India: Incentives for critical export sectors
On 23 August 2010, India announced a host of export incentive measures to critical sectors as part of the Annual supplement 2010-11 to the Foreign Trade Policy, 2009-14. These measures were announced in the wake of the uncertainties in the global markets. After posting a robust growth of over 32 per cent in the first quarter of 2010-11, India's exports slumped to 13 per cent in July due to sluggish demand in its traditional markets of the U.S. and EU.
- A number of products from sectors such as engineering, leather, textiles and jute have been added to the two per cent interest subvention scheme under the Market Linked Focus Product Scheme (MLFPS). Handloom, handicrafts, carpet and the SMEs (small and medium enterprises) have been getting this facility, which will now be available till March 31, 2011.
- In order to meet the declared export target of $200 billion for 2010-11, the government announced the extension of the extension of schemes such as the Duty Entitlement Pass Book (DEPB) scheme, under which taxes were reimbursed to exporters; interest subsidised; and incentives given for import of capital goods. The DEPB scheme was being extended till June 30, 2011 for the last time.
- Zero duty Export Promotion Caption Goods (EPCG) Scheme, introduced in August 2009 and valid for only two years upto 31.3.2011, has been extended by one more year till 31.3.2012. The EPCG scheme allows for zero duty Import of capital goods for exports of agricultural products and their value added variants. In order to give a boost to technological up-gradation for additional sectors as well, the benefit of the scheme has been expanded to cover paper & paperboard and articles thereof, ceramic products, refractories, glass & glassware, rubber & articles thereof, Plywood and allied products, marine products, sports goods and toys and additional engineering products.
- The 1% Status Holder Incentive Scheme (SHIS) introduced in August 2009 and valid for only two years upto 31.3.2011, has been extended by one more year for 2011-12 exports. The SHIS entitles the status holders such as trading houses, star trading houses etc for additional duty scrip @ 1% of the FOB value of exports and is used for import of capital goods. The benefit of the scheme has been expanded to cover chemical & Allied products, paper, paperboard and articles thereof, ceramic products, refractories, glass & glassware, rubber & articles thereof, plywood and allied products, electronics products, sports goods and toys and additional engineering products.
The total revenue implication of these incentives is valued at $224.8 mn. The next trade policy review will be undertaken in December 2010.
These proposals have different effects on foreign commercial interests. On the one hand they create commercial opportunties in the goods for which tariffs are lowered. On the other hand, these proposals increase the relative profitability of supplying overseas markets, intensifying competition there.
Any Evidence-Based Deliberation:
|Is there anything in the public record to suggest that evidence of the effectiveness of the proposed measure was considered during official deliberations?|
|Is there any evidence that alternatives to the proposed measure were considered?|
|Is there anything in the public record that suggests that empirical evidence informed the comparison across the alternatives available to government?|
|Was such evidence identified?|
|Is such evidence publicly available?|
|Did the official decision-maker in question provide an explanation as to why a chosen measure was favoured over alternatives?|
|Is there any evidence to suggest that potentially affected trading partners were consulted before the measures were taken?|
|Is there any evidence that safeguards have been put in place to ensure that implementation of the initiative is transparent and non-discriminatory?|
|Did the government state its intention to review the measure within one year of implementation?|
Date Discovered: 24/08/2010
Date of inception: 23 Aug 2010
GTA Evaluation: Amber
Press release, Ministry of Commerce and Industry on 23 August 2010, http://pib.nic.in/newsite/erelease.aspx?relid=0
'Rs.1,052-crore incentives to critical export sectors', The Hindu, 24 August 2010