Small units' export prop
New Delhi: The much delayed mid-year review of the Foreign Trade Policy (FTP), to be unveiled this week, would focus on sops to small and medium enterprises (SME) and labour-intensive segments.
The trade policy, to be released on Tuesday, is likely to give a 2 per cent additional incentive under the Merchandise Export from India Scheme (MEIS) to labour-incentive sectors such as leather, sports goods, marine products and textiles.
The commerce ministry gives benefits to several products as "duty credit scrips" under the Merchandise Exports from India Scheme (MEIS), which can be used to import inputs by the exporter or sold to other entities.
The commerce ministry had recently raised the rate of incentive under MEIS for garments and made-ups to 4 per cent from 2 per cent till June 2018 to help exporters struggling with the implementation of the GST.
"Most of the incentives for goods under the ongoing five-year FTP are extended through the MEIS scheme. So, in the review of the FTP, the additional sops will be given through the scheme," the official said.
Officials said the MEIS is being re-designed to make exports from India compliant with the GST and WTO. Duty-drawbacks are basically taxes foregone and that is considered a "prohibited subsidy" by the WTO.
However, globally, zero-rating of exports are a norm and this is WTO-compatible as the idea is to neutralise the tax content in export items and not to subsidise them.
The mid-term review of the FTP is aimed to take stock of the changing aspects of global trade, rationalise trade norms and bring into play new policies to boost trade facilitation that may include tweaks in the export promotion schemes.
The review comes at a time India's goods exports have shrunk (-) 1.12 per cent in October this year to $23 billion, the lowest since (-) 6.86 per cent in July 2016, which was the last time the shipments contracted. The fall in shipments in October, the first after 14 consecutive months of positive growth, was understood to be because of the GST impact.
G.K. Gupta, president of the Federation of Indian Export Organisations, had said, "The fall was expected as exporters, particularly SMEs, were facing liquidity problem to pay the GST for four months in a row without getting any refund."