FOREIGN_TRADE_POLICY

-COPY OF-
FOREIGN TRADE POLICY STATEMENT (2015-2020)
Dated 1st April, 2015

Foreign Trade Policy Statement

Contents

EXECUTIVE SUMMARY .

...........................................................................................................................

SECTION 1: INTRODUCTION AND BACKDROP .

........................................................................................

Introduction .

.......................................................................................................................................

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 .

..................................................................................................................................

Europe .

..............................................................................................................................................

Australia and New Zealand .

..............................................................................................................

South Asia .

........................................................................................................................................

Iran .

...................................................................................................................................................

South-East Asia .

................................................................................................................................

North East Asia .

.................................................................................................................................

Africa .

................................................................................................................................................

The West Asia & North Africa Region .

..............................................................................................

Latin American and Caribbean region .

.............................................................................................

The CIS Region.

..................................................................................................................................

Impact and Utilisation of FTAs .

.........................................................................................................

India’s Initiatives for LDCs .

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SECTION III: PRODUCT STRATEGY .

........................................................................................................

Engineering Exports .

.........................................................................................................................

Electronics .

........................................................................................................................................

Pharmaceuticals .

...............................................................................................................................

Medical Devices/Equipment .

............................................................................................................

Light Manufacturing Sectors: leather products and textiles .

...........................................................

Gems & Jewellery Sector .

.................................................................................................................

Natural Resource Based Exports .

......................................................................................................

Agricultural Products .

.......................................................................................................................

Plantation Products .

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Defence Products .

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Hi Tech Products .

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Exports by medium, small and micro enterprises .

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Interest Subvention.

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SECTION IV: THE SERVICES SECTOR - AN AREA OF GREAT POTENTIAL .

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SECTION V: TRADE PROMOTION & INFRASTRUCTURE .

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Towards World Class Products .

........................................................................................................

Building the India Brand .

...................................................................................................................

Institutional Mechanisms for Trade Promotion.

...............................................................................

Project Exports .

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Mainstreaming Trade .

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Export Infrastructure .

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ASIDE .

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iii

Special Economic Zones .

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SECTION VI: TRADE ECOSYSTEM .

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Digitisation and E-governance .

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Ease of Doing Business .

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Trade Facilitation .

.............................................................................................................................

Reduction of Transaction Costs .

.......................................................................................................

Trade Remedial Measures .

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Export Development and Outreach .

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Capacity Development .

.....................................................................................................................

Strengthening the Commercial Wings in Indian Missions Abroad .

..................................................

Centre for Research in International Trade .

.....................................................................................

Institutional Mechanism for Communication .

..................................................................................

Monitoring and Review .

....................................................................................................................

Consultation .

.....................................................................................................................................

EXECUTIVE SUMMARY

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.

It describes

the market and product strategy envisaged and the measures required not just

for

export

promotion

but

also

for

the

enhancement

the

entire

trade

ecosystem.

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

environment for

foreign

trade

merchandise

and

services; 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‟; 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.

Going

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.

State/UT

Governments can play a crucial role in promoting exports and rationalising non-

essential imports.

Many of the State Governments have nominated Export

Commissioners.

The

Department

Commerce

also

helping

State

Governments to prepare export strategies. An Export Promotion Mission will be

constituted

provide

institutional

framework

work

with

State

Governments to boost India‟s exports. Senior officials have been appointed as

designated focal points for exports and imports in several Central Government

departments.

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.

The biggest

challenge, however, is to address constraints within the country such as

infrastructure

bottlenecks,

high

transaction

costs,

complex

procedures,

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

export

promotion

efforts

will

have

take

future, i.e.

towards

fundamental systemic measures rather than incentives and subsidies alone.

The Mega Agreements: Implications for India

11.

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

enabling environment.

Market Strategy

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.

Important

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

several

challenges

the

form

stringent

sanitary

and

phytosanitary

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

trade

promotion

activities

new

products

with

higher

value

addition

particularly

the

categories

defence

equipment,

medical

equipment,

construction

material,

processed foods, as also services.

87.

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.

89.

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.

90.

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.

91.

New Zealand is a participating country in the RCEP negotiations.

India and

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.

South Asia

92.

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.

93.

India

has

indicated

its

willingness

take

asymmetrical

trade

responsibilities in the region in order to promote greater regional and economic

integration.

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.

94.

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

economy.

95.

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.

Issues

96.

India-Sri Lanka trade is mostly conducted under a bilateral FTA.

The two

countries

completed

negotiations

for

Comprehensive

Economic

Partnership

Agreement a few years ago. The CEPA is aimed at building bilateral value chains

and promote

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.

97.

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

Agreement.

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.

98.

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

the LDCs.

Future focus

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.

100.

In order to encourage regional integration within South Asia, India will:

(i)

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;

(ii)

Pursue

negotiations

under the SAFTA Trade In

Services

Framework

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;

(iii)

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;

(iv)

Intensify efforts at infrastructure development at the borders;

(v)

Promote multimodal connectivity including inland waterways in order to

realise the vision of a seamless South Asia;

(vi)

Work towards concluding SAARC Agreements on promotion and protection of

investments,

Motor

Vehicles

and

Railways,

and also for

electricity

transmission grids;

(vii)

Intensify efforts at utilization of hydro power potential in the region; and

(viii)

Promote project exports to South Asian partners.

Iran

101.

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.

102.

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

EXIM Bank.

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

areas

such

meat,

agricultural

products,

gems

& jewellery,

engineering,

pharmaceuticals, automobiles and auto components will be encouraged.

Trade

promotion activities will be further intensified. An institutional mechanism for regular

interaction will be set up to review, evaluate and monitor bilateral trade.

Other

institutional opportunities will also be explored.

South-East Asia

104.

In pursuance

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.

105.

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.

106.

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

ASEAN.

107.

The

India-Singapore

Comprehensive

Economic

Cooperation

Agreement

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.

Future Focus

108.

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.

109.

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

offers opportunities

for Indian investment

manufacturing

zones

with

view

to benefitting from

their institutional

trade

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

111.

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.

113.

On completion, the project will provide complete land connectivity between

India

and

the

ASEAN

region

through

Myanmar

and

Thailand.

The relevant

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

collectively

emerge

globally

competitive

economic region.

Intensive

implementation of ongoing connectivity projects in the region is strongly required.

114.

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

countries is

a high trade deficit.

117.

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.

118.

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.

119.

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.

Future Focus

120.

Engagement

with

China

requires

comprehensive

approach

trade,

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:

(i)

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;

(ii)

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;

(iii)

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;

(iv)

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

(v)

Remain vigilant and take action to safeguard against unfair trade practices to

protect the legitimate trade interests of Indian industry.

121.

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

market access.

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

business.

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

trade.

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.

122.

Korea

has

taken

significant

advantage

the

bilateral

regional

trade

agreement.

India has not been able to utilise the bilateral agreement to the extent

National Investment and Manufacturing Zones

required.

Therefore one of the major efforts will be to intensify outreach work on

bilateral trade agreements with Japan and Korea.

Africa

123.

There

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. 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.

124.

Agro-processing,

manufacturing,

mining,

textiles,

FMCG

infrastructure

development and construction, to name a few, can offer huge potential to Indian

companies.

125.

Against the backdrop of an uncertain global economic recovery, Africa‟s

macroeconomic prospects remain favourable. According to the African Economic

Outlook 2014

, 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.

126.

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

2013-14.

127.

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

ICT

, education, vocational skills development, health and financial services.

128.

Facilitating

investment

private

Indian

entrepreneurs,

especially

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.

129.

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

2014

accessed at

http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/2014/PDF/E-

Book_African_Economic_Outlook_2014.pdf on 26.10.2014

Information and Communications Technology

130.

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.

131.

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.

132.

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

133.

India is engaging actively with countries and regional groupings in Africa

although presently, India does not have any trade agreements with countries in the

region.

(i)

Negotiations need to be pursued to finalise a PTA with the South African

Customs Union (SACU)

(ii)

Feasibility

studies

are underway to

explore

the

possibility

trade

agreements

with

the

Common

Market

for

Eastern

and

South

Africa

(COMESA) and the Economic Community of West African States (ECOWAS).

(iii)

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.

(iv)

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.

Many

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.

(v)

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

Technical

and

Economic

Cooperation

(ITEC)

Programme

for

Capacity

Development. They will continue to receive intensive attention.

134.

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).

Through its

training programmes and through the mechanism of WTO promoted institutional

processes, India has engaged with African partners in a wide area of policies.

The

India-Africa Forum Summit and the Trade Ministers Conclave during the Summit

have provided

a major institutional platform for this regular engagement.

This

will

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

135.

India‟s total trade with the 18 countries in the West Asia and North Africa

(WANA) region

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

2013-14.

136.

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.

The

mechanisms of Joint Commissions have offered institutional frameworks for pursuing

bilateral interests.

They need further strengthening to maintain a long term

sustainable trade relationship.

A greater focus on trade promotion efforts in this

region, is desirable.

137.

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

138.

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

fertile land.

139.

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

(i)

Six Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United

Arab Emirates);

(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.

140.

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.

141.

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.

Deepening and

widening of the India-MERCOSUR PTA is an important

part of the agenda for this

region.

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

basket.

142.

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.

143.

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.

With the

discovery of new oil fields in Brazil, Venezuela, Columbia and shale gas in

Argentina,

India‟s

public

and

private

sector

companies

are

looking

for new

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.

Future Focus

144.

The plan for greater engagement with this region envisages:

(i)

Efforts to diversify India‟s exports to the region in the future;

(ii)

Expansion of India-MERCOSUR PTA;

(iii)

Strengthening trade and investment linkages with the Pacific Alliance;

(iv)

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

(v)

Initiation of a

Joint Study on a proposed India-Peru FTA.;

(vi)

Exploring

the

potential

for

large-scale

farming

Indian

companies/individuals with a view to augmenting India‟s food security

programme as well as playing a greater role in global agriculture trade.

(vii)

Encouraging project exports in the LAC region through easy access to

credit facilities;

(viii)

Intensifying trade promotion programme to encourage and support Indian

exporters to export to Latin American countries;

(ix)

Extending help in setting up warehousing facilities in Latin America to

make our exports more competitive by overcoming distance and time

constraints; and

(x)

Continuing to explore possibilities for new regional trading arrangements

in Central America and Caribbean Region.

The CIS Region

145.

Trade between India and the CIS (Commonwealth of Independent States)

region - which

includes

countries, namely, Kazakhstan,

Turkmenistan,

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.

146.

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,

potash,

fertilizers,

metals

and

minerals.

The

CIS

region

has

strong

complementarity with India‟s manufacturing sector.

147.

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.

148.

There are several complementarities between the two sides and scope to

increase

cooperation

areas

such

hydrocarbons,

nuclear

energy,

pharmaceuticals, fertilizers, diamonds, coking coal, agro products, textiles and

leather,

engineering,

information

technology

services

and

infrastructure

development.

149.

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.

150.

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

potential

for

bilateral

trade

between

the

two

countries

and

commits

the

two

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.

151.

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.

Ongoing/Future Initiatives

Connecting India with the CIS: The International North South Transport

Corridor

152.

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

with

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.

153.

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.

154.

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

Moscow. It

was calculated that on the INSTC a shipment would take an average of

23 days

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.

155.

The Federation of Freight Forwarders Association of India (FFFAI) has

conducted a

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

Russia.

156.

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

www.pmindia.gov.in

Press Release dated 11 December 2014, Press Information Bureau, viewed on 7 February 2015 at

www.pib.nic.in

In the meantime, an institutional mechanism to deal with outstanding bilateral trade

issues is being put in place.

157.

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.

158.

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.

However, this

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

etc.

The institutional process for bilateral trade has not been worked to the extent

desired.

The infrastructure constraint is another reason for the relative lack of

integration.

It is expected that once the INSTC becomes

popular, integration would

be initiated.

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

sector.

Impact and Utilisation of FTAs

159.

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.

160.

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.

161.

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

pace.

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

much deeper.



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.

162.

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

challenge.

Some Issues being addressed

Rules of Origin

163.

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

reviewed.

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

164.

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.

However,

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

disadvantage

Preferential Export Data

165.

The present export documentation does not separately capture preferential

trade data.

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.

Consequently, it

is necessary to capture preferential export data in the normal course.

This is

possible either by making certain amendments in the shipping bill itself or in the

application format.

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

166.

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.

167.

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

origin.

Trade Portal

168.

A web portal on FTAs has been developed which can be accessed at

http://indiantradeportal.in/

. 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

169.

keeping

with

its

commitments

the

WTO,

India

became

the

first

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

170.

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.

171.

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

172.

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

Agreement

. At the Ninth Ministerial Conference in Bali, Indonesia, in December

2013, Ministers decided to take further steps towards the operationalization of the

waiver.

173.

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

favourably received:



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:

India will

earmark a share of at least 25 percent out of all technical assistance and capacity

building

opportunities

currently

offered

the

Ministry

External

Affairs,

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

engineering

services,

management

consulting

services,

entertainment

and

sporting services, cultural and sporting services, maritime transport and maritime

auxiliary services, etc.

SECTION III: PRODUCT STRATEGY

174.

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)”

175.

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.

176.

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.

Engineering Exports

177.

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.

178.

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.

179.

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.

180.

A study

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

181.

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

markets.

182.

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),

KPMG

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

marketing strategy.

Electronics

183.

The huge

domestic

demand

for

electronics is

met

largely

imports

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.

184.

Indian electronic hardware manufacturers also experience a higher level of

taxation, higher cost

of power,

finance

and

freight

and

poorer

infrastructure

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

manufacturing competitiveness,

inter alia

, on account of lower factor costs, is India‟s

main competitor in this sector.

185.

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

for

improving

product

standards,

creating

compliance

conformity

mechanisms,

discouraging non-essential imports, offering trade promotion opportunities for the

sector and promoting manufacturing and exports of products left out in ITA 1.

Pharmaceuticals

186.

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

globally). The

industry is expected to expand at a compound annual growth rate (CAGR) of 14.5

percent over 2009-2020 to reach USD 55 billion.

187.

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

. Developed

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

188.

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

factors.

189.

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

generic medicines.

These challenges include the following:

(i)

Campaigns to malign generic products as being in violation of India‟s IPR

commitments;

(ii)

Alleged lack of compliance of generic medicines coming out of India, with

quality standards;

(iii)

India‟s

over

dependence

some

sources for

its active

pharmaceutical

ingredients (APIs);

(iv)

India not being party to the PIC/S

Convention and Indian Pharmacopeia being

not recognized yet in major markets; and

(v)

India‟s pricing policies forcing Indian exporters to price their products with

extremely low margins.

190.

All these challenges have been met frontally by the government over the past

few years.

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

affordable.

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

sources.

The brand promotion for India‟s pharmaceuticals has shown excellent

results.

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

the Government.

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

yoga.

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/Equipment

191.

Medical devices and equipments constitute a new area of focus.

The recent

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

performance.

Light Manufacturing Sectors: leather products and textiles

192.

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.

193.

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

(iii) Improving

competitiveness

through

supporting

environmental

compliance

expenses and other capital expenses.

(iv) Supporting skill development and marketing efforts.

194.

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

several challenges.

The textiles policy should address most of the concerns of this

sector.

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.

India is

positioned

along the entire value chain of cotton and synthetic textiles and

garments.

It needs to reorient itself in view of increasing global challenges and

emerging

opportunities.

Several

developing

countries

are

becoming

major

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.

This approach

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

interventions.

Gems & Jewellery Sector

195.

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.

196.

Though the sector has relatively low value addition, the volume of exports is

high.

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.

The sector

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.

197.

The gems and jewellery sector is an import intensive sector with export

orientation.

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

198.

Another focus area is that of natural resource based exports. This category

includes

agriculture,

plantation

crops,

marine

products

and

iron-ore

exports.

Revitalizing plantations, enabling a less controlled regime for agriculture, and aiming

at greater value addition and processed products would help increase the value of

exports.

Small and Medium Enterprises

199.

There is a steadily growing market for processed foods and vegetables,

organic

agricultural

produce,

and

fresh

agricultural

produce

for

retail

supermarkets. According to

one study

, 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.

200.

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

at home.

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

ore.

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.

Agricultural Products

201.

Exports of agricultural and allied products (including plantation and marine

products) have more than doubled over a period of 5 years. Exports have grown

from USD

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.

202.

Framing policies for the export of agricultural products involves consultations

and

consensus

building

with

several

stakeholders

including

various

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

domestic

price

situation, ensuring

remunerative

prices

for

growers

and price

competitiveness in the international market.

Production, marketing and pricing

policies adopted by major producers of like products or substitutes also influence the

export

potential

of agricultural products.

Climatic

factors

have also become

increasingly relevant in this matter.

203.

The salient features of a plan of action to promote exports of agricultural

products are as under:

(i)

A stable policy regime:

maintaining a long term, stable, consistent and by-

default „open‟ export policy as against an „on-off‟ policy;

(ii)

SPS/TBT issues:

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.

(iii)

Post-harvest facilities:

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

airports;



silos with temperature control mechanisms to preserve the quality of

produce;



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.

(iv)

Organic exports:

Promoting organic agri-exports through appropriate policy

interventions

and

setting

credible

and

up-to-date

organic

export

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

realisation.

This sector requires special attention which will include major

investment in technical capacities

for organic certification,

outreach and

capacity development in some of the States particularly in the North Eastern

States

where

the potential

for

organic

agriculture

very

encouraging.

Support

for

packaging,

branding

and

marketing

such

products

and

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.

204.

Export strategies for processed agricultural exports and organic product

exports are under preparation and should be ready soon.

Plantation Products

205.

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-

friendly

manner

that

supports

the

tribal

social

structure. Plantation

products,

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.

206.

Plantations

today

face

number

challenges

including

stagnation

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.

207.

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.

While tea

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

with

support for export after branding of these products will be taken up.



Quality compliance is most critical in the case of all these products.

A sound

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,

inter alia

, 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.

Defence Products

208.

Government

aims

encourage

and

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.

209.

Various initiatives already taken or to be

taken to enhance export of items from the defence

sector

include

modifications

the

FDI

policy,

greater clarity as regards industrial licenses for this

sector,

fastracking

applications,

listing

munitions, creation of HS codes for items in this

sector and setting up promotional institutions for

defence exports.

Hi Tech Products

210.

In the selection of winners and potential

winners for export rewards special attention has

been paid towards promoting products with higher

technology content.

There is no clear definition of

high-technology

product.

However,

various

reports

categorise

products

high-technology

products without actually defining them.

Based on

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

a high

technology

product

necessarily a

constantly

evolving

and

dynamic

one

and,

therefore, the list will be regularly reviewed and

updated.

Exports by medium, small and micro

enterprises

211.

Micro,

Small

and

Medium

Enterprises

(MSMEs)

contribute

about

percent

the

manufacturing output, over 40 per cent of the total

exports of the country, and around 8 percent of the

country‟s

GDP.

They

contribute

significantly

employment generation and the development of

rural areas.

212.

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

improving

entrepreneurial

skills

and

economic

Strategy for Defence Exports, Department of Defence Production, Ministry of Defence, Government of India,

accessed at

http://ddpmod.gov.in/showfile.php?lid=158

on 26.10.2014

Box 3: National Offsets Mechanism

India

considering

national

offsets

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

were

held

with

stakeholders

and

various

Ministries.

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

the

relevant

WTO

rules

and

the

Public

Procurement Bill have been kept in mind in

drawing up the draft Policy.

The national offsets mechanism will have the

following objectives:

technology transfer;

acquisition of assets in the importing

country;

investments;

augmenting capacity for research,

design and development;

long-term supply agreements;

enhancing exports (including project

exports);

creation of employment

opportunities, etc.

It would contain provisions for cross-sectoral

linkages across organizations/ departments in

offset clauses.

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

incorporate offsets.

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

export

services,

agricultural

products,

minerals and ores, as India is competitive in

these

products/

sectors

and

would

difficult to isolate the incremental effect of the

offsets contract.

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.

213.

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

the FTP.

Interest Subvention

214.

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.

Export

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

215.

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.

216.

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)

217.

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

world exports.

218.

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

has declined

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.

219.

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.

In order

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

these actions.

220.

India has inherent competitiveness and export potential in many skill based

and

labour

intensive

services.

Healthcare,

education,

professional,

R&D,

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.

221.

also

have

advantages

various

services

which

are

incidental

manufacturing and R&D and can bring transformational efficiency to manufacturing.

With the structure of manufacturing in many countries, including India, becoming

and

sophisticated,

there

increasing

“servicification”

manufacturing. Better services will improve the competitiveness of the manufacturing

sector.

For instance, efficient and reliable infrastructure services such as transport,

distribution and logistics chains, finance and payments infrastructure, utilities such as

telecommunications,

and

professional

services

are

essential

for

cost

effective

production and marketing of goods. The Services sectors have a critical role to play

in the „Make in India‟ initiative.

Challenges

222.

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

partners;



Domestic

regulatory

weaknesses

limiting

the

capacity

domestic

service

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.

223.

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

224.

This is an evolving area with rapid changes in technology and extensive

digitization.

India

must

take

full

advantage

the major

emerging

business

opportunities in areas such as E-Commerce, Cloud Computing, Mobile Applications

and

data

security

requirements. The

Indian

government

has

recognised

the

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.

225.

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

226.

There is a growing worldwide trend towards setting standards not only for the

manufacturing industry, which chiefly initiated standardization activity, but also for

organizations, services,

processes and systems.

227.

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.

228.

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.

Ongoing/Future Initiatives

229.

The Department of Commerce is working on an ambitious reforms agenda for

services.

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.

230.

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.

231.

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.



The

Focus

Sectors

of the GES

are

Telecom,

tourism,

media

entertainment,

healthcare,

logistics,

professional

services,

education,

R&D,

space and SME in Services.

232.

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

the FTP.

233.

Efforts are also underway to improve the availability of data on services to

facilitate better policy making, effective international engagement and targeted

incentives.

SECTION V: TRADE PROMOTION & INFRASTRUCTURE

Towards World Class Products

234.

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.

235.

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

well-documented.

236.

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:

(i)

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.

(ii)

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

regulatory practices.

(iii)

The internationally accepted system is “Certified Once,

Accepted Everywhere”

through

accreditation, which recognizes

the

competence

testing

and

calibration

laboratories,

product certification

bodies,

quality

system

certification

bodies

and

inspection

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.

(iv)

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.

(v)

Participation

agencies

and

industry

international

standard

setting

processes can ensure that international standards reflect country-specific

production and trade interests and this should be promoted by providing the

requisite funding.

(vi)

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

237.

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.

238.

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.

Future Focus

239.

„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

Tier I

240.

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

environment.

The term „Brand India‟ is used very often without actually defining its

specific elements.

What is it that we actually associate or wish to associate with

„Brand India?

Therefore the first exercise needs to be to identify the elements of

„Brand India‟.

241.

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 „

Brand India

‟. Indian missions abroad and the

foreign missions in India are the conduit for disseminating this information.

ii.

Revamping of websites of trade bodies (export promotion councils etc)

In an age of hyperconnectivity it is extremely important that the web portals of

all

interfaces

involved

the

Brand

India

campaign

are

user

friendly,

searchable and updated. The websites of all the export promotion councils will

be revamped, redesigned and oriented to export priorities.

iii.

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.

iv.

Re-orienting “

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

impact.

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

also important.

Brand manual for exhibitors

A brand manual for the exhibitors would be designed and provided for all the

“

India Shows

”.

vi.

Broader sectoral campaign

The sectoral brand campaign must include all organisations and associations

associated with the sector apart from the relevant export promotion council.

vii.

Tactical positioning

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

242.

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.

Therefore, the

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.

Therefore an

exercise will be instituted to work towards this objective.

Geographical Indications

243.

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

Darjeeling Tea.

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

244.

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

245.

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

scheme

broadly

include

the

organization

exhibitions,

buyer

seller

meets,

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

scheme

is inadequate

for

the

enormous

opportunities

which

exist

and

the

promotional efforts that are required.

Therefore, efforts will be required towards

augmenting resources both within and outside the Government.

246.

Under

the

Market

Development

Assistance

(MDA)

Scheme,

financial

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.

MICE

247.

The

meetings,

incentives,

conventions,

exhibitions

(MICE)

space

has

emerged as a major opportunity for a fast emerging economy like India.

In an

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.

While

there could be several reasons for such poor participation in MICE activities, the lack

of convention infrastructure is one of the major bottlenecks.

Convention tourism

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

present infrastructure.

248.

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

and conferences.

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

249.

Another important instrumentality for the promotion and development of the

country‟s exports are Export Promotion Councils (EPCs).

250.

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.

251.

EPCs have, over time, acquired a central position in India‟s trade promotion

efforts.

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

India.

Now almost all of them receive trade promotion grants from the Department of

Commerce.

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.

Substantial work

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

outreach.

All Councils which receive Government assistance for trade promotion

work will have to subscribe to the elements of this decision.

Project Exports

252.

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.

253.

The full value of project exports is not captured under any single aggregate

classification.

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.

254.

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.

India‟s

current project export contracts are estimated at around USD 5 billion.

It is

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.

255.

Such

projects,

while

helping

the

recipient

countries

bridge

their

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

projects.

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

entities.

They also exhibit India‟s cost competitiveness while at the same time

maintaining internationally comparable quality standards.

256.

Project exports can be boosted through opening of special lines of credit and

also

provision

cheap

lines

credit

through

buyer

credit

mechanism.

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.

257.

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.

258.

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

Corporation (ECGC).

259.

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.

This enables

EXIM Bank to offer co-financing for project exports from India to target countries in

South Asia, Africa, CIS and others.

260.

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

resource constraints.

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

scheme.

Mainstreaming Trade

261.

There is a compelling need to

ensure that trade is fully assimilated in the

relevant

parts

the

country‟s

governance

architecture,

hence

the

phrase

„mainstreaming‟. A trade/industry/business orientation is practically non-existent in

many local bodies, some State Governments and even in many departments of the

Central Government.

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

restricting

them

but

optimising

imports

important

tool

for

ensuring

competitiveness and efficiency.

262.

Efforts have already been initiated for mainstreaming foreign trade in the

Central

Government

departments.

Senior

officials

have

been

appointed

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

prepare

strategies,

work

plans,

incentive

programmes,

support

capacity

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.

263.

An Export Promotion Mission will be constituted to provide an institutional

framework to work with State Governments to boost India‟s exports.

Export Infrastructure

264.

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.

ASIDE

265.

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

exports.

This was being done through coordinated efforts with States under the

ASIDE

(Assistance

States

for

Developing

Export

Infrastructure

and

Allied

Activities) Scheme.

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.

These

initiatives

are

designed

help

exporters

especially

from

the

small

industry,

handicrafts, agri-business and commodities sectors to produce high quality finished

products with high value addition primarily for the export market.

266.

The

ASIDE

scheme

has

played

important

role

bridging

some

infrastructure gaps.

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

curtailed.

This is in pursuance to Government‟s decision to transfer additional tax

resources

States

accordance

with

the

recommendation

the

Finance

Commission.

Consequently, the ASIDE scheme would need to be restructured/even

renamed.

The scheme hereafter will only be able to support infrastructure gaps in

central institutions.

It is assumed that States will continue to support funding of

infrastructure

projects

under

the

State

component

and

will

undertake

new

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

267.

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.

268.

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;

(d) Development of infrastructure facilities.

269.

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.

270.

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

& DDT

were

imposed on the SEZs, which has severely hampered the progress of the SEZ

scheme.

271.

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

several countries.

The need for strengthening of this scheme is felt for the following

reasons:

(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

one place.

(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

each time.

available to bigger players for obtaining various kinds of approvals, finding

space etc.

(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.

272.

Recently, dual use of infrastructure was allowed for non-processing areas.

Single window services as far as central government services are concerned, are a

reality.

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

end-to-end e-governance.

Restoring tax benefits is of critical importance.

The

Department of Commerce will pursue action on all these elements to make SEZs

more competitive and better placed for manufacturing and services exports.

As a

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

alone.

This paradigm requires a review of the SEZ-DTA relationship.

Minimum Alternate Tax

Dividend Distribution Tax

SECTION VI: TRADE ECOSYSTEM

Digitisation and E-governance

273.

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.

274.

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.

275.

Government

has

already

launched

very

ambitious

programme

for

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.

This would

require close interaction between various departments involved in the process of

trade.

Ongoing Initiatives

276.

As far as digitization and e-Governance exercises in other relevant areas are

concerned, the following initiatives are underway:

(i)

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.

(ii)

All

transactions

respect

of delivery

services

rendered by

various

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

SEZ

online

with

the

Customs

ICEGATE

active

state

implementation.

Indian Customs Electronic Commerce/Electronic Data interchange (EC/EDI) Gateway

Box 4: Automation of Procedures & Use of Technology for Communication

EDI:

Electronic Data Interchange; DFIA:

Duty Free Import Authorisation; FPS:

Focus Product

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

Incentive

Scheme;

SCOMET:

Special

Chemicals,

Organisms,

Materials,

Equipment

and

Technologies

Trade

Facilitation

through EDI and E-

governance

Initiatives

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

Fee

Payments.

The

use

EDI

DGFT

has

enabled

faster

processing,

speedier

communication

and

on-line

availability

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.

Facility

online

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)

ii.

Advance Authorization Scheme, Annual Advance Authorization

scheme, DFIA

iii.

EPCG scheme, Annual EPCG scheme

iv.

FPS, FMS, MLFPS, VKGUY, SFIS, SHIS, Incremental Export

Incentivisation Scheme

Registration Certificate for Cotton, Cotton Yarn etc.

vi.

Authorization for items falling under Restricted (imports / exports)

or SCOMET (exports) list.

Use

Digital

Signatures

DGFT allows filing of online applications (except IEC) with Class-II digital

signatures with IEC number embedded in it.

eBRC

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.

DGFT operationalized

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

Enforcement Directorate.

Ease of Doing Business

277.

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

import.

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.

Trade Facilitation

278.

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.

279.

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.

280.

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

performance

and

infrastructure

development

through

pan-India

approach.

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.

281.

The WTO has recently agreed on a Trade Facilitation Agreement (TFA).

India

is a party to this and once it is ratified would follow the categorisation of various

facilitation initiatives provided for in the agreement.

282.

India has undertaken a host of autonomous reforms even before the WTO

agreed to have a TFA. Our main focus is to:

(i)

Simplify laws and procedures and streamline fees and formalities dealing with

release and clearance of goods;

(ii)

Ensure greater transparency in trade law administration; and

(iii)

Enhance and initiate measures for border cooperation and free movement of

transit goods.

Measures to Enhance Transparency

283.

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

284.

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.

Border Management

285.

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.

286.

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:

(a)

Extension of

the Advance Ruling facility gradually to any exporter, importer or

person with a justifiable course or a representative thereof.

(b)

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.

(c)

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

delay.

Constitution of a National Committee on Trade Facilitation

287.

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

implementation.

288.

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

the system.

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

289.

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

doing

business

India

easier.

High

transaction

costs

directly

impact

the

competitiveness of Indian exporters vis-à-vis exporters of competing countries.

290.

Steps are being taken by various Ministries and Departments to simplify

administrative

procedures

and

reduce

transaction

costs

based

the

recommendations

two

Task

Forces.

The

implementation

these

recommendations is being actively pursued.

Trade Remedial Measures

291.

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.

292.

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

293.

India‟s growing integration with the world economy makes the pursuit of

foreign trade an attractive opportunity for young people.

Recognising the

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

remains underexploited.

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 Development

294.

Capacity building of the relevant stakeholders and institutions is of utmost

importance in order to fully realize the potential of

various trade agreements and

foreign

trade

policy

measures.

This

especially

necessary

for

the

State

Governments

and

various

institutions,

namely

export

promotion

councils,

development authorities and industry associations. The focus of this capacity

building will be on the following areas:

(i)

Training

officers

the

export

promotion

councils

and

export

development authorities;

(ii)

Establishment of a trade research/ analysis cell in these institutions;

(iii)

Creation

internal

team

for

soliciting

value

added

inputs

from

stakeholders; and

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.

(iv)

Development and regular updation of the web portals of institutions.

295.

A similar capacity building exercise would be carried out for the commercial

missions with the focus being on

(ii)

Carrying out in-house trade research;

(iii)

Branding India activities;

(iv)

Monitoring of trade developments in the host country;

(v)

FTA monitoring (including 3rd parties); and

(vi)

Monitoring of unilateral schemes like the GSP.

Strengthening the Commercial Wings in Indian Missions Abroad

296.

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

Affairs.

Centre for Research in International Trade

297.

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.

298.

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.

299.

The proposed CRIT will fill this gap and will also help in forming enduring

coalitions

with

large

number

developing

countries

which

may

have

convergence of interests with India and could potentially become India‟s allies on

various trade issues at the global level.

Institutional Mechanism for Communication

300.

Two mechanisms are being put in place for regular communication with

stakeholders.

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.

301.

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

302.

A policy whose implementation is not regularly monitored and periodically

reviewed can remain a piece of paper.

Therefore, a concurrent mechanism for

monitoring

the

implementation

the

policy

quarterly

basis

will

institutionalised.

This

mechanism

will

internal

process

set

the

Department of Commerce.

The policy will be reviewed mid-term with the objective of

making a mid-course assessment and modification where required.

A concurrent

mechanism of evaluation will also be put in place.

Consultation

303.

While preparing this statement, consultations have been held with a cross

section of stakeholders in formal and informal settings.

Written communications

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

to time.

Many of these suggestions/recommendations have been incorporated in the

policy.

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