Foreign Trade Policy mid-term review: How SMEs are impacted

Foreign Trade Policy mid-term review: How SMEs are impacted

Economy

GlobalLinker Staff

GlobalLinker Staff

6 Dec 2017, 13:07 — 4 min read

The Centre released the mid-term review of the Foreign Trade Policy (FTP). The expectation was that the policy would be instated to boost the exports, increase employment and provide significant value-addition to the economy. The review is a mid-course correction that was postponed, to take into account any fallout from the implementation of GST and to ensure that the Foreign Trade sector was operating optimally.

 

The SME sector was given special attention as part of the government’s plan to make business easier for the sector that forms the backbone of the economy in terms of labour and growth.

 

Union Minister of Commerce and Industry Suresh Prabhu said that the review is aimed at promoting exports by “simplification of processes, enhancing support to high employment sectors, leveraging benefits of GST, promoting services exports and monitoring exports performance through state-of-the-art analytics”. “Emphasis will be on exports of agriculture products to increase farmers’ income,” Prabhu added.


The government hiked by 2% MEIS for the textiles industry which engages a significant number of SMEs in its workings.  The agriculture industry, another industry in which SMEs are prevalent, are slated to receive a boost via reforms. A cold chain and transport logistics network will be set up and organic exports will be a priority. Obtaining organic export certification and availing of accrediting programmes will be key to raising revenues from exports thereby benefiting farmers.

Exporters' issues with the GST have also been addressed with certain measures announced to ease the strain of the new tax. Upfront payments of GST on inputs were hampering the flow of working capital, so the review remedially has extended the benefit of sourcing inputs from abroad and at home without the need to pay GST upfront. This would enable SMEs in their sector to conduct business in a manner that is more streamlined, allowing for further growth of their companies and their sectors.


Highlights from the review that was announced by Alok Chaturvedi, Director General of Foreign Trade are:

 

  • New incentives are valued at about INR 8000 crore

  • The main focus will be on MSMEs, labour-intensive segments and the agriculture sector

  • Goods exports get incentives worth INR 4,556 crore and the services industry a smaller but significant sum of INR 1,140 crore.

  • FTP now provides cover to 8,000 of the 12,000 items used in trade in the country with trade accounting for 45% of the GDP of the nation.

  • Further breakdown of incentives: INR 749 crore for leather and footwear; INR 1354 crore for agriculture and related items; INR 759 crore for marine exports; INR 369 crore for telecom and electronic items; INR 921 crore for handmade carpets; INR 193 crore for medial and surgical equipments; INR 1140 crore for textiles and ready made garments.

 

The FTP (2015-2020) "clearly focuses" on strategies to enhance exports, said Deloitte India's Senior Director R.Muralidharan speaking of the plan’s nature to go beyond incentives. "Besides focusing on incremental exports on traditional markets and products, measures have been announced to encourage exploring new markets and products," Muralidharan said. He continued, "Increasing the validity period of duty credit scrips from 18 months to 24 months besides increase in the export incentives (both for MEIS and SEIS schemes) should benefit the export sector in general."

 

The ministry in its foreign trade policy statement 2017 stated, "The revised FTP focuses on... leveraging benefits of GST by exporters; close monitoring of export performances and taking immediate corrective measures based on state-of-the-art data analysis; increasing ease of trading across borders; increasing the realisations from Indian agriculture based exports.”

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