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.
- An additional incentives of 2% over existing benefit under Focus Product Scheme has been extended to 135 products in sectors including handicrafts, carpets, toys, sports goods, leather products, handloom, engineering etc.
- 256 new products are added to Focus Product Scheme with incentivesat the rate of 2% of exports in sectors including Engineering, electronics, rubber products, oil meals, leather, etc.
- Instant tea and CSNL Cardinol added for incentives under the Vishesh Krushi Gram Upaj Yojana, incentivizing agricultural exports
- The incentive for exports 300 products in the readymade garments sector and some rubber products to the EU under the Market Linked Focus Product Scheme has been extended for 6 months until March 2011
- Re-export of unsold imported raw hides, skins and semi finished leather has been allowed
- Certain trimmings, embellishments etc. in the handloom sector have been allowed duty free imports up to 5% of FOB export values
- Certain trimmings, embellishments etc. for polyester made-ups have been allowed duty free imports up to 5% of FOB export values
- The Export Promotion Capital Goods Scheme has been extended from 31 March 2011 to 31 March 2012 and additional sectors have been covered under the scheme. EPCG provides duty free import of capital goods against export commitments for export intensive industries
- 3 Towns of Export Excellence have been added. One each for handicrafts, textiles and leather products
- The Status Holder Incentives Scheme that provides incentives for high volume exporters has been extended from 31 March 2011 to 31 March 2012 and additional sectors have been included
- Several procedures for exporters to avail these schemes have been proposed to be simplified
- Duty scrips issued under Served From India Scheme for service exports can now be used for duty payment on vehicle imports
- The Duty Entitlement Pass Book scheme that incentivises exporters with tax reimbursements, interest subsidies and incentives for capital goods imports is extended from 31 December 2010
Most of the incentives under specified schemes above have been granted retrospectively for exports since 1 April 2010. 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.
