy to gain global competitiveness with a view to
(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
government‟s flagship „Make in India‟ initiative;
To provide a mechanism for regular appraisal in order to rationalise imports and
reduce the trade imbalance.
What must be done
In order to achieve these objectives, the way forward requires measures to:
Help improve India‟s export competitiveness and deepen engagements with
Operationalise institutional mechanisms in existing bilateral and regional trade
Deepen and widen the export basket;
Reduce transaction costs;
Make efforts to reduce the cost of export credit;
Promote product standards, packaging and branding of Indian products;
Rationalise tax incidence - introduce the Goods and Services Tax (GST);
Help improve manufacturing by mainstreaming exports;
Incentivise potential winners for promising markets;
and diversify Services Exports; and
Mainstream States and Ministries in India‟s Export Strategy.
These measures cut across several Departments and Ministries of the
Government of India and also State Governments. The success of trade policy is
critically dependent on the coordinated efforts of the Government of India as a whole
as well as State Governments.
Anchoring Trade Policy in the Domestic Policy Framework
There is a symbiotic relationship between the FTP and the government‟s
„Make in India‟ initiative. The „Make in India‟ initiative aims to achieve global
recognition for the
destination, spur manufacturing and promote employment. It encompasses initiatives
for skill development to ensure the availability of skilled manpower for manufacturing,
to improve the ease of doing business through initiatives such as self-certification of
documents and innovative revenue models. It also envisages the development of
infrastructure including i-ways besides highways, ports, optical fibre networks, gas
grids and water grids.
There is a clear recognition within Government that exports should not merely
be a function of marketable surplus but should reflect a genuine enhancement of
economic capacity and development. Through its foreign trade policy, government
generation of foreign trade opportunities
Zero defect products with a focus on quality and standards;
A stable agricultural trade policy encouraging the import of raw material where
required and export of processed products;
A focus on higher value addition and technology infusion;
Investment in agriculture overseas to produce raw material for the Indian
Lower tariffs on inputs and raw materials; and
Development of trade infrastructure and provision of production and export
Focus of the FTP
The Foreign Trade Policy is primarily focused on accelerating exports. This is
sought to be implemented through various schemes intended to exempt and remit
indirect taxes on inputs physically incorporated in the export product, import capital
goods at concessional duty, stimulate services exports and focus on specific markets
and products. The Policy attempts to dovetail these schemes with the specific
market access openings that India has achieved through negotiations with its trading
partners for various bilateral and regional trading arrangements.
In order to make these schemes more focused and effective, an exercise was
undertaken to identify products that are winners and potential winners for export
purposes, based on their price competiveness, the CAGR of India‟s exports and
world imports and RCA
and areas of strength, both now and in the future. These
have been identified separately from amongst industrial and agricultural products.
Further, in order to realise the objective of exporting more value-added goods,
technology intensive sectors have also been identified for hand-holding by the
Government in the next five years.
Striking a balance between meeting the needs of a growing economy and the
promotion of domestic industry is a continuous challenge for policy makers.
institutional mechanism for continuous import appraisal would provide valuable
inputs for economic policy in general and trade policy in particular. A mechanism has
been put in place by the Department of Commerce for quarterly appraisal of imports.
The 21 stakeholder Ministries/Departments which have been identified have been
advised to probe into the need for importing various commodities and the feasibility
of producing them in a cost effective way. The objective is to develop an ecosystem
conducive to formulating coordinated and rational import policies in various sectors.
Revealed Comparative Advantage
India‟s simple average applied and bound MFN tariff rates are indicated in
Table 2 below. The applied rates are much lower than the bound rates especially in
autonomous tariff liberalization. Apart from the occasional adjustment in the tariffs on
some agricultural commodities in the face of high volatility in food prices, in most
cases tariffs have been reduced rather than raised and have generally been
continued at the lower levels.
Tariff policy will be optimized in order to take advantage of the manufacturing
opportunities offered by regional and global value chains, while retaining the policy
space to protect domestic industry.
Table 2: Simple Average of MFN Tariffs
*As per the definition of agricultural products in the WTO‟s Agreement on Agriculture
Source: WTO Trade Profiles 2014
The Multilateral Trading System and India
India, a founding member of the World Trade Organization (WTO), believes
that a rules-based, non-discriminatory multilateral trading system is necessary for
bringing transparency, equity and fair play into global trade relations.
Such a system
ensures discipline and enables members at all levels of development to chart out a
course in global trade that would meet their economic development requirements.
developing country. The consensus-based decision making in the WTO ensures that
even the voice of the smallest Members is heard.
India also recognizes the extraordinary contribution made by the WTO in
dispute settlement, laying down jurisprudence in areas where the law was relatively
ambiguous or not fully developed.
As a founding member, and a country which has evolved significantly since
the WTO was established, India will continue to contribute to the capacities of willing
developing members to help them to fully participate in the rule making process.
The need to ensure that the FTP is aligned with both India‟s interests in the
Agreements, has been an important consideration in framing this Policy.
The Doha Development Agenda
developments and update the relevant rules, the fact is that there are glaring
asymmetries in the capacities of WTO members to participate in and benefit from
international trade. Therefore, while India will endeavour to work towards new areas
of rulemaking in the WTO, at the same time, it will continue to work towards fulfilling
its objectives through negotiations under the Doha Round.
It is well recognized that various Uruguay Round Agreements which form the
covered agreements under the Marrakesh Agreement contain several asymmetries.
One such asymmetry is in the methodology prescribed in the Agreement on
for estimating trade-distorting support on account of procurement at
administered prices for public stocks of food.
India took up this issue with likeminded
members through the G-33 coalition of developing countries and the group has been
able to persuade the WTO membership
to agree to negotiate a permanent solution
to this problem. India will intensively work towards getting a consensus on a
permanent solution at an early date and will continue to work with like-minded
members to remove such asymmetries which place a developing country at a
Phasing out Export Subsidies
The Agreement on Subsidies and the Countervailing Measures of the WTO
envisages the eventual phasing out of export subsidies. In the case of India, some
sectors may be affected and would require rationalisation of support over a period of
time. The phasing out and eventual elimination of agricultural export subsidies is also
one of the key elements of the Doha Development Agenda.
This is a pointer to the direction that export promotion efforts will have to take
in future, i.e. towards the more fundamental measures detailed in earlier sections
rather than incentives and subsidies alone.
The Mega Agreements: Implications for India
The three mega agreements that are currently being negotiated namely the
Trans Pacific Partnership (TPP), Trans Atlantic Trade and Investment Partnership
(TTIP) and the Regional Comprehensive Economic Partnership (RCEP) add a
completely new dimension to the global trading architecture. The 49 participants in
these mega agreements are significant economies both in terms of trade volumes
and GDP. Statistics indicate that these countries account for nearly 3/4
trade and 4/5
of the global GDP.
There is an overlap of participating countries in the three mega agreements.
While the United States is common to the TPP and TTIP, 7 countries, namely,
Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam are part of
both the TPP and RCEP.
India is engaged in the RCEP negotiations which is a comprehensive free
trade agreement between the 10 ASEAN Member States
and ASEAN‟s FTA (Free
Trade Agreement) partners viz. Australia, China, India, Japan, Korea and New
The 16 RCEP countries cover around 49 percent of world population, 30
percent of global GDP and 29 percent of global trade.
development in the of global trade architecture.
These agreements are perceived by
some as consequences of the stalemate in the WTO or due to the unique process of
decision making in the multilateral institution while others perceive it as a natural
progression of ambitions on the part of major players in the WTO.
commitment to the processes and substance of the WTO remains firm, it must also
recognize the emerging challenges from the mega agreements under negotiation.
These agreements create a significant layer in the global trade architecture for
preferential trading among prominent members of the WTO.
They also reflect the
high ambitions of the participating members in rule making.
Tariff reduction is no
more a major challenge for these countries.
Therefore, rules harmonization,
achieving coherence, and removal of non-tariff barriers, are the major tasks that
these negotiations intend to address.
Among the 3 agreements, the TPP seems to be at the most advanced stage
On account of its position on several matters dictated by the stage
of its social and economic development, India cannot be a party to either of these
But they are bound to challenge India‟s industry in many ways.
will erode existing preferences for Indian products in established traditional
markets such as the US and EU benefitting those who are partners to these
Secondly, they are likely to develop a rules architecture which will
place a greater burden of compliance on India‟s manufacturing and services
standards for access to the markets of the participating countries.
challenges should be treated as an opportunity to respond strategically and to
persuade Indian industry to rise to the challenge of higher standards both in the area
of products and services, and the framework of rules.
Therefore, the Government
will work towards facilitating Indian industry to do so.
The RCEP negotiations are on
They are scheduled to
conclude by the end of 2015.
This is an ambitious
Parties to these negotiations are
engaged in serious discussions, round
after round, on issues of modalities and the extent of liberalisation.
continue to engage in these negotiations in the right spirit of concluding them in time
while taking into account the interest of its business and industry.
SECTION II: MARKET STRATEGY
In order to put exports on a high growth trajectory,
India needs a
diversification strategy based on the changing dynamics of growth in the world
economy. So far India‟s bilateral trade engagement has been mainly with the
industrial powers or driven by multiple considerations. In future engagements, India
will engage with regions and countries that are not only promising markets but are
also major suppliers of critical inputs and have complementarities with the Indian
permanent features of the global trading architecture. As per WTO statistics there
were 398 Regional Trade Agreements (RTAs) in force as of January 2015, covering
both goods and services.
RTAs have clearly become the rule rather than the
India has been actively engaging in regional and bilateral trade negotiations
with a view to diversifying and expanding the markets for its exports as well as
ensuring access to raw materials, intermediates and capital goods for stimulating
value added domestic manufacturing.
RTAs are an important means to take advantage of
tariff reduction, address non-tariff barriers, facilitate the
integration of the economy into global value chains and
potential growth sectors. With the declining role of tariffs,
non-tariff barriers, including TBT
increasingly becoming more crucial and
RTAs provide a
potentially effective tool to address such measures.
The need to attract foreign investment for boosting
manufacturing and increasing competitiveness, thereby
Partnership Agreements (CEPAs).
India has, so far, signed 11 FTAs and 5 limited
Preferential Trade Agreements (PTAs) and is negotiating
17 FTAs, including the expansion of some of the existing
Recognising the complementarity between India
and Peru; and between India and the Customs Union of
Belarus, Kazakistan and the Russian Federation, two Joint
Study Groups have been established to recommend the
approach and process for RTAs with these countries.
The focus of India‟s future trade relationship with its
traditional markets in the developed world would be to:
Increase, or at least, retain market share in these markets;
Move up the value chain in these markets (this in turn, would provide an
manufacturing and service delivery);
Optimise applied customs duties in order to enable the import of inputs for
India‟s manufacturing sector; and to
Supply high quality inputs for the manufacturing sector in these markets.
Latin America and Africa are the new growth frontiers. South-East Asia is a
melting pot of diverse cultures that is a focus area under India‟s “
North East Asia, the Middle East, and the Commonwealth of Independent States
(CIS) are relatively less traversed territories for Indian trade and offer considerable
The United States of America is the most important market for India in this
In terms of statistics, it is the largest export destination for India.
14, 12.5 percent of India‟s total exports were destined for the US.
The size of
Technical Barriers to Trade
Sanitary and Phytosanitary Measures
Box 2: FTA Nomenclature
Preferential Trade Agreements
Agreements (FTAs), Regional
The basic difference is in the
CECA / CEPA
/ BTIA covering an integrated
Goods (both tariffs and non
Property etc while the more
traditional FTAs are limited to
trade in goods.
bilateral trade stood at approximately USD 62 billion for merchandise goods.
significant contribution of information technology services would raise the overall
exports to USA to approximately USD 100 billion.
The US is one of the most
prominent traditional markets for India‟s products and services and has helped
Indian producers in evolving their capacities both in merchandise and services
products standards, technology, processes, etc.
The recent macroeconomic data
clearly shows that the US economy is doing well with a growth rate of 3.1 percent
The US will therefore continue to be the sheet anchor of India‟s exports.
Enhancing trade and investment linkages with the US economy offers India a unique
opportunity for finding markets for its technology products and services and products
from high-employment creating sectors such as textiles, agriculture, leather and
gems & jewellery.
Therefore, these sectors will continue to receive major attention
for accessing the US market.
At the same time there are challenges relating to area
such as intellectual property rights, immigration policies of the US Government,
labour and skill related policies of the US Government.
Therefore, while on the one
hand, the focus will be on promoting Indian exports in identified sectors, on the other
hand, regular dialogue will be held with the US stakeholders
in order to make
India‟s perspective on these issues clear.
Important aspects of the India-US economic relationship for India include
access for our high skilled professionals in US markets and resolution of the issue
relating to social security contributions by Indian workers in the US, through the early
conclusion of a Totalisation Agreement between the two countries.
Bilateral investment is a prominent tool
the bouquet of instruments of
economic engagement between the two countries.
With focus on „Make in India‟,
simplification and further opening up of investment policies and a focus on sector
specific efforts for attracting investment, it is expected that investment flows will
Targeted investments will make a significant contribution to
the improvement of trade performance.
One of the factors with implications for India-US trade ties is the outcome of
Preferences) Program, which expired in July 2013.
India‟s bilateral trade with Canada is at present USD 5.2 billion.
significant potential for this bilateral trade to grow.
There is complementarity
between several sectors of the two countries. Bilateral negotiations are underway for
The plan is to conclude the FTA negotiations by the end of this year.
expected that this agreement will offer significant trading opportunities to India‟s
employment creating sectors besides the services sector including information
sensitive area for India), its position on certain
principles of market access
services and India‟s concerns on percolation of commitments upto sub-federal
levels in Canada, are some of the challenges in these negotiations.
Mexico is a major market for India.
At USD 5.9 billion bilateral trade, it has
the potential to grow significantly.
Mexico is the destination for an array of products
Mexico‟s participation in NAFTA, along with Canada, creates a rules
framework that may be difficult to comply with. However, the potential of this market
underscores the need for a closer look at it.
The European Union
The European Union (EU), as a regional bloc, is India‟s largest trading
partner. India‟s total merchandise trade with the EU has increased fivefold from USD
21 billion in 2000 to USD 101 billion in 2014.
The EU is a highly discerning market.
It presents several challenges in the
area of sanitary and phytosanitary standards and technical standards, complex
systems of quotas and tariffs and trade remedial actions against Indian products.
The EU‟s practice of constantly evolving its sanitary and phytosanitary standards and
is a major challenge and raises the bar for exports from developing
While India‟s merchandise exports in some sectors are very well integrated
with the EU market, there is significant potential for growth in many of the
employment creating sectors.
There is also high potential for growth of exports in
technology areas such as automobiles, auto components, engineering products and
Therefore, the EU continues to be an
been the beneficiary of the GSP in some sectors.
However, some of these sectors
have now been excluded from the EU GSP list adversely impacting India‟s market
access for these products.
The EU is also a significant market for India‟s information technology services
but India has not been able to adequately harness the potential because of the data
security related constraints thrown up by EU regulations.
While large Indian
companies can respond to EU‟s data security framework, smaller companies find it
impossible to access the EU market.
India‟s skilled professionals find the EU regime
for movement of natural persons for services delivery highly discomforting, and
expensive. India‟s services particularly in the IT and ITES sector have contributed to
the competitiveness of several US businesses.
A similar approach is available to the
EU companies if these challenges are appropriately addressed.
An India-EU Broadbased Trade and Investment Agreement (BTIA) has been
under negotiation for several years.
India has made the most liberal offer so far
made to any of its trading partners.
sides have reached
on many issues.
However, some areas still remain outstanding.
India is an
emerging economy with several policy and legislative matters still under evolution.
Therefore India‟s approach has been incremental rather than one off.
state of the European economy is also a challenge in these negotiations.
India is negotiating a TEPA
with the EFTA
countries. In the next 5 years, our
Hungary, Slovak Republic, Poland)
and other non-EU countries in Europe, which will
Trade and Economic Partnership Agreement
Iceland, Norway, Switzerland and Leichtenstein
machinery, leather and organic chemicals. Increasingly, we will focus our trade
promotion activities on new products with higher value addition particularly in the
processed foods, as also services.
These regions hold out potential for project exports from India in several
sectors. Given the challenges of their demographics, high cost of manufacturing and
lack of capital, local entrepreneurs would naturally look for potential collaborations
with India. Studies on trade and investment in the region have concluded that there
are several viable investment opportunities for Indian companies.
Australia and New Zealand
88. There is considerable scope to both widen and deepen India‟s economic
relations with Australia, underpinned by trade and, more importantly, investment
linkages. India and Australia have a strong and mutually beneficial partnership in the
energy and minerals sector. Australia is an important source of six crucial inputs,
namely, iron ore, coking coal, copper, gold, uranium and LNG.
It is noteworthy that
all of Australia‟s primary exports are received in India at a zero tariff or very low tariff.
There is significant potential for Australia to scale up investment in India, in
areas including cold chains, mega food parks, bio-tech projects, the marine sector,
infrastructure, clean and renewable energy, engineering and manufacturing sectors,
and pharmaceuticals, apart from mining and energy related projects.
India and Australia are negotiating a Comprehensive Economic Cooperation
Agreement (CECA) covering trade in goods, services, investment and related issues.
A traditional approach aimed primarily at enhanced market access would neither be
acceptable domestically nor would it do justice to the multi-faceted nature of the
economic relationship between the two countries. The possibility of a fresh approach
guided by trade,
investment and sectoral cooperation objectives is being explored.
New Zealand is a participating country in the RCEP negotiations.
New Zealand are also pursuing bilateral negotiations for a CEPA.
New Zealand is a
globally recognized source of dairy and dairy products.
It is also an important source
of some fruits,
lamb meat and wool.
Some of these product areas are highly
sensitive in India as regards imports.
An approach similar to the one proposed for
Australia should be considered for New Zealand also.
India‟s trade relations with its immediate neighbours are a special focus area
for the government. During the last decade, India's total trade with SAARC countries
increased from USD 5.6 billion in 2004-05 to nearly USD 20 billion in 2013-14.
During the five-year period of 2009-10 to 2013-14, exports grew at a CAGR of 20.2
percent, while imports grew at a CAGR of 10.5 percent. Bangladesh is India's largest
trading partner in the SAARC followed by Sri Lanka, Nepal and Pakistan.
responsibilities in the region in order to promote greater regional and economic
It already provides zero duty market access to all Least Developed
Countries (LDCs) of SAARC, for
all tariff lines, except 25 lines of liquor and tobacco.
This measure is already helping them to reduce their trade deficits with India.
India has kept 88 percent of tariff lines outside the SAFTA
Sensitive List for
non-LDC members. India also provides significant trade access to Sri Lanka under a
separate bilateral India-Sri Lanka Free Trade Agreement. These measures have led
to a fair degree of integration of the economies in the region with the Indian
India‟s approach in this region has been to enlarge the canvas for economic
engagement by including services, investments and several other non-tariff areas.
South Asia should be visualised as one large economic entity which can take part as
a seamless whole in regional and global production networks. South Asia contributes
substantially to global demand and, therefore, it is only fitting that it plays a greater
role in regional economic decision making.
India-Sri Lanka trade is mostly conducted under a bilateral FTA.
Agreement a few years ago. The CEPA is aimed at building bilateral value chains
services and investment on both sides. The agreement could not be
made effective due to certain reservations on the part of Sri Lanka, expressed after
the negotiations were completed.
The operationalisation of SAFTA with respect to trade with Pakistan has been
constrained by Pakistan‟s unique approach to trade with India under the SAFTA
Not only do they maintain a legitimate sensitive list under SAFTA but
they also have a negative list of 1209 products at 6-digit level which cannot be
exported from India to Pakistan.
The two countries had agreed to a roadmap for
normalisation of relations in 2012 but this roadmap has not been acted upon due to
continued reservations expressed by Pakistan.
Several studies have shown that
because of this, consumers in Pakistan have been deprived of affordable, good
quality Indian products or made to pay more for Indian products which reach there
through circumvention of route. India will await action on the part of Pakistan in
accordance with the agreed roadmap.
While several socio economic and political concerns have affected economic
integration within South Asia, often what some of India‟s trading partners in the
region term as NTBs are, in fact, their own supply side constraints.
India, as in the
past, will always be prepared to help through technical assistance, and capacity
development in strengthening infrastructure and human resource capacity at least for
99. After tariff liberalisation, Government proposes to focus on improvement of trade
infrastructure in the region. The aim is to provide seamless connectivity for trade and
commerce within the SAARC region. These measures would help in building
regional value chains in different sectors such as textiles, engineering goods,
chemicals, pharmaceuticals, auto components, plastic and leather products. An
added advantage of such integration will be an expanded role for North East India in
South Asian Free Trade Area
regional trade with its consequent development outcomes. A better connected South
Asia can provide additional trade routes to South East Asia and Central Asia.
In order to encourage regional integration within South Asia, India will:
Prepare a 5-year plan for South Asian integration by identifying specific value
chains which will include textiles, leather, tourism, automotive components,
chemicals and healthcare;
under the SAFTA Trade In
Agreement with a view to concluding it at the earliest.
This will open up a
pathway for services-related liberalisation within the region which will, in turn,
make South Asia more competitive in many product areas;
Help our South Asian trading partners, particularly the LDCs, to develop their
technical regulatory framework including infrastructure to respond to the
requirements of the growing Indian market and work towards creating a
Regional Standards Regime;
Intensify efforts at infrastructure development at the borders;
Promote multimodal connectivity including inland waterways in order to
realise the vision of a seamless South Asia;
Work towards concluding SAARC Agreements on promotion and protection of
and also for
Intensify efforts at utilization of hydro power potential in the region; and
Promote project exports to South Asian partners.
India‟s exports to Iran have increased two-fold in the last couple of years.
This has been facilitated by the Rupee-Riyal payment mechanism and supported by
the complementarities between the two economies.
The potential for bilateral trade,
however, has not even been scratched on the surface.
Given the significant complementarities between the two economies, project
exports to Iran hold out a lot of promise and need to be adequately supported.
Keeping in view the long-term potential of
project exports to Iran especially in the
railways sector, an umbrella financing agreement for rupee credit has been signed
between EXIM Bank of India and Iranian banks. The financing will be on commercial
terms and in rupees. For the designated project export contracts, rupee financing
would be offered through the Export Development Fund being operated through
103. The Rupee-Riyal mechanism has stabilized and is now showing results.
will continue to strengthen this mechanism for long term results.
Bilateral trade in
pharmaceuticals, automobiles and auto components will be encouraged.
promotion activities will be further intensified. An institutional mechanism for regular
interaction will be set up to review, evaluate and monitor bilateral trade.
institutional opportunities will also be explored.
of the „Look East‟ policy, which has been a major pillar of the
country‟s foreign policy since the early 1990s, India has developed multi-faceted
relationship with ASEAN
countries both bilaterally and multilaterally. Taking this to
the logical next phase, the „Act East‟ policy of the Government of India endeavours
to cultivate wide-ranging economic and strategic relations in South-East Asia.
India‟s trade with ASEAN was USD 74.6 billion in 2013-14 and accounts for
about 10 percent of India‟s total trade. ASEAN, as a bloc, has become one of India's
largest trading partners in recent years. India‟s four major trading partners from
ASEAN are Singapore, Indonesia, Malaysia and Thailand, accounting for more than
80 percent of India‟s trade with ASEAN.
The ASEAN-India Trade in Goods Agreement, which was signed in Bangkok
on 13 August 2009, entered into force on 1 January 2010. The ASEAN-India
Agreement on Trade in Services and Investment was concluded in 2014 and will
become operational from 1 July 2015. It provides business certainty to service
providers from both India and ASEAN countries and is expected to strengthen
business and commercial relations between ASEAN and India.
It will also open up
opportunities of movement of both manpower and investments between India and
became operational from 1 August 2005. The second review of this CECA is
underway. A Comprehensive Economic Cooperation Agreement was signed with
Malaysia on 18 February 2011. A Comprehensive Free Trade Agreement is being
negotiated with Thailand.
Enhancing bilateral and regional trade relations with this rapidly growing
region of strategic importance will continue to be a focus area. Trade integration with
the CLMV (Cambodia, Lao PDR, Myanmar, Vietnam) countries is an important part
of India‟s future regional trade strategy. These are among the fastest growing
economies in the ASEAN region, with rising consumption levels, a young workforce,
a potentially strong manufacturing sector and rich natural resources, offering India
significant opportunities for trade in goods and services, investment and project
exports. Three of the CLMV countries benefit from India‟s zero-tariff regime for LDCs.
However, so far the scope of engagement by Indian firms with CLMV
countries remains limited. Seamless connectivity with this region will help in the flow
of goods, services and manpower and enable Indian industry to create forward and
backward linkages with the existing production networks in this region.
110. The CLMV region also
for Indian investment
to benefitting from
architecture and lower factor costs.
It was announced in the Budget 2015-16 that in
order to catalyze investments from the Indian private sector in this region, a Project
Development Company will, through a Special Purpose Vehicle (SPV), set up
manufacturing hubs in the CLMV countries. This policy will vigorously pursue the
follow up action to this decision.
ASEAN (Association of South East Asian Nations) comprises 10 countries namely Brunei Darussalam,
Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.
Connecting India’s North-East Region with ASEAN: A Trilateral Highway
Connectivity with ASEAN is one of the strategic priorities of India, one of the
two Dialogue Partners that share land and maritime boundaries with ASEAN. Four
North-Eastern States of India, namely, Arunachal Pradesh, Nagaland, Mizoram and
Manipur share borders with Myanmar. We have recently started a shipping service to
Myanmar for boosting sea connectivity.
112. The single biggest effort under the ASEAN-India Connectivity initiative is the
India-Myanmar-Thailand Trilateral Highway, which also constitutes
part of the
proposed Asian Highway network AH-1. It starts from Moreh (Manipur) in India and
ends at Mae Sot in Thailand, passing through Mandalay and Yangon in Myanmar.
On completion, the project will provide complete land connectivity between
governments are also considering extending the highway further to Cambodia, Laos
and Vietnam. This connectivity will augment trade by reducing travel distance and
time thus enabling the economies of ASEAN and India to integrate further and
implementation of ongoing connectivity projects in the region is strongly required.
In addition a task force is also discussing the text of the Agreement for
Facilitation of Cross Border Transport of Goods and People between the countries
so that the soft connectivity component is also in place by the time the hard
connectivity gets established in the region.
North East Asia
115. Accounting for over 16 percent of India‟s total trade, North East Asia is
important for India and includes China, a major trading partner. India‟s trade with the
North East Asia region, comprising China, Japan, Hong Kong, Taiwan, The Republic
of Korea, the Democratic People‟s Republic of Korea, Macao and Mongolia, stood at
USD 125.1 billion in 2013-14. Trade with China (USD 65.9 billion), Hong Kong (USD
20.1 billion), Japan (USD 16.3 billion) and Korea (USD 16.6 billion) constitute the
major chunk of India‟s trade volumes with this region. India has Comprehensive
Economic Partnership Agreements with the Republic of Korea and Japan.
116. Three countries of this region, namely, China, Republic of Korea and Japan are
participants in the RCEP negotiations. Japan is part of the group of countries
negotiating the Trans-Pacific Partnership Agreement, which the Republic of Korea
also wants to join. A characteristic common to India‟s trade relations with these three
a high trade deficit.
China accounts for over a quarter of our trade deficit
. India‟s imports include
manufactured items in both „non-essential‟ categories and capital goods in sectors
such as Power and Telecom. Market access and non-tariff barriers block India‟s
exports of pharmaceuticals, IT& ITES
, agro commodities etc. India‟s IT Services
are unable to make a breakthrough in China‟s highly controlled and, at times,
opaque SOE (State Owned Enterprises) business.
If the current situation persists, by 2016-17, merchandise imports from China
will exceed USD 80 billion while India‟s exports will be around USD 20 billion leaving
India‟s trade deficit with China stood at USD 36 billion in 2013-14
Information Technology and Information Technology Enabled Services
an unsustainable trade deficit of USD 60 billion. Despite hope offered by Chinese
agencies, real market access has not yet materialized.
As far as India‟s economic relations with the Republic of Korea and Japan are
concerned, analysis indicates that the projected gains for India from the CEPAs with
these two countries have not materialised to the extent expected.
investment and economic cooperation issues. India recognises China‟s position as a
competitive supplier in many product areas and its exporting interest in many areas
of industrial manufacturing in India. Specifically, India will:
Continue to pursue market access issues and removal of Non-tariff Barriers to
augment exports of pharmaceuticals, agro commodities, including bovine
meat, oil meals and cake, tobacco, rice, fruits & vegetables etc and seek tariff
concessions in specific product lines of interest to India. through forums such
as APTA and RCEP;
Seek to open China‟s SOE Services sector for Indian IT Services and
encourage other service sectors such as tourism, film and entertainment to
reach their full potential;
Seek Chinese investment in boosting India‟s manufacturing capacities –
Industrial Parks, SEZs, and NIMZs
etc. An MOU for Industrial Parks has
been signed with China;
Operationalise the Five-Year Development Program for Economic and Trade
Cooperation that lays out a roadmap for comprehensively deepening and
balancing bilateral economic engagement; and
Remain vigilant and take action to safeguard against unfair trade practices to
protect the legitimate trade interests of Indian industry.
While on the one hand, the Japanese market has not seen
growth in the
product areas of India‟s interest, Indian business entities are facing problems in
These problems can be briefly said to be arising out of language
constraints faced by Indian companies in Japan, highly demanding product and
service standards, regulations which require business modalities making market
access a costly venture, and a relative lack of intensive effort on the part of Indian
India‟s trade and investment relationship with Japan is unique in nature.
Japan is India‟s largest investment partner.
Several ongoing initiatives in this
direction are likely to increase Japanese investment in India.
Indian business would
therefore have the option of taking part in this process of investment generated
The other route of access of India‟s export sectors into Japan will require
language proficiency, negotiating a simplified framework for market access and
continuous trade promotion efforts on the part of businesses and the Government.
The Government will, therefore, run special programmes for trade promotion in
Japan in identified sectors such as textiles, garments, information technology
services, pharmaceuticals, leather products and agro processed products.
India has not been able to utilise the bilateral agreement to the extent
National Investment and Manufacturing Zones
Therefore one of the major efforts will be to intensify outreach work on
bilateral trade agreements with Japan and Korea.
relations with the African continent, encompassing not just trade and investment but
also capacity development, technical assistance and provision of services such as
healthcare and education. India shares several commonalities with the countries in
this region in terms of high economic growth rates, large domestic markets, a young
demographic profile and abundant natural resources.
development and construction, to name a few, can offer huge potential to Indian
Against the backdrop of an uncertain global economic recovery, Africa‟s
macroeconomic prospects remain favourable. According to the African Economic
, Africa maintained an average growth rate of about 4 percent in
2013, while the global economy grew at 3 percent underscoring again the continent‟s
resilience to global and regional headwinds. The Outlook projects that growth for the
continent as a whole could return to 5-6 percent in 2015, a level last seen before the
onset of the 2009 global recession.
The India-Africa trade and investment relationship has been increasingly
vibrant in recent years. The share of Africa in India's total exports was 9.7 percent in
The government lays great emphasis on institution building in Africa in order
to promote the sustainability of the relationship. India has already stepped up its
assistance in Africa and intends to further increase aid-for-trade assistance in the
coming years. The private sector both in Africa and in India see India's development
assistance as having a comparative advantage in many services sectors, including
, education, vocational skills development, health and financial services.
agriculture, in Africa, is another means to build productive capacity and generate
employment there while bringing about greater integration between the major African
economies and India. Greater cooperation in agriculture and agro-processing would
also contribute to food security in both Africa and India.
A small but significant step taken by India is a 3-year technical assistance
programme for the cotton sector which is underway for 6 African countries and is in
the final year of implementation. The response to this programme has been
extremely positive and the government is looking to expand this programme both in
terms of its scope and coverage. Further, there is tremendous scope for India to help
African countries especially LDCs to augment their capacity in international trade
policy and law as well as to provide sector-specific training for expanding trade.
Fast-moving Consumer Goods
African Development Bank Group, OECD Development Centre and UNDP (2014),
African Economic Outlook
Book_African_Economic_Outlook_2014.pdf on 26.10.2014
Information and Communications Technology
21 LDCs from Africa have signed on to India‟s Duty Free Tariff Preference
(DFTP) Scheme for LDCs. This can make a significant contribution in boosting
exports from these countries to India provided of course that they have adequate
productive capacities. This latter aspect also needs to be addressed if India‟s
engagement with Africa is to be developed in a holistic manner.
In the WTO, India has been working closely with the African countries on
development issues, through platforms such as the Friends of Development Group
and the G-33 coalition of developing countries. The strong support provided by the
ACP (African-Caribbean-Pacific) Group and the Africa Group has helped in bringing
to the fore issues such as special and differential treatment for developing countries
and the need to correct anomalies in rules such as those relating to public
stockholding for food security purposes.
Given the synergies between what India and Africa have to offer to each other
and what they need, there are strong reasons to work together to establish regional
value chains and production networks.
Ongoing Initiatives/Future Focus
India is engaging actively with countries and regional groupings in Africa
although presently, India does not have any trade agreements with countries in the
Negotiations need to be pursued to finalise a PTA with the South African
Customs Union (SACU)
are underway to
(COMESA) and the Economic Community of West African States (ECOWAS).
A product-based export plan for Africa is under preparation also covering the
institutional mechanisms to be set up for greater interaction with these
countries for expansion of trade.
In this emerging market of the future with high infrastructure needs, there is a
strong case for promoting India‟s project exports. There is also considerable
potential for India to provide many skill based services in Africa, including
healthcare, educational, professional, R&D, and consultancy services.
of these services can be exported in different modes.
India can provide
distance education for students abroad and establish off-shore campuses of
Indian universities. We also have advantages in various services and R&D
which can enhance the efficiency of manufacturing.
Capacity building is another area in which India can contribute. Ongoing
activities which are to be completed or extended include the India Africa
Institute of Foreign Trade in Kampala, Uganda on which work is in progress,
the India Africa Diamond Institute to be established in Botswana and the India
Development. They will continue to receive intensive attention.
India‟s engagement with the region in areas relating to trade policy evolution
has been significant.
Though not appropriately structured at times, India has
contributed to the institutional process in Africa, in specific sectors dealing with laws
and policies (for example, in the area of Intellectual Property laws).
training programmes and through the mechanism of WTO promoted institutional
processes, India has engaged with African partners in a wide area of policies.
India-Africa Forum Summit and the Trade Ministers Conclave during the Summit
a major institutional platform for this regular engagement.
also ensure that the engagement continues to evolve further and provide well
identified streams of cooperation in sectors and other relevant areas with a view to
building a long term sustainable bilateral trade relationship.
The West Asia & North Africa Region
India‟s total trade with the 18 countries in the West Asia and North Africa
has increased at a rapid pace in recent years and stood at USD
191 billion during 2013-14 (about 25 percent of India‟s total trade with the world).
India‟s total exports to the WANA countries in 2013-14 stood at USD 61.8 billion
(19.6 percent of India‟s total exports to the world). At USD 129.2 billion, imports from
the WANA region accounted for 28.7 percent of India‟s total imports from the world in
The United Arab Emirates (UAE) ranked first among the destinations for
India‟s exports in the WANA region and among the GCC countries (and second
overall, after the US in 2013-14). The other major destinations in the WANA region
include Saudi Arabia, Israel, Oman and Egypt. The UAE is a major entry point for
Indian products transiting to other markets in the region.
The growth has been
impressive clearly indicating the demand for Indian products in this region.
mechanisms of Joint Commissions have offered institutional frameworks for pursuing
They need further strengthening to maintain a long term
sustainable trade relationship.
A greater focus on trade promotion efforts in this
region, is desirable.
This is a dynamically growing region with concomitantly high absorptive
capacity for exports. Our ability to diversify exports to the region has been a
significant factor in keeping India‟s foreign trade growing even during the most
severe phase of the global economic downturn. This region deserves greater focus
in our trade policy, factoring in, of course, the effect of lower oil prices on the oil
exporting countries of this region. India is negotiating two FTAs in the region, with
Israel and with the six countries comprising the Gulf Cooperation Council.
Latin American and Caribbean region
India‟s relations with the Latin American and Caribbean (LAC) region are
underpinned by strong trade and investment links which have strengthened and
deepened in a short span of time.
This region, comprising 33 sovereign countries
and 7 overseas territories, is rich in natural resources and also has vast tracts of
India‟s total merchandise trade with the region stood at USD 38 billion in
2013-14 accounting for 5 percent of India‟s total global trade. The rising importance
of the LAC region in India‟s global trade is evidenced by the increase in the region‟s
Six Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United
(ii) Six West Asian countries (Iraq, Israel, Jordan, Lebanon, Yemen and Syria); and
(iii) Six North African countries (Algeria, Egypt, Libya, Morocco, Sudan and Tunisia).
share in India‟s global exports from 1.7 percent in 2001-02 to 4.5 percent in 2012-13
and in imports from 1.8 percent in 2001-02 to 5.6 percent in 2012-13.
Brazil is India‟s major trade partner in the region. Brazil and India are both
members of BRICS, IBSA and the G20.
India‟s other important trading partners in
the region are Venezuela, Argentina, Chile, Columbia and Peru. India‟s export
basket, except in respect of Brazil, is largely dominated by commodities such as
crude oil, iron ore, copper, sugar, soya, cereals etc.
India has a Preferential Trade Agreement with MERCOSUR (a trading block
of Argentina, Brazil, Paraguay, Venezuela and Uruguay) which was signed on 25
January 2004 and
came into operation from 1 June 2009. In 2006 it was agreed to
expand this agreement by enhancing both the number of products covered and tariff
concessions offered. The process of expansion of the India-MERCOSUR bilateral
agreement has remained a non-starter.
The MERCOSUR region itself has been
going through some churning.
The fact that it has some of the most significant
markets of Latin America, makes this region quite important.
widening of the India-MERCOSUR PTA is an important
part of the agenda for this
The India-Chile PTA is in the final stages of expansion.
Chile is a promising
market and expansion of this agreement will help in broadening India‟s export
Peru and Colombia form part of a regional economic group known as the
„Pacific Alliance‟ which comprises, in addition, Mexico and Chile.
India has been
officially accepted as an „Observer member‟ of the Pacific Alliance in February 2014.
The Global System of Trade Preferences (GSTP) also encompasses some countries
from this region. As and when the Sao Paulo Round of GSTP negotiations is ratified
by some countries in Latin America, it would provide greater market access for India
and its partners.
From the energy security point of view, the region is already ranked third in
terms of supply of crude oil to India at over 12 million metric tons annually.
discovery of new oil fields in Brazil, Venezuela, Columbia and shale gas in
investment opportunities in this part of the world.
From the food security point of
view, the region offers excellent opportunities for large-scale farming and most of the
produce could be re-exported to India.
Further, the LAC region can be an excellent
source of minerals for India‟s growing industry. Airline and shipping connectivity
issues with the region also need to be addressed in order to reap the full benefit of
this growing trade relationship.
The plan for greater engagement with this region envisages:
Efforts to diversify India‟s exports to the region in the future;
Expansion of India-MERCOSUR PTA;
Strengthening trade and investment linkages with the Pacific Alliance;
Conclusion of the expansion of the India-Chile PTA;
BRICS: the acronym for an association of five major emerging national economies, namely, Brazil, Russia,
India, China and South Africa.
IBSA: acronym for a grouping of India, Brazil and South Africa
Initiation of a
Joint Study on a proposed India-Peru FTA.;
companies/individuals with a view to augmenting India‟s food security
programme as well as playing a greater role in global agriculture trade.
Encouraging project exports in the LAC region through easy access to
Intensifying trade promotion programme to encourage and support Indian
exporters to export to Latin American countries;
Extending help in setting up warehousing facilities in Latin America to
make our exports more competitive by overcoming distance and time
Continuing to explore possibilities for new regional trading arrangements
in Central America and Caribbean Region.
The CIS Region
Trade between India and the CIS (Commonwealth of Independent States)
region - which
countries, namely, Kazakhstan,
Uzbekistan, Kyrgyzstan, Tajikistan, Russia, Georgia, Azerbaijan, Armenia, Ukraine,
Belarus and Moldova - has increased by about 45 percent in the last five years.
Russia and Ukraine are India‟s major trading partners in this region, accounting for
approximately 81 percent of India‟s total bilateral trade with the CIS region.
The CIS region offers enormous market potential given its strong GDP, high
per capita incomes and economic growth rates, the size of the region‟s population,
and the abundance of natural resources such as petroleum, coal, natural gas,
complementarity with India‟s manufacturing sector.
Invigorating trade and investment ties with Russia is a focus area of the
government. India‟s trade with Russia (USD 6 billion in 2013-14), a member of the
WTO since 2012 and a BRICS partner, remains surprisingly small.
There are several complementarities between the two sides and scope to
pharmaceuticals, fertilizers, diamonds, coking coal, agro products, textiles and
Some of the impediments faced by exporters in trading with Russia include
underdeveloped trade infrastructure, onerous regulatory requirements, complex and
time-consuming customs procedures, the requirement for the exporter to bear the
cost of obtaining import licences, product-specific approvals and even for pre-
shipment inspection, frequent changes in laws, decrees and regulations, complicated
rules for certification of products and banking and finance issues. In addition, Indian
exporters face various non-tariff barriers in their trade with Russia such as stringent
sanitary and phytosanitary standards on bovine meat, egg products, oilseeds and
non-basmati rice. The Indian pharmaceutical industry also faces similar barriers in
exporting to Russia.
The Joint Statement issued on the occasion of the visit of the President of the
Russian Federation to India in December 2014 recognizes the enormous untapped
governments to identifying measures to facilitate the full realization of this potential
such as encouraging payments in national currencies.
It also sets a target of USD
30 billion for bilateral trade in goods and services to be achieved by 2025.
Diamond trading is an important constituent of trade relations with Russia.
During the Summit in December 2014, ALROSA, the largest diamond supplying
company of Russia signed agreements for direct sale of rough diamonds with twelve
Indian companies. Under these agreements, over the next three years, USD 2.1
billion worth of rough diamonds will be supplied to India at the rate of USD 700
million per year.
Connecting India with the CIS: The International North South Transport
India‟s exports to the CIS countries have traditionally been routed through
Nhava Sheva port in Mumbai
to Dubai and then on to St Petersburg. On an
average, a shipment from Mumbai to Moscow on this route takes about 35 days
freight costs of USD 2500 to USD 4000 for a dry container and USD 5000 to USD
6800 for a reefer container. This route is long and time consuming.
Major exports from India to the CIS
are perishables such as onions, potatoes,
garlic etc which can even be transported in dry containers if the transit time is
reduced and packing technology is improved. Hence time is of the essence for
exports to the CIS.
The International North South Transport Corridor (INSTC) was envisaged with
this in view. This corridor runs from Nhava Sheva in Mumbai to Bandar Abbas (Iran)
and then on to Amirabad (Iran) or on to Astrakhan in Russia for onward shipment to
was calculated that on the INSTC a shipment would take an average of
with a freight cost of around USD 2300 to USD 3500 for a dry container and
USD 4600 to USD 6800 for a reefer container.
The Federation of Freight Forwarders Association of India (FFFAI) has
dry-run to study the dispatch of cargo along the corridor and to identify
problems and bottlenecks. A number of roadblocks and the remedial measures
required have been identified. This route once popularized, will unlock the true
potential of international trade between India and the CIS, particularly India and
In order to enhance trade relations with the CIS region, it has been decided to
set up a Joint Study Group for an agreement between India and the Customs Union
of Belarus, Kazakhstan and the Russian Federation for trade in goods and services.
Joint Statement dated 11 December 2014 accessed on 7 February 2014 at
Press Release dated 11 December 2014, Press Information Bureau, viewed on 7 February 2015 at
In the meantime, an institutional mechanism to deal with outstanding bilateral trade
issues is being put in place.
Special Notified Zones for consignment import and export of rough diamonds
which will have in place, the regulatory framework and taxation regime necessary to
encourage international mining companies to sell their rough diamonds directly in
India, have also been proposed. This will give the Indian diamond industry a strong
competitive advantage over other diamond trading centres of the world and will also
ensure a steady supply of rough diamonds in India.
In order to expand India-Russia bilateral trade, there have been demands in
some quarters for trade in local currency. A technical group in the Department of
Commerce had looked at the potential for this some time ago.
While the group had
recommended trade in local currency with a few identified countries, subsequent
developments specifically in the context of Russia, have reportedly, dampened the
interest of industry on both sides in pursuing trade in local currency.
will remain on the agenda to examine further how implementation, delivery and the
interests of industry on both sides can be adequately served.
The CIS region is a
major supplier of raw materials.
India‟s engagement with most of the countries
except Russia has been much below its potential.
While there are significant
prospects of investments leading to sourcing of raw material, there is also a
reasonable market for export of specific products of India‟s strength such as
agricultural and agro processed products, pharmaceuticals, light engineering, textiles
The institutional process for bilateral trade has not been worked to the extent
The infrastructure constraint is another reason for the relative lack of
It is expected that once the INSTC becomes
popular, integration would
Further, long term contracts for raw materials is also a business
modality to be promoted.
Therefore the focus of action should be to promote
investment in the exploitation of raw materials; to operationalise the INSTC; to
promote export of products of India‟s strength and to help facilitate investments in
some of these countries for building value chains, for example, the pharmaceutical
Impact and Utilisation of FTAs
FTAs and similar trading agreements are rapidly becoming the predominant
way in which global trade is conducted. There are divergent views, however, about
their utility and effect on the domestic economy. An Impact Analysis of FTAs has,
therefore, been instituted in order to assess whether the concessions under these
agreements are being gainfully utilised.
Analysis of data for the period 2009-10 to 2013-14 indicates that preferential
imports still form a small proportion of total imports. In 2013-14, it ranged from 3.4
percent of total imports under the India-Malaysia CECA to 22.4 percent of total
imports under the India-Japan CEPA.
Other broad inferences from the impact analysis are:
India‟s FTA partner countries have not significantly displaced other markets as
India‟s largest trading partners indicating that trade diversion has been limited.
Under each of these FTAs, there has been a significant increase in overall
trade, in both exports and imports, although imports have increased at a faster
This is only to be expected given the tariff asymmetry between India
and its FTA partners with India having much higher applied tariffs compared to
all its FTA partners and consequently tariff concessions given by India being
India has not become a supplier of raw materials to any of these countries.
An increase in the share of intermediate goods and capital goods in India‟s
export basket in some of these FTAs could be indicative of a rise in value
addition of India‟s exports.
Preferential imports of intermediate goods into India through these FTAs such
as organic chemicals, plastics and iron & steel may have facilitated an
increase in manufacturing activity within India
by making these available at
competitive prices and facilitating value addition, as also import of capital
goods like mechanical and electrical machinery.
The statistics clearly show that we have not been able to derive full
advantage out of our later trade agreements such as with Korea, Japan and ASEAN.
The learning from the exercise is that utilisation of FTAs is the most important
Some Issues being addressed
Rules of Origin
Rules of origin (ROOs) are used to determine the country of origin of
products, and accordingly, their eligibility for preferential treatment. They set out
specific and detailed conditions on the level of processing that an imported item from
a non-FTA partner country must undergo in the FTA partner country (or other eligible
countries in the region) before being eligible to be called an originating product of a
FTA partner country. They are an effective means of both preventing trade diversion
and addressing the sensitivities of the domestic industry.
With these objectives in
view, India has been negotiating for the most conservative rules of origin in its FTAs.
However, at the same time, conservative rules of origin of India‟s trading partners
have affected our ability to take advantage of export opportunities under India‟s
FTAs and come in the way of India becoming a part of global and regional value
chains even in products where it is competitive. This approach is already being
It is necessary to simplify and ease rules of origin criteria to locate India
effectively in global and regional value chains.
Inversion in Duty Structure
Another criticism of FTAs is that they have led to some cases of inversion in
duty structures i.e. finished products can be imported into the country at zero or
reduced import duties whereas duties on raw materials or intermediates are higher,
thereby making raw materials and intermediates costlier than finished products. An
analysis indicates that most of the inversions reported were the outcomes of the
MFN duty structure.
Some of them could be attributed to specific FTAs.
the interpretation of inversion depends upon the position of the product concerned in
the value chain and, therefore, the complete value chain needs to be examined.
Some instances of inversion due to FTAs were rectified in the Budget 2014-15.
Some others have been proposed for correction in Budget 2015-16. The likelihood of
such inversions will continue to be examined both at the time of negotiating an
agreement as well as subsequently to ensure that industry is not put to any
Preferential Export Data
The present export documentation does not separately capture preferential
Consequently, despite best efforts, it has not been possible to quantify
India‟s preferential trade under various FTAs.
An approximation through quantifying
certificates of origin is possible but the scope of error is substantial.
is necessary to capture preferential export data in the normal course.
possible either by making certain amendments in the shipping bill itself or in the
In view of the importance of this matter, a system for capturing
preferential data will be put in place at the earliest.
FTA Outreach and Information Dissemination
The impact analysis mentioned above revealed a relative lack of awareness
on the part of industry and business about the benefits which can be drawn from an
FTA, indicating the need for a strong outreach programme.
It also showed that
industry is not adequately oriented towards using such FTAs to find new markets
and new products for business except when they adversely affect their business.
fill this gap, an intensive FTA outreach programme has been launched covering all
tier 1 and tier 2 cities. Such outreach programmes will be conducted through the
entire duration of this policy till a satisfactory level of awareness is achieved.
In addition, FAQs
on FTAs have been compiled and can be accessed on the
website of the Department of Commerce. In the next phase, sector-specific FAQs
will be prepared which will provide information such as product-specific rules of
A web portal on FTAs has been developed which can be accessed at
. The portal provides both MFN and preferential tariff rates,
rules of origin, sanitary and phytosanitary (SPS) standards and technical barriers to
trade (TBT) under various FTAs signed by India. It also captures the trade flows from
major trading partners. The data is provided at the 8 digit level of the Harmonized
System of classification. The portal will be maintained and regularly updated by the
Federation of Indian Exporters Organisation.
India’s Initiatives for LDCs
developing country to extend Duty Free Quota Free access to Least Developed
Countries (LDCs). India announced the Duty Free Tariff Preference (DFTP) Scheme
for LDCs in 2008. Effective from 1 April 2014, the DFTP scheme provides duty free
market access on 96 percent of India‟s tariff lines and preferential duties on 2.2
percent of the lines. Only 1.8 percent of tariff lines have been retained in the
Exclusion List, i.e. with no duty concessions. The new expanded Scheme will also
bring in several procedural simplifications with reference to the Rules of Origin.
Frequently Asked Questions
At present, 31 LDCs have become beneficiaries of the scheme. This can
make a significant contribution in boosting exports from these countries to India
provided of course that they have adequate productive capacities.
As mentioned earlier in this Statement, a Technical Assistance Programme is
underway for the cotton sector in 6 countries of Africa, namely, Benin, Burkina Faso,
Chad, Uganda, Nigeria and Malawi. The initiative has been conceptualised and
designed under the auspices of the 2
India- Africa Forum Summit in fulfilment of
the commitment made by India in the WTO to provide development assistance for
the cotton sector to the Cotton-4 countries. The project has been very well received
and several other African countries have requested India to replicate the programme
for them and, accordingly, a project is being prepared for appropriate approval.
India‟s Preferential Offer in Trade in Services to LDC Members of the WTO
An LDC Services Waiver was adopted at the Eighth Ministerial Conference of
the WTO in 2011, which allows non-LDC members to grant preferences providing
greater market access to LDCs. In other words, this decision allows WTO members
to deviate from the Most Favoured Nation obligation under the WTO Services
. At the Ninth Ministerial Conference in Bali, Indonesia, in December
2013, Ministers decided to take further steps towards the operationalization of the
At a high-level meeting of the WTO Services Council on 5 February 2015,
India made the following offer of preferential treatment to LDCs which has been very
Visa Related Issues:
India will waive off visa fees for LDC applicants applying
for Indian business or employment visas.
Offers in respect of Technical Assistance and Capacity Building:
earmark a share of at least 25 percent out of all technical assistance and capacity
Government of India, exclusively for the LDC members of the WTO.
Offers in Mode 4 (Movement of Natural Persons):
India has decided to
undertake liberal commitments in 15 sub-sectors, which were not scheduled in
India‟s GATS commitments. These include key sub-sectors such as integrated
sporting services, cultural and sporting services, maritime transport and maritime
auxiliary services, etc.
SECTION III: PRODUCT STRATEGY
In order to raise India‟s share in world exports from 2 percent to 3.5 percent, it
is essential to focus efforts on those sectors where India already has strengths as
well as those which have untapped potential. A Strategy Paper prepared by the
Department of Commerce in 2010
identified such sectors, based on various
considerations which continue to be relevant today.
General Agreement on Trade in Services
Department of Commerce, Ministry of Commerce & Industry, Government of India (2010), “Strategy for
Doubling Exports in Next Three Years (2011-12 to 2013-14)”
Promoting the growth of exports from high value creating and employment
generating sectors with a strong domestic manufacturing base, would be the
lynchpin of India‟s overall export growth strategy.
Further, based on domestic manufacturing capabilities and potential demand,
exports of drugs and pharmaceuticals, chemicals and electronics (all high value
products reliant on our manufacturing base) would need to grow significantly to
realize the overall growth targets, and these sectors would be prioritized accordingly.
Some of the promising product areas are discussed below.
In order to increase the share of manufacturing in the country‟s GDP and
absorb the increasing numbers being added to the labour force, the engineering
industry is critical. Within engineering, we need to move up the value chain both in
terms of domestic production and exports.
A Strategy Paper commissioned by EEPC India for the growth of Indian
engineering exports in 2014-19
, estimates that India‟s engineering exports will be
in the range of USD 86 - 125 billion by the end of 2018-19.
Engineering exports from
India stood at 62 USD billion in FY 2013-14. According to the report, the share of
engineering exports in India‟s total exports has remained at around 20 percent over
the last decade. India‟s share in global engineering trade is around 1.2 percent
whereas China‟s share is around 12.3 percent. India does not hold a dominant
position in any of the 34 product categories in the engineering sector.
India primarily exports low and medium technology intensive engineering
goods. The share of high tech goods is less than 6 percent of the overall engineering
export basket. According to the report this is because almost all exporters from India
rely on the labour cost arbitrage and this has resulted in limited exports in the high
end segment. The report concludes that India cannot indefinitely continue to rely on
labour cost arbitrage because of emerging trends like near shoring and disruptive
technologies. Further, the bulk of the Indian engineering export basket is accounted
for by SMEs who have constraints on their financial capacities to invest in technology
and research and development.
on „Make in India‟ has identified India‟s auto ancillary industry as
one in which India has a significant opportunity to move up the value chain. India is
fast emerging as a manufacturing and exporting hub for small sized cars. The auto
components sector is also substantially integrated with global supply chains. Both
these product areas offer significant opportunity for growth in exports.
Issues to be addressed
The EEPC India report identifies impediments such as high energy costs, high
interest rates, un-refunded tax benefits, lack of adequate physical infrastructure,
outdated manufacturing processes and lack of best practices. These increase the
cost of manufacturing, rendering Indian manufacturers uncompetitive in international
The report suggests that rather than subsidies and incentives, measures to
remove structural deficiencies through institutional reforms would result in more
25 EEPC India (2014),
Strategy Paper for the Growth of Indian Engineering Exports (2014-19),
Conducted by JM Financial Institutional Securities Limited
durable benefits. Innovation and increased R&D, attracting FDI, a skilled workforce
and easier funding have been identified as other requirements to boost engineering
manufacturing and exports. As far as purely trade related measures are concerned
promotional incentives for market diversification and support to products at the
higher end of the value chain will be the pillars of our
supplemented by some locally manufactured products. Companies are not actively
looking for export opportunities because of the large and rising domestic demand
fuelled by the growing middle class.
Indian electronic hardware manufacturers also experience a higher level of
taxation, higher cost
compared to their competitors from China, Taiwan, Korea and Japan. The cost of
production of most electronic goods in India is at least 8 to 10 percent higher than in
other countries of South East Asia. China, with its superior infrastructure and
, on account of lower factor costs, is India‟s
main competitor in this sector.
Indian exports of electronics hardware can increase faster if we are able to
increase exports of high value added items, products embedded with IPRs and
diversify our export basket. The strengths of the Indian electronics industry in design,
systems integration and diagnostic skills need to be leveraged for catering to niche
markets. After the Information Technology Agreement (ITA 1) came into effect, with
zero or very low duty rates already prevalent in this sector, reforms such as
simplification of procedures can have a significant impact in raising exports. Some of
the disabilities related to infrastructure, labour productivity, costs and common
facilities would also need to be addressed in the medium to long term. In the last
couple of years Government has given a lot of emphasis to reviving manufacturing in
this sector which should bear results in due course.
The approach for improving the
prospects for promotion of exports from the electronics sector should include action
discouraging non-essential imports, offering trade promotion opportunities for the
sector and promoting manufacturing and exports of products left out in ITA 1.
India‟s pharmaceutical industry has established a global reputation for quality
and affordability. Pharma exports account for 10 percent of the global market by
volume (ranked 3
globally) and 1.4 percent by value (ranked 10
industry is expected to expand at a compound annual growth rate (CAGR) of 14.5
percent over 2009-2020 to reach USD 55 billion.
Our pharma exports have been dominated by generics. With many drugs
having gone off-patent in recent years and a shift in developed market drug spends
towards generics, the prospects for this segment are very good
economies are facing fiscal problems and wherever public health is a major charge
on the national exchequer, solutions will have to be found, an integral piece of which
DOC Strategy Paper
will be increasing reliance on high quality generics instead of patented or brand-
named drugs. This is an opportunity that should not be missed.
Issues to be addressed
Access to the Japanese market remains constrained by NTBs. In China,
Indian pharma companies face regulatory hurdles in the form of prolonged and
unpredictable timelines for registering Indian drugs, which has adversely impacted
expansion plans of Indian pharmaceutical companies. On an average registration in
China takes about 3 to 4 years, compared to less than 10 months in India. The
Chinese drug regulator – The State Food & Drug Administration (SFDA) - requires a
company planning to register its products in China to not only reveal the detailed
process of manufacture but also conduct clinical trials within China, which has
deterred a number of Indian pharmaceutical players for fear of IPR violation and cost
The pharmaceutical sector is beset with several challenges.
Most of these
challenges arise out of the enviable reputation of India as a reliable supplier of
These challenges include the following:
Campaigns to malign generic products as being in violation of India‟s IPR
Alleged lack of compliance of generic medicines coming out of India, with
India not being party to the PIC/S
Convention and Indian Pharmacopeia being
not recognized yet in major markets; and
India‟s pricing policies forcing Indian exporters to price their products with
extremely low margins.
All these challenges have been met frontally by the government over the past
In the area of IPRs the challenges have been addressed in international
and multilateral forums by filing disputes and challenging any wrongful treatment
meted out to Indian medicines.
Quality related compliance issues have been
addressed by promoting self-discipline on the one hand and dealing with ill-
intentioned campaigns against Indian medicines in some geographies on the other.
India will be the first country to adopt a trace and track policy for all medicinal
products exported by it globally from 1 April 2015.
The tertiary and secondary
packaging of products will necessarily have to follow the trace and track compliance
mechanism with authentication facility.
As regards pricing, while the challenge is
daunting, it is also recognized that this is the factor that makes Indian medicines
It is important for India to work towards membership of PIC/S.
It is also
necessary that India sources a large part of its APIs from within or distributed
The brand promotion for India‟s pharmaceuticals has shown excellent
So much so, that the India Brand Equity Foundation (IBEF) and the Indian
private sector have agreed to form a Trust to run a branding campaign for Indian
The Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme
pharmaceuticals, clearly indicative of the industry‟s faith in the branding initiative of
Recognizing the value India can offer in a variety of healthcare
products and services, a composite healthcare products and services promotion
programme will be run for some more geographies.
This will include promoting
pharmaceuticals, medical devices, healthcare services, traditional medicines and
India has unique strengths in all these areas and a composite marketing
exercise will help in projecting India not as a “pharmacy of the world” alone but also
as a source of healthcare and fitness.
Medical devices and equipments constitute a new area of focus.
100 percent opening up of the sector for FDI recognizes the potential of the sector
for new investments.
India‟s unique position, as stated above, and the fact that it is a
major market for healthcare services, positions this sector as one with potential for
exports. This sector is regulated by the Drugs and Cosmetics Act of 1940 and
requires significant changes in legislative and regulatory practices to distinguish it
from the pharmaceutical sector.
All these actions are
underway in different
departments and once materialised will lead to a significant improvement in export
Light Manufacturing Sectors: leather products and textiles
Another important category that needs to grow is that of exports based on
light manufacturing sectors, i.e. leather products and textiles. These are important
because they generate employment, have high domestic value addition, and have
historically been areas of strength in our export markets.
The leather sector is a major employment creating sector.
India already has a
significant name in the footwear sector.
Additional focus is required for composite
leather footwear exports as well as leather garment manufacturing and exports and
non-leather product exports.
The sector also needs financial resources to augment
its environmental compliance.
Therefore, attention will be paid to the following:
(i) Greater focus on finished and composite products
(ii) Additional attention to garments, non leather products
expenses and other capital expenses.
(iv) Supporting skill development and marketing efforts.
In textiles, we need to realize more effectively the scope for growth made
possible since the dismantling of the quota regime. The labour intensity of the
apparel industry is one of the highest. With over 45 million people employed directly,
the apparel industry is one of the largest sources of employment in India.
As a net
exporter of cotton yarn, India has an advantage over competitors such as China and
Bangladesh and can benefit from moving up the value chain. Product diversification
in garments is essential; into women‟s garments, value added cotton products, and
synthetic textiles. In these sectors, the aim will be to scale up operations and
increase export growth rates. The textiles and garments sector has traditionally been
a leader of India‟s exports in global markets particularly to the traditional markets of
Study by JM Financial Institutional Securities Limited on „Make in India‟
the US and EU.
While it continues to be an important sector, it has come up against
The textiles policy should address most of the concerns of this
As far as the foreign trade policy is concerned, it recognizes the employment
creation potential of this sector.
It also recognises the importance of the apparel
sector particularly as a value creator and as an employment generator.
along the entire value chain of cotton and synthetic textiles and
It needs to reorient itself in view of increasing global challenges and
competitors of India in the garments sector. India must therefore leverage its
capacity in the pre-garment stages of the value chain while it should add unique
value to the garment stage of the value chain.
Further, it must regionalise its value
chain in a manner that a continuum is established within the region.
should determine its relations with its neighbouring countries including South East
Asia. Many of the concerns of this sector will get addressed through domestic policy
Gems & Jewellery Sector
Another important labour intensive export sector that must continue to be
encouraged is that of gems and jewellery. This sector has relatively low value
addition, but contributes a high volume of exports and employment and is, therefore,
important. The gems and jewellery manufacturing sector largely consists of SME
units, employing skilled and semi-skilled labour, almost entirely in the unorganized
sector. This sector is not only a major source of revenue generation but also a
source of employment, employing a skilled workforce of 3.5 million.
Though the sector has relatively low value addition, the volume of exports is
Gems and jewellery exports have increased from USD 29.1 billion in 2009-10
to USD 41.7 billion in 2013-14; its share in India‟s total merchandise exports was
13.3 percent in 2013-14. The top five export destinations for Indian gem and
jewellery products are the UAE, Hong Kong, the US, Belgium and Israel.
has been included under the „Make in India‟ initiative.
During 2013-14, exports of cut
and polished diamonds, silver jewellery, pearls and synthetic stones have shown a
positive growth and the sector now aspires to move towards higher value addition
jewellery segments like fashion, silver and studded jewellery.
The gems and jewellery sector is an import intensive sector with export
It also requires high working capital.
Recent budget announcements are
expected to help
in this direction.
The decision to create a Special Notified Area will
help bring diamond trading into India.
In order to make the sector more efficient, the
policy has also addressed wastage and value addition norms for the jewellery sector.
Natural Resource Based Exports
Another focus area is that of natural resource based exports. This category
Revitalizing plantations, enabling a less controlled regime for agriculture, and aiming
at greater value addition and processed products would help increase the value of
Small and Medium Enterprises
There is a steadily growing market for processed foods and vegetables,
supermarkets. According to
, the availability of abundant raw material,
low-cost labour and the large domestic market provides an opportunity to move up
the value chain. There is tremendous potential for exports from this sector. The
Government is focusing on this sector with mega food processing parks and cold
chain projects to address infrastructure issues.
A few years ago, iron ore exports used to comprise a large part of India‟s
exports to China and several other markets.
Today, for several reasons, iron ore
exports have dwindled to a trickle.
The recent lifting of the ban on iron ore mining in
some States will unshackle iron ore mining activity.
At the same time India is
embarking upon a programme of manufacturing for which iron ore would be required
In the last few years, pelletisation facilities have also come up in a major
way in the country.
All this will mean that iron ore exports may not reach the same
levels as was the case a couple of years ago.
This is particularly true in the context
of exports to China where growth rates have declined reducing the demand for iron
Nevertheless, as global markets pick up, it is expected that iron ore exports,
particularly as pellets, will increase.
Efforts will continue, to encourage exports,
particularly of pellets.
Exports of agricultural and allied products (including plantation and marine
products) have more than doubled over a period of 5 years. Exports have grown
17,789.0 million in 2008-09 to USD
42,505.7 million in 2013-14 with a
CAGR of 19 percent. During 2013-14, agri product exports constituted 13.6 percent
of total exports and registered a growth of 3.8 percent (in USD terms) over 2012-13.
Framing policies for the export of agricultural products involves consultations
Ministries/Departments of the Government of India, State Governments and other
organizations. Important considerations while framing a trade policy for agricultural
products are: the stocks available in the country, food security concerns, the
competitiveness in the international market.
Production, marketing and pricing
policies adopted by major producers of like products or substitutes also influence the
of agricultural products.
have also become
increasingly relevant in this matter.
The salient features of a plan of action to promote exports of agricultural
products are as under:
A stable policy regime:
maintaining a long term, stable, consistent and by-
default „open‟ export policy as against an „on-off‟ policy;
effective handling of such issues, which includes:
Upgrading quality to avoid disruption in trade on account of SPS issues
with major trading partners;
Effectively challenging unfair practices of trading partners if they resort to
unreasonable SPS measures; and
Conducted by JM Financial Institutional Securities Limited
Creating physical infrastructure and institutional capacities within India,
responsive to the needs of importing country regulations.
while India is now a significant supplier of agro
products to the world, these remain largely confined to commodities such as
cereals, groundnut, castor oil, oil meals, guar gum etc. of which surpluses are
limited. It is recognised that while supply side issues need to be actively
addressed, there should be a shift in focus towards processed and value
added exports and niche products such as organic, culinary herbs and herbal
products. We need a range of facilities and infrastructure on the post-harvest
front, such as:
cold chain facilities and transport logistics from the farm to the ports and
silos with temperature control mechanisms to preserve the quality of
state-of-the-art pack houses with complete cold chain arrangements; and
integrated post harvest facilities and centres for perishable cargo with
uninterrupted power supply and connection to National Highways.
Promoting organic agri-exports through appropriate policy
certification and accreditation programmes - the number of certifying bodies
has to be expanded, especially in the North-East. Today, India‟s export of
organic products is miniscule.
But recognising the value of organic agriculture
for exports particularly in discerning markets such as EU, US and Japan, it is
necessary to promote organic agricultural exports to derive greater market
This sector requires special attention which will include major
investment in technical capacities
for organic certification,
capacity development in some of the States particularly in the North Eastern
simplification of procedures will also be prioritised.
Sikkim has chosen to be
an “Organic State”. In order for Sikkim to draw advantage from this foreign
trade policy, a package will be made in consultation with the Government of
Sikkim to facilitate organic exports from Sikkim.
Similar such initiatives from
amongst other North Eastern States will be encouraged.
Export strategies for processed agricultural exports and organic product
exports are under preparation and should be ready soon.
The plantations sector directly supports livelihoods of about 18 lakh small
growers and more than 33 lakh workers, majority of them resource poor, low income
groups, inhabiting tribal and geographically challenging terrain, in a sustainable, eco-
especially spices and tea, being closely and strongly associated with „Brand India‟,
help to promote Indian cuisine, lifestyle and exports, and establish a personal recall
value amongst consumers in general.
productivity due to the ageing plant material, impact of climate change including
pests, scarcity of labour and volatile international prices.
Stringent food safety
regulations in importing markets and
the slow movement from commodity to product
and brand exports are also squeezing margins and profitability.
To ensure that plantations remain commercially viable, attract investment and
professional talent, it is critical that our tea, coffee and spices exports become more
competitive in discerning international markets.
In order to do so, the following
issues assume importance:
Productivity enhancement is a major goal for all plantation products, particularly
tea and coffee.
Alongside productivity, expansion of the production area is
another important challenge.
This is particularly relevant for rubber and spices.
Through intensive efforts rubber plantations have expanded phenomenally in
Tripura but there is still vast potential to expand rubber plantations in Assam and
other Sstates of the North East.
Programmes for expansion of rubber will be
initiated in Chhattisgarh, Jharkhand and parts of Orissa and Maharashtra where
areas suitable for rubber cultivation have been identified.
Coffee plantations are adversely affected by pests particularly the stem borer.
Effective means of neutralising the impact of this pest will be found through
scientific and technological methods and collaborative research.
India occupies an important position in exports of all the plantation crops.
It is the
leader in spices, and plays an important role in coffee and tea exports.
exports have remained stagnant, coffee exports have grown steadily but need to
grow even further.
India has essentially remained a bulk supplier of these
products thereby not realising the full value of niche products in global markets.
Programmes for promoting value added products of tea, coffee and spices along
support for export after branding of these products will be taken up.
Quality compliance is most critical in the case of all these products.
technical regulatory infrastructure will be augmented by investment in human
resources, infrastructure and equipment.
A critical review of all Commodity Boards will be carried out within the first year of
the policy which would include,
, taking steps for restructuring their
governance architecture, where required, equipping them for digital delivery of
services and other measures to enable them to remain abreast with the changing
requirements of their respective sectors.
promote exports from the defence sector. The
Department of Defence Production has put in place
a specific strategy for encouraging defence exports
within the overall ambit of the FTP.
Various initiatives already taken or to be
taken to enhance export of items from the defence
greater clarity as regards industrial licenses for this
munitions, creation of HS codes for items in this
sector and setting up promotional institutions for
Hi Tech Products
In the selection of winners and potential
winners for export rewards special attention has
been paid towards promoting products with higher
There is no clear definition of
products without actually defining them.
such reports and a broad assessment, certain
products have been identified as high technology
products for the duration of this policy. Given the
rapid rate of technological progress, the concept of
therefore, the list will be regularly reviewed and
Exports by medium, small and micro
manufacturing output, over 40 per cent of the total
exports of the country, and around 8 percent of the
employment generation and the development of
The MSME sector is one of the key drivers
of India‟s transition from an agrarian economy to
an industrialized one, through its contribution to
Strategy for Defence Exports, Department of Defence Production, Ministry of Defence, Government of India,
Box 3: National Offsets Mechanism
mechanism. At present India has an offset
mechanism for the defence sector under which
foreign suppliers have to buy at least 30 per
cent of the total value of the supplies locally.
The Department of Commerce was assigned
the task of formulating the national offsets
mechanism. Several rounds of consultations
It will primarily cover Central Government
procurement including procurement by PSUs,
except defence procurement which is already
covered by an offset policy. The provisions of
Procurement Bill have been kept in mind in
drawing up the draft Policy.
The national offsets mechanism will have the
acquisition of assets in the importing
augmenting capacity for research,
design and development;
long-term supply agreements;
enhancing exports (including project
creation of employment
It would contain provisions for cross-sectoral
linkages across organizations/ departments in
While the high-value import
may be by one organization, the main contract
may incorporate in it offset clauses (through
cross-sectoral offsets) that would serve the
demands of other organizations/ departments.
The mechanism will have a threshold and
only contracts above that would have to
The minimum value of
the offsets obligations would be 30 percent of
the estimated cost of the acquisition.
The negative list for offsets would include
minerals and ores, as India is competitive in
difficult to isolate the incremental effect of the
empowerment. MSMEs feed local consumer markets and international value chains.
The sector currently produces more than 6,000 quality products, ranging from
handloom sarees, carpets, soaps and pickles, to auto and machine parts targeting
both domestic and international markets.
An inter-Ministerial Committee on boosting exports from the sector submitted
its report in 2013.
The Committee examined the factors obstructing the growth of
exports from the sector and recommended various measures. The potential of the
sector, the problems it faces and its requirements have been kept in view in framing
As stated earlier, a large segment of India‟s exporting community belongs to
the MSME sector, which is often constrained for financial resources. In foreign trade
transactions, often there is a long period before export value realisation.
credit plays a significant role in facilitating exports.
A programme for providing
interest subvention on identified sectors for a period of 3 years has been worked out
and budget allocation in 2015-16 has been made available.
SECTION IV: THE SERVICES SECTOR - AN AREA OF GREAT POTENTIAL
The Services sector has emerged as a prominent sector in India in terms of its
contribution to national and State incomes, trade flows and FDI inflows. The sector
contributes around 58 percent to the GDP of the country and 28 percent to
employment. Its contribution to total trade is 25 percent, around 35 percent to
exports and 20 percent to imports. The sector accounts for more than 50 percent of
FDI into the country.The Services sector in India has in general grown at a rate
higher than the overall GDP growth rate.
The increasing surplus from services trade over the previous decade has
helped to offset a major part of the merchandise trade deficit thereby, keeping a
check on the Current Account Deficit.
Chart 3: India’s Services Trade
(in USD billion)
The share of India‟s services exports in the world export of services, which
increased from 0.6 percent in 1990 to 1 percent in 2000 and further to 3.3 percent in
2013, has been increasing faster than the share of India‟s merchandise exports in
However, after witnessing a double digit growth during 2002-03 to 2008-09,
with a peak of 60.9 percent in 2004-05, the growth in services exports
in the aftermath of the global financial crisis. In 2013-14, services exports grew by
4.0 percent to USD 151.5 billion and services imports declined by 2.8 percent to
USD 78.5 billion resulting in net services exports of USD 73.0 billion. This declining
rate of growth primarily reflects the impact of the global financial crisis and the
consequent slowdown in the US and the EU.
The single most important contributor to India‟s services exports is the
IT/ITES sector. While the share of the IT/ITES sector in India‟s export has been a
little less than 50 percent, the share of IT/ITES in India‟s net services export is
around 90 percent. And, 80 percent of India‟s IT/ITES exports is targeted towards
the West (the share of the US
is above 60 percent and the share of the EU is 20
percent). Hence, any slowdown in the US/EU and the protectionist measures that
inevitably follow, are bound to impact India‟s IT/ITES exports.
This suggests the
imperative of diversification of markets and products in the area of information
technology enabled services.
Japan, China and Korea can be potentially promising
markets but Indian businesses are hampered by language constraints and the
unique features of these markets.
It is important to promote India‟s expertise in
information technology services in these markets both in order to integrate with their
manufacturing (thereby making their products more competitive) and to get greater
market access for Indian businesses in the information technology sector.
to do so, supporting language learning and trade promotion activities and working
towards special arrangements with their partners for facilitating market access for
Indian businesses are important.
Therefore efforts will be made to materialize all
India has inherent competitiveness and export potential in many skill based
consultancy, printing and publishing and entertainment services are some of the
sectors which have great export potential.
Many of these services can be exported
in different modes.
manufacturing and R&D and can bring transformational efficiency to manufacturing.
With the structure of manufacturing in many countries, including India, becoming
manufacturing. Better services will improve the competitiveness of the manufacturing
For instance, efficient and reliable infrastructure services such as transport,
distribution and logistics chains, finance and payments infrastructure, utilities such as
production and marketing of goods. The Services sectors have a critical role to play
in the „Make in India‟ initiative.
Market and policy related issues that can impede the future growth of India‟s
services exports include:
Protectionist measures (or the threat of such measures) by our key trading
suppliers to provide services;
Inadequate information and finance to build a case for export assistance; and
Supply side factors include a „talent gap‟ and infrastructural constraints.
Such obstacles can dilute any favourable outcomes that India may achieve in
international services negotiations and prevent India from achieving the desired
openings in foreign markets.
Impact of Technology on Services Delivery – India’s Preparedness
This is an evolving area with rapid changes in technology and extensive
opportunities in areas such as E-Commerce, Cloud Computing, Mobile Applications
overwhelming importance of the mobile device in India‟s growth and development
agenda. The Digital India initiative pledges to deliver universal mobile access to all
citizens of India by 2018.
At the same time, we are conscious of the need to preserve policy space in
various negotiations and to avoid undertaking commitments that would limit our
options in such areas.
Promoting Quality in Services
There is a growing worldwide trend towards setting standards not only for the
manufacturing industry, which chiefly initiated standardization activity, but also for
processes and systems.
The first step would be to identify the Services sectors which are important for
the Indian economy. The next step would be to decide which of the identified
services need to be regulated in public interest - healthcare, education on grounds of
the possibility of deceptive practices, private security services on grounds of national
interest etc. In such sectors, regulation needs to be done through appropriate
legislation by the government. There are other sectors where government may need
to enforce certain minimum standards e.g. wellness centres claiming to be Ayurvedic
centres. The rest of the services sectors would have a voluntary standards regime. A
clearly stated policy is important.
We will work towards institutionalizing certification systems wherever required
to ensure compliance of India‟s services with the highest standards and also
promote a rating system for services providers.
The Department of Commerce is working on an ambitious reforms agenda for
This is being pursued through an inter ministerial mechanism. Specific
services sectors including health, education, tourism, logistics, entertainment and
professional services have been identified for internal reforms aimed at enhancing
their competiveness and quality. Apart from identifying policy constraints and
required changes in regulations, this diagnostic exercise has helped identify winners
and potential winners which can be nurtured, incentivized and promoted.
Services liberalization together with obtaining market access through free
trade agreements will help remove barriers to export of services in other countries.
Efforts will be made to gain effective market access abroad through comprehensive
economic partnership agreements with important markets.
A Global Exhibition on Services (GES) will be held annually. This would be an
opportunity to showcase India‟s strengths in the Services sector.
In the opening event more than 40 countries are expected to participate. The
GES will discuss ways for the Services sector to become more competitive
globally. It is intended to serve as a global platform to enhance strategic
cooperation and develop synergies for increased trade in services and to
increase FDI flow in the services sector. It will be a meeting place for countries
and for global services sector players to forge new business relationships and
enhance international trade in services.
of the GES
space and SME in Services.
Financial assistance for export of services is also being expanded through a
new, ambitious, user friendly „Served from India Scheme‟ being launched as part of
Efforts are also underway to improve the availability of data on services to
facilitate better policy making, effective international engagement and targeted
SECTION V: TRADE PROMOTION & INFRASTRUCTURE
Towards World Class Products
Government is committed to transforming India into a manufacturing and
exporting hub. This is possible only if India‟s products are world class and of a
standard acceptable in the most discerning markets.
There is a synergistic relationship between standards and trade. Adherence to
standards enhances the potential of trade because standards reduce information
asymmetry, signal quality to consumers and create a common language for potential
trading partners, thus reducing overall transaction costs. At the same time the
concerns about standards acting as non-tariff barriers (NTBs) in global trade are also
It is essential for India to develop a coordinated national response and
strategy to meet the challenges of standards and conformity assessment and
promote its presence in the international market. The way forward in this direction
must address the following aspects:
Legislative and institutional reforms:
a) To enable a range of options for regulators for conformity assessment
procedures to provide for use of independent, third party Conformity
Assessment Bodies (CABs) (inspection bodies, certification bodies and
laboratories) for the purpose of administering the regulations.
b) For low risk items there should be provision for conformity assessment
through Supplier‟s Declaration of Conformity (SDoC) procedure.
c) SDoC works well in combination with a strong Product Liability Law and
market surveillance both of which are weak in India. A new legal framework
on Product Liability is required.
Each regulator/ line ministry should review its technical regulations/ standards
for various products to identify the gaps vis-à-vis the international standards
and lay down realistic time frames for bridging these gaps and evolving good
The internationally accepted system is “Certified Once,
accreditation, which recognizes
bodies. This minimizes re-testing and re-
certification thereby reducing costs and market access delays and eliminating
non-tariff barriers to trade. A policy must be evolved in this regard.
It is necessary to promote awareness about standards, regulations and
conformity assessment procedures of India‟s trading partners and gaps with
reference to global benchmarks.
processes can ensure that international standards reflect country-specific
production and trade interests and this should be promoted by providing the
Funding will also be required for enhancing the competitiveness of Indian
enterprises especially SMEs through quality and productivity improvements
and supporting the development of mechanisms to assist them in accessing
global subcontracting and supply chains and networks.
Building the India Brand
Today, nations, businesses and people are competing for the same global
share of trade, investment, business and tourism in the backdrop of a rapidly
changing global context, fragile global economic recovery and newer and faster
technologies. Many countries are allocating huge resources for brand promotion.
A long term branding strategy is required for India to hold its own in this highly
competitive environment, not merely to attract consumers but, more importantly, to
encourage industry to position its products in highly discerning markets and to
ensure that Brand India becomes synonymous with high quality.
„Brand India‟ would entail a two tier strategy which would be coordinated and
implemented by the India Brand Equity
Foundation (IBEF). The key elements of the
first tier are the following
The concept of „Brand India‟ can be interpreted differently by different people.
Branding is a dynamic process which needs to evolve continually in line with the
The term „Brand India‟ is used very often without actually defining its
What is it that we actually associate or wish to associate with
Therefore the first exercise needs to be to identify the elements of
As a follow up to the articulation of the „Brand India‟concept, the following
action will be taken:
Development of a standard brand kit
This would comprise a powerpoint presentation, soft copies of downloadable
posters by sectors and a film on „
‟. Indian missions abroad and the
foreign missions in India are the conduit for disseminating this information.
Revamping of websites of trade bodies (export promotion councils etc)
In an age of hyperconnectivity it is extremely important that the web portals of
searchable and updated. The websites of all the export promotion councils will
be revamped, redesigned and oriented to export priorities.
Engagement with global media
One of the key aspects of this engagement is a regular interface with senior
editors and journalists from global media Regular press briefs and interactions
with domestic media on brand promotion will also be conducted.
The India Shows
The „India Shows should not be standalone events but part of global as well
as the biggest sectoral shows. They must showcase India on the biggest and
the best international platforms through campaigns designed for maximum
They should be strategically planned with a focus on onsite branding,
buyer-seller meets and media interface. A follow up review and action plan is
Brand manual for exhibitors
A brand manual for the exhibitors would be designed and provided for all the
Broader sectoral campaign
The sectoral brand campaign must include all organisations and associations
associated with the sector apart from the relevant export promotion council.
IBEF and all the organizations associated with the promotion would decide on
the tactical positioning plan for the show.
Tier II: Promotion of Brands from India
Brands fetch additional value for their promotors. They also bring additional
institutional recognition to the country because building a brand is a long term
comprehensive procedure in which several stakeholders play a role.
capacity of a local brand to acquire global recognition needs to be rewarded.
It is a
difficult exercise but in the backdrop of the conceptual development of „Brand India‟
as stated earlier, a logical follow up should be to promote those brands which have
the potential to be or which have already become global brands.
exercise will be instituted to work towards this objective.
India has about 300 registered Geographical Indications (GIs), but only a few
of them have been used for commercial value.
A large number of these GIs are on
man-made products from specific regions.
Several of these manufactured products
are in the area of textiles.
Some of India‟s well known GIs are Basmati Rice and
The potential to enhance the branding and, thereby, the commercial
value of such products remains underutilised. Nor have exports of such products
been adequately incentivised.
Doing so will give a boost to our traditional sectors. A
programme to promote the branding and commercialisation of GI products and to
promote their exports will be initiated within one year of this policy coming into force.
Institutional Mechanisms for Trade Promotion
Various instruments and schemes are used for trade promotion such as
schemes providing financial assistance for market access and development through
buyer-seller meets, trade fairs, conventions and seminars. In addition there are a
number of export promotion councils responsible for the promotion and development
of the country‟s exports.
The MAI & MDA Schemes
The Market Access Initiative (MAI) scheme is an umbrella instrument for
supporting trade promotion initiatives.
The scheme, which was launched in 2003,
has been revised from time to time. The activities which are supported under the
seminars, conferences and conventions; supporting participation in established
exhibitions; supporting brochures, catalogues and other such literature; supporting
registration and specific requirements in some sectors such as the pharmaceutical
sector; and supporting studies with the specific objective of facilitating a better
understanding of commodities and markets.
The present allocation for the MAI
promotional efforts that are required.
Therefore, efforts will be required towards
augmenting resources both within and outside the Government.
assistance is provided for a range of export promotion activities implemented by
Export Promotion Councils and Trade Promotion Organizations. The scheme will
continue for the duration of this policy.
emerged as a major opportunity for a fast emerging economy like India.
estimated business of USD 300 billion in this area, India occupies only 1.2 percent of
the global convention business and is ranked 25
in delegate attendance.
there could be several reasons for such poor participation in MICE activities, the lack
of convention infrastructure is one of the major bottlenecks.
clearly aligns with India‟s focus on improving its tourism footfalls.
Under this policy
efforts will be made to support convention infrastructure in all major tier 1 and tier 2
States in a graduated manner over a period of time.
A major convention-cum-
exhibition centre will be developed at the iconic Pragati Maidan in Delhi replacing the
The India Trade Promotion Organisation (ITPO) is making a significant
contribution both in terms of providing an exposure to Indian industry and business
on new opportunities and offering a better ecosystem for international exhibitions
ITPO‟s annual work plan will have to align with the priorities of
this policy e.g. by devising new opportunities for priority sectors and markets through
differentiated mechanisms if required and tailoring participation in external fairs in
accordance with the new priorities.
Export Promotion Councils
Another important instrumentality for the promotion and development of the
country‟s exports are Export Promotion Councils (EPCs).
Each Council is responsible for the promotion of a particular group of
products, projects and services. The main role of the EPCs is to project India's image
abroad as a reliable supplier of high quality goods and services. In particular, the
EPCs are tasked with encouraging and monitoring the observance of international
standards and specifications by exporters. They are also required to keep abreast of
the trends and opportunities in international markets for goods and services and
assist their members in taking advantage of such opportunities in order to expand
and diversify exports.
EPCs have, over time, acquired a central position in India‟s trade promotion
Most of the EPCs are registered entities under the Societies Registration Act
or the Companies Act.
Many of these began with grants from the Government of
Now almost all of them receive trade promotion grants from the Department of
Over the last several years, experience has shown the need for
institutional practices which help in building the technical capacities of these
Councils to achieve the objectives of trade and export promotion.
has already been done on providing a structural framework for the management of
these Councils so that they play an important role in the area of trade promotion and
All Councils which receive Government assistance for trade promotion
work will have to subscribe to the elements of this decision.
Project exports are broadly defined as exports of such goods and services
where the export receipts are allowed to be staggered (in conformity with RBI
guidelines) over a period of more than twelve months.
This is largely to reflect that
the export transaction is not a one-off single transaction but represents certain
goods, construction and service activities, where the payment receipts are staggered
in line with the project components / execution.
The full value of project exports is not captured under any single aggregate
However, as per data maintained by the Project Export Promotion
Council, its members‟ project exports orders have increased from USD 1.7 billion in
2012-13 to USD 4.4 billion in 2013-14.
This increase of 162 percent is indicative of
the strong potential which exists for India to aggressively increase its world trade
market share in project exports.
Since project export contract earnings range over one year to five years, such
export orders also impart stability to the export earnings of the country.
current project export contracts are estimated at around USD 5 billion.
estimated that project exports from India can be boosted to at least USD 25 billion
per annum within a time frame of five to seven years.
The main markets for India‟s
project exports are expected to be in Africa, Middle-East countries, SAARC and
ASEAN countries, Central Asian Republics in CIS.
These are the emerging markets
which have high infrastructure needs.
infrastructure gaps also help India‟s exports of goods and services. They help to
build a long term relationship of the target country with India and its project export
entities. India‟s entry into high value project exports will also impart high brand
visibility in the target countries.
Besides the specific brand visibility, India‟s general
branding is also promoted as a country which can export hi-tech and high value
Such branding and visibility facilitates easier acceptance of other products
exported by India to such markets.
Long term business relationships also develop in
supplies of replaceable components and spare parts, annual maintenance and
servicing contracts, upgradation of project technology, etc. Repeat orders become
easier, as the countries gain experience and confidence in Indian project export
They also exhibit India‟s cost competitiveness while at the same time
maintaining internationally comparable quality standards.
Project exports can be boosted through opening of special lines of credit and
Concessional lines of credit are generally extended through the Ministry of External
Affairs, where diplomatic considerations also matter for offering such lines of credit.
The Buyers‟ Credit Scheme
being offered by the Department of Commerce through
Exim Bank of India aims at enhancing Indian exports to select countries.
Many Indian companies in both the private and public sectors have, over the
years, developed considerable expertise in executing project export contracts in
diverse areas such as railway sector, power sector, roads and bridges, drinking
water supply schemes, irrigation projects, construction of oil and gas pipelines,
construction of electricity grids, hydro power projects, airport construction etc.
For boosting project exports, the Department of Commerce has set up the
National Export Insurance Account (NEIA).
Essentially, the Account helps to cover
project export risks which cannot be fully covered by the Export Credit Guarantee
In tandem with EXIM Bank of India and ECGC, the NEIA is also now being
used to selectively offer a Buyers‟ Credit Cover for project exports.
EXIM Bank to offer co-financing for project exports from India to target countries in
South Asia, Africa, CIS and others.
While buyers credit cover has brought in major encouragement for project
exports, the cost of capital remains very high in India.
An effort was made towards
setting up an interest equalisation scheme under the Market Access Initiative
scheme of the Department of Commerce but it did not materialise due to financial
Since project export is recognized as an important element of
this policy, renewed efforts will be made to seek allocation of resources for such a
There is a compelling need to
ensure that trade is fully assimilated in the
„mainstreaming‟. A trade/industry/business orientation is practically non-existent in
many local bodies, some State Governments and even in many departments of the
Even in the economic ministries/departments of the Central
Government, there is relatively little emphasis on exposing various sectors to
international competition for improving policies, efficiency and competitiveness.
Similarly lacking is a consciousness of the need to rationalise imports not by
competitiveness and efficiency.
Efforts have already been initiated for mainstreaming foreign trade in the
designated focal points for exports and imports. Many of the State Governments
have nominated Export Commissioners. States are also being helped in preparing
export strategies aligned them with overall national objectives. Several States have
already formulated export strategies on which they are in consultation with the
Government of India.
Government of India will encourage State Governments to
development initiatives including efforts to better understand international trade
architecture and law.
This effort is being made in recognition of the fact that various
ministries and departments of the Central Government and State Governments have
a collective role and responsibility in promoting exports and boosting the contribution
of foreign trade to the achievement of national objectives and priorities. States will
also be helped in building the capacities of
relevant officials in areas relating to
international trade through various programmes.
An Export Promotion Mission will be constituted to provide an institutional
framework to work with State Governments to boost India‟s exports.
Leaving aside the external environment, infrastructure bottlenecks are the
most critical constraints to achieving accelerated export growth. There are two
categories of infrastructure requirements:
A. Better multi modal transportation for improved road connectivity to ports, rail
heads and airports, faster throughput at ports and shorter dwell time, faster
movement of rakes by railways and quicker air cargo movement with all the
concomitant trade facilitation measures in place.
B. Supportive infrastructure required for exports including more laboratories for
testing, more tool rooms and plant quarantine facilities, larger trade facilitation
centres and land customs stations and enhanced cold storage facilities for
pharmaceutical and perishable goods.
While a number of ministries are responsible for creation of infrastructure, the
Department of Commerce has the role of filling in key infrastructure gaps to facilitate
This was being done through coordinated efforts with States under the
Small infrastructure projects are selected on the basis of
identified local needs of export sectors, with a focus on projects such as common
facility centres for handicrafts, textiles, leather, clusters, backend agro processing
facilities like cold storages and pack houses, labs for testing and export certification,
common effluent treatment plants in chemical and pharma clusters, advanced
processing and finishing facilities and marketing and packaging support.
handicrafts, agri-business and commodities sectors to produce high quality finished
products with high value addition primarily for the export market.
It has particularly helped in areas such as border infrastructure,
sanitary and phytosanitary infrastructure and connectivity to major trading points.
the Budget for 2015-16, the allocation for the ASIDE scheme has been severely
This is in pursuance to Government‟s decision to transfer additional tax
Consequently, the ASIDE scheme would need to be restructured/even
The scheme hereafter will only be able to support infrastructure gaps in
It is assumed that States will continue to support funding of
infrastructure projects from the additionally allocated State resources.
Since this will
require a fresh appreciation of the new situation, the infrastructure development
programme will be revisited within 6 months of this policy announcement to put
together a new programme of infrastructure support.
Special Economic Zones
India‟s Export Processing Zone Scheme, launched in 1965, is the precursor to
the present day SEZ (Special Economic Zones) Scheme. The SEZ Act was enacted
in 2005 and made operational through SEZ Rules in February 2006.
The objectives of the SEZ Scheme, as laid out in Section 5 of the SEZ Act,
are as under:
(a) Promotion of exports of goods and services;
(b) Promotion of investment from domestic and foreign sources;
(c) Creation of employment opportunities; and
(d) Development of infrastructure facilities.
Evaluating the performance of SEZs on these parameters, we find that SEZs
have performed well. Exports from SEZs have gone up from Rs. 22,000 crore in
2005-2006 to Rs.4,94,077 crore in 2013-14; investment in SEZs have gone up from
Rs. 4035 crore in February 2006 to Rs. 3,80,284 crore in September 2014; and
direct employment in the SEZs has gone up from 1,34,704 persons in February 2006
to 13,50,071 in September 2014.
Most importantly, SEZs have enabled the
development of world class infrastructure in some of the SEZs. A greater emphasis
on creation of world class infrastructure for multi-product SEZs supported by the right
incentives can provide a much needed fillip.
Underlying the enactment of the SEZ Act was the need to provide long term
stability and continuity to the scheme. In order to achieve this objective, income-tax
provisions were incorporated in the Act. However, in 2011, MAT
imposed on the SEZs, which has severely hampered the progress of the SEZ
The SEZ scheme, in terms of export promotion through tax incentives, is not
unique to India. Such schemes continue to be in operation in some form or other in
The need for strengthening of this scheme is felt for the following
(a) The SEZ scheme provides an ecosystem conducive to exports, wherein all
clearances, starting from setting up of the unit, allocation of space, approval of
raw material, capital goods, issuance of letters of permission, monitoring of
exports, permission for sale in DTA (Domestic Tariff Area) etc. are provided at
(b) It provides a mechanism enabling manufacturing units to repeatedly import
raw materials and capital goods for export production and export, without
having to separately seek Advance Authorization, EPCG Authorization etc
(c) The scheme is especially helpful for SME investors as they lack the resources
available to bigger players for obtaining various kinds of approvals, finding
(d) The Services sector is an extremely important component of our foreign trade.
There are large inflows of investment into SEZs (specifically for software
exports) and this trend is likely to continue over the next decade.
Recently, dual use of infrastructure was allowed for non-processing areas.
Single window services as far as central government services are concerned, are a
Infrastructure has still not developed to world class standards and one of the
reasons is said to be the relatively low occupation of SEZs.
Therefore SEZs are a
work in progress.
Action needs to be taken on two platforms: one, within the present
paradigm of SEZs, time bound efforts should be made to provide a single window by
mainstreaming State Governments
and pursuing process simplification - providing
Restoring tax benefits is of critical importance.
Department of Commerce will pursue action on all these elements to make SEZs
more competitive and better placed for manufacturing and services exports.
first step, the FTP includes specific measures to revitalise SEZs. In the second
paradigm, SEZs can be treated as instruments of manufacturing rather than export
This paradigm requires a review of the SEZ-DTA relationship.
Minimum Alternate Tax
Dividend Distribution Tax
SECTION VI: TRADE ECOSYSTEM
Digitisation and E-governance
For export-import operations, the costs involved, as well as the complexity of
the documents and the procedures, are a major burden for business.
For small and
medium-sized companies, especially, these costs act as a major disincentive to
engage in international trade. Since goods cannot travel faster than the information
that controls them, speeding up the information exchange makes trading more
competitive and efficient.
All operations related to exports and imports should be automated and
paperless. A firm should be able to submit all information required by government
and related agencies through a Single Window. South Korea, Singapore and many
other countries have implemented such systems. An integrated single window,
through which smooth and speedy clearance can be enabled without compromising
on compliance, is the need of the hour.
digitization under its „Digital India‟ initiative.
Under the National e-governance
programme, subsumed within the Digital India initiative, the e-Trade programme will
continue to be a strong focus area with the objective of ensuring transparency,
simplification and faster action.
The initiatives taken for message exchange will be
taken to their logical conclusion in order to make e-Trade effective.
require close interaction between various departments involved in the process of
As far as digitization and e-Governance exercises in other relevant areas are
concerned, the following initiatives are underway:
IBEF has audited 35 websites of Government/Government supported relevant
trade institutions and on the basis of the audit report, these institutions are
now in the process of modifying their official websites.
The objective is to
bring into the public domain all information which can be shared, in a lucid,
simple and substantive manner.
It is expected that all these websites would
be modified within 6 months.
institutions under the Department of Commerce such as Commodity Boards,
product development authorities, SEZs, will be digitized.
This process of
digitization for services delivery will be completed in all the institutions within
the period of this policy.
In the case of SEZs, this has already been achieved
to a large extent.
SEZ services are available online and the integration of
Indian Customs Electronic Commerce/Electronic Data interchange (EC/EDI) Gateway
Box 4: Automation of Procedures & Use of Technology for Communication
Electronic Data Interchange; DFIA:
Duty Free Import Authorisation; FPS:
Scheme; FMS: Focus Market Scheme; MLFPS: Market-linked Focus Product Scheme; VKGUY:
Vishesh Krishi and Gram Udyog Yojana; SFIS: Served from India Scheme; SHIS: Status Holder
through EDI and E-
a) DGFT endeavours to deliver its services in a transparent and efficient
manner using tools such as Online Filing of Applications, Message
Exchange with Community Partners, Digital Signatures and Electronic
application processing status.
b) All the DGFT Regional Authorities are EDI-enabled and connected
with the DGFT Central Server to provide online connectivity to the
export-import community in a 24*7 environment.
filing of applications
The facility of online filing of applications is presently available to all
applicants for the following export promotion schemes:
Importer Exporter Code Number (IEC)
Advance Authorization Scheme, Annual Advance Authorization
EPCG scheme, Annual EPCG scheme
FPS, FMS, MLFPS, VKGUY, SFIS, SHIS, Incremental Export
Registration Certificate for Cotton, Cotton Yarn etc.
Authorization for items falling under Restricted (imports / exports)
or SCOMET (exports) list.
DGFT allows filing of online applications (except IEC) with Class-II digital
signatures with IEC number embedded in it.
Electronic Bank Realization Certificate (eBRC) system allows electronic
transmission of export-related Foreign Exchange Realization information
from the respective Banks to the DGFT‟s server.
the eBRC project on 5 June 2012. eBRC was made mandatory with effect
from 17 August, 2012.
The project has created an integrated platform for
receipt, processing and subsequent use of all bank realization-related
information including information sharing with Government organizations.
So far 1.2 crore eBRCs have been uploaded by 90 banks onto the DGFT
server. The eBRC data is being shared with 12 State governments and the
Ease of Doing Business
One of the indicators of the ease of doing business in the annual publication
brought out by the World Bank relates to trade across borders.
There are 3
elements underlying this indicator, namely, the number of documents required for
imports and exports, cost of export and import and the time taken for export and
All these are under review.
As a first initiative in this direction, it has already
been notified that normal categories of exports and imports would require only 3
documents for completion. Action on reduction of cost and time is underway and will
be completed within 3 months.
The smooth flow of goods and services across borders is one of the most
significant elements contributing to a country‟s competitiveness at the global level.
In India there are bottlenecks at two levels.
Firstly, the movement of goods within
the country, from one territory to another, is constrained by the laws, practices,
regulations and taxation regimes of various States.
The second bottleneck is caused
by infrastructure constraints at the border, such as the lack of necessary equipment
and testing facilities at the border ports, human resource inadequacies etc. resulting
in port and road congestion.
Action in respect of many of these issues lies with several departments of the
Government of India such as the Ministry of Shipping, Ministry of Agriculture,
Ministry of Finance, Ministry of Road Transport and the State Governments.
Concerted action is, therefore, the need of the hour.
This policy does not specifically touch on all these issues as they are being
addressed as part of a much larger initiative for improving India‟s manufacturing
However, it is necessary that trade is facilitated in terms of procedures and
processes as that is the ultimate test of competitiveness in a global context.
The WTO has recently agreed on a Trade Facilitation Agreement (TFA).
is a party to this and once it is ratified would follow the categorisation of various
facilitation initiatives provided for in the agreement.
India has undertaken a host of autonomous reforms even before the WTO
agreed to have a TFA. Our main focus is to:
Simplify laws and procedures and streamline fees and formalities dealing with
release and clearance of goods;
Ensure greater transparency in trade law administration; and
Enhance and initiate measures for border cooperation and free movement of
Measures to Enhance Transparency
The Government is committed to making available in a simple and easy
manner the description of importation, exportation and transit procedures including
appeal formalities with practical steps, and the required forms and documents
needed to import and export in both print and on the internet.
Fees & Charges imposed in connection with importation and exportation
Government will ensure that all information regarding fees and charges that
are applied in connection with export and import or transit are made available in both
print and on the internet.
It will be ensured that adequate time period is accorded
between the publication of new and amended fees and charges and their entry into
force except in urgent circumstances.
It will be ensured that authorities and agencies responsible for border controls
and procedures dealing with importation, exportation and transit of goods coordinate
their activities in such a manner that it facilitates hassle free movement of goods.
Government of India will work with State Governments to simplify procedures.
In addition to the above, some of the next generation reforms in trade
procedures which the Government intends to pursue in the coming years are:
the Advance Ruling facility gradually to any exporter, importer or
person with a justifiable course or a representative thereof.
Incremental implementation of a Single Window through appropriate use of
information technology to enable traders to submit documentation and or data
requirements for importation, exportation or transit of goods through a single
entry point to the participating authorities or agencies.
Conferring on the appellants in trade disputes, the right to either further appeal
or further review by the administrative authority or the judicial authority or any
other recourse to the judicial authority, if an administrative appeal or judicial
appeal or review of an administrative decision by Customs or any other border
agencies is not settled in a set period which will be specified, or without undue
Constitution of a National Committee on Trade Facilitation
One of the biggest handicaps for smooth administration of trade laws is lack
of inter-agency coordination and stakeholders participation in the administration of
trade procedures. A National Committee on Trade Facilitation (NCTF) for domestic
coordination and implementation of the TFA is being constituted with the objective of
pursuing India‟s trade facilitation agenda and removing obstacles in the way of its
Besides the above, several other measures are being taken in this policy
which will help in facilitating India‟s exports and imports by improving efficiencies in
Needless to say, trade facilitation requires
the continuous commitment
of all parties involved in the process and regular monitoring of activities.
Reduction of Transaction Costs
In recognition of the fact that export promotion efforts through schemes and
stimulus packages will be ineffective unless transaction costs are substantially
lowered, the Government has taken a number of initiatives over the years to
streamline export/import processes and facilitate trade and industry so as to make
competitiveness of Indian exporters vis-à-vis exporters of competing countries.
Steps are being taken by various Ministries and Departments to simplify
recommendations is being actively pursued.
Trade Remedial Measures
Trade remedies are a legitimate method of addressing unfair trade practices.
While India is a strong votary of free trade and benefits from it, yet it has used trade
remedial measures where required and will continue to do so if unfair practices are
adopted by trading partners or their business entities.
A Directorate General of Trade Remedies was to be set up a couple of years
ago but was not due to resource constraints. Such a Directorate will help both in
securing trade remedies for Indian business as well as in taking defensive action
when trade remedies are used against Indian businesses.
The Directorate will be
set up at the earliest.
Export Development and Outreach
India‟s growing integration with the world economy makes the pursuit of
foreign trade an attractive opportunity for young people.
need for a
concerted and integrated efforts for capacity development, the Niryat Bandhu
scheme was announced in October 2011. The significant potential of this scheme
This scheme can be utilised to bring new entrepreneurs
into trade, promote better technical understanding in the area of export related
international architecture and law and for familiarising the exporting community about
the opportunities and potential available for growth.
The Niryat Bandhu scheme will
be revamped to achieve these objectives and also further dovetailed with the
ongoing outreach programmes.
This will require augmentation of resources and
redeployment and establishing links with academia and the research community.
Capacity building of the relevant stakeholders and institutions is of utmost
importance in order to fully realize the potential of
various trade agreements and
development authorities and industry associations. The focus of this capacity
building will be on the following areas:
Establishment of a trade research/ analysis cell in these institutions;
India is at rank 134 out of 189 countries, in terms of the„Doing Business 2014‟ rankings by the World Bank.
However, a closer examination of the methodology followed by the World Bank reveals that it does not reflect
the reality in India and this has been brought to their notice.
Development and regular updation of the web portals of institutions.
A similar capacity building exercise would be carried out for the commercial
missions with the focus being on
Carrying out in-house trade research;
Branding India activities;
Monitoring of trade developments in the host country;
FTA monitoring (including 3rd parties); and
Monitoring of unilateral schemes like the GSP.
Strengthening the Commercial Wings in Indian Missions Abroad
There are about 35 markets which are very important for India from the
perspective of trade and investment. In order to be able to harness the opportunities
for export to these markets, we need to strengthen Indian Missions in these
countries by posting
people with experience and a sound understanding of trade
negotiations and commercial matters. 38 additional posts were created in July 2011.
Suitable officers will be deployed shortly. This is a focused effort aimed at giving a
fillip to our trade promotion efforts.
The Indian Missions which are important from the
trade point of view, have already been advised on a mechanism for reporting on
events and the performance of trade in their territories.
This mechanism and
structure will be further strengthened in consultation with the Ministry of External
Centre for Research in International Trade
Given the growing complexity of the process of globalization and its spillover
effects on domestic policymaking, there is a need to significantly deepen existing
research capabilities and widen them to encompass new and specialized areas. In
this context, a new institution, namely, the Centre for Research in International Trade
(CRIT) will be set up.
At present there are very few institutions at the global level which can provide
a counter narrative on key trade and investment issues from the perspective of
developing countries like India. This prevents the developing country perspective
from appearing prominently in the global intellectual discourse.
The proposed CRIT will fill this gap and will also help in forming enduring
convergence of interests with India and could potentially become India‟s allies on
various trade issues at the global level.
Institutional Mechanism for Communication
Two mechanisms are being put in place for regular communication with
The first of these is a Board of Trade which will have an advisory role
and offer a platform for discussion and consultation. The Board of Trade will be
constituted once the policy comes into force.
Another institutional mechanism which
will be set up is the Council for Trade Development and Promotion.
This Council will
be a community of Central Government and various States and UT Governments.
The objective will be to bring in the views of various State Governments with the
objective of mainstreaming them in trade policy formulation and implementation.
This Council will be constituted after this policy is brought into effect.
Besides the above two institutional mechanisms, export promotion councils
and various industry and business chambers will continue to be the specialised
institutions available for consultation from time to time.
Monitoring and Review
A policy whose implementation is not regularly monitored and periodically
reviewed can remain a piece of paper.
Therefore, a concurrent mechanism for
Department of Commerce.
The policy will be reviewed mid-term with the objective of
making a mid-course assessment and modification where required.
mechanism of evaluation will also be put in place.
While preparing this statement, consultations have been held with a cross
section of stakeholders in formal and informal settings.
were not formally invited but stakeholders were made fully aware of this process
underway in the Government and consequently they have sent responses from time
Many of these suggestions/recommendations have been incorporated in the