Arvind Limited and the Power of India's Foreign Trade Policy: A Comprehensive Analysis of Export Promotion Schemes and Incentives

 

 

Introduction

The Foreign Trade Policy (FTP) in India is a set of guidelines and measures formulated by the Ministry of Commerce and Industry to promote exports and facilitate trade. The main objective of the FTP is to enhance the country's export competitiveness, provide incentives for exports, and promote sustainable and inclusive growth.

The current FTP covers the period of 2015-2020 and is divided into five-yearly plans. It outlines various initiatives and schemes to boost exports, such as export promotion schemes, exemption and remission schemes, and reward and incentive schemes.

The export promotion schemes include the Merchandise Export from India Scheme (MEIS) and the Services Export from India Scheme (SEIS), which provide exporters with financial incentives based on their export performance. The Advance Authorization Scheme and the Duty-Free Import Authorization Scheme enable duty-free import of inputs for export production. The Export Promotion Capital Goods (EPCG) Scheme allows for the import of capital goods at a concessional rate of customs duty.

The exemption and remission schemes include duty drawback, which provides a refund of duties paid on inputs used for export production, and the refund of taxes and duties paid on the inputs used in the manufacturing and export of goods and services.

The reward and incentive schemes include the status holder scheme, which provides various benefits to recognized exporters such as faster clearance of goods and duty-free import of inputs. The Market Access Initiative (MAI) and the Market Development Assistance (MDA) schemes provide financial assistance to exporters to explore new markets and promote their products and services.

Focus areas in New FTP:

The new FTP 2021-2026 focuses on several areas to boost exports, such as promoting digital exports, encouraging MSMEs to export, diversifying export markets, creating export infrastructure, simplifying export procedures, and improving logistics and transportation facilities.

The new Foreign Trade Policy (FTP) 2021-2026 of India focuses on several key areas to boost exports and promote international trade. Some of the key highlights of the new FTP are:

Digital Exports: The policy aims to promote digital exports and encourage the use of digital technologies in international trade.

MSME Exports: The policy emphasizes the importance of MSMEs in boosting exports and provides several measures to support and incentivize MSMEs to export.

Diversifying Export Markets: The policy aims to diversify export markets and reduce reliance on a few traditional markets.

Export Infrastructure: The policy focuses on developing export infrastructure such as ports, airports, and highways to facilitate trade.

Simplifying Export Procedures: The policy aims to simplify export procedures and reduce the time and cost of doing business for exporters.

Logistics and Transportation: The policy aims to improve logistics and transportation facilities to enhance the competitiveness of Indian exports.

Merchandise Export from India Scheme (MEIS): The popular MEIS scheme will be replaced with a new scheme that provides a more targeted and focused approach to incentivize exports.

Services Export from India Scheme (SEIS): The SEIS scheme will continue to incentivize exports of specified services.

RoDTEP Scheme: The new Remission of Duties and Taxes on Exported Products (RoDTEP) scheme will replace the existing MEIS scheme to provide a more WTO-compliant and transparent system of duty remission.

Coverage of the Policy:

The FTP covers all aspects of international trade, including exports, imports, trade-related infrastructure, foreign investments, and intellectual property rights.

Various Export Promotion Scheme:

The Indian government has several export promotion schemes to support and incentive exporters. Some of the popular schemes include:

• Merchandise Export from India Scheme (MEIS)
• Services Export from India Scheme (SEIS)
• Export Promotion Capital Goods (EPCG) Scheme
• Advance Authorization Scheme
• Duty-Free Import Authorization (DFIA) Scheme
• Special Economic Zone (SEZ) Scheme
• RoDTEP Scheme (Remission of Duties and Taxes on Exported Products)

Exemption and Remission Schemes (Inputs):

The Advance Authorization Scheme and Duty-Free Import Authorization (DFIA) Scheme are two important exemption and remission schemes that help exporters reduce their input costs.

a) Advance Authorization Scheme: It allows duty-free import of inputs, which are physically incorporated into the exported products. This scheme is available to both manufacturer exporters and merchant exporters.

b) Duty-Free Import Authorization (DFIA) Scheme: It allows duty-free import of inputs, which are used in the production of export products. The benefits of this scheme are available to both manufacturer exporters and merchant exporters.

Export Promotion Capital Goods:

Export Promotion Capital Goods (EPCG) Scheme is designed to facilitate the import of capital goods for producing quality goods and services for export purposes. There are three types of EPCG schemes:

a) Pre-Export EPCG: This scheme allows the import of capital goods for export production at zero customs duty, subject to export obligations.

b) Post-Export EPCG: This scheme allows the import of capital goods for export production at a concessional rate of customs duty, subject to export obligations.

c) EPCG Scheme for Capital Goods Purchased in India: This scheme allows the domestic purchase of capital goods at a concessional rate of customs duty, subject to export obligations.

Status Holder Scheme:

The Status Holder Scheme is designed to encourage exporters to improve their performance and boost exports. Under this scheme, exporters who have achieved a certain level of exports are designated as "status holders," and they are eligible for several benefits such as faster clearance of goods, duty-free import of inputs, and other fiscal incentives.

Reward and Incentive Scheme:

The government of India provides several rewards and incentives to exporters under various schemes. Some of the popular schemes are:

a) Merchandise Export from India Scheme (MEIS): It provides incentives to exporters on the export of specified goods. The incentive is calculated as a percentage of the FOB value of exports.

b) Services Export from India Scheme (SEIS): It provides incentives to service exporters on the export of specified services. The incentive is calculated as a percentage of the net foreign exchange earned.

CASE STUDY- Analysis

Lastly, a case study on how the Indian government's foreign trade policy helped a business could be the example of the Indian textile and apparel manufacturer Arvind Limited. With the help of various export promotion schemes such as the EPCG scheme, the company was able to expand its operations and increase its exports significantly.

Arvind Limited is a leading textile and apparel manufacturer in India that exports its products to over 80 countries worldwide. The company has been able to leverage various government schemes to enhance its competitiveness and grow its exports.

One of the schemes that Arvind Limited has benefitted from is the EPCG scheme. The company has used this scheme to import capital goods at a concessional rate of customs duty, which has helped it to modernize its manufacturing facilities and improve the quality of its products. This, in turn, has helped the company to increase its exports and gain a competitive edge in the global market.

The company has also benefited from the Status Holder Scheme, which has helped it to reduce its transaction costs and improve its supply chain efficiency. Under this scheme, Arvind Limited has been designated as a "Three Star Export House," which has allowed it to enjoy various benefits such as faster clearance of goods and duty-free import of inputs.

As a result of these initiatives, Arvind Limited has been able to increase its exports from $340 million in 2014 to $670 million in 2020. The company has also been able to expand its operations and set up manufacturing facilities in several countries such as Bangladesh, Ethiopia, and Vietnam.

Conclusion

In conclusion, the Indian government's foreign trade policy has been instrumental in helping companies like Arvind Limited to enhance their competitiveness and increase their exports. The various export promotion schemes, exemption and remission schemes, and reward and incentive schemes have provided a conducive environment for businesses to grow and thrive in the global market..

 

Article Compiled by:-

Mayank Garg

(LegalMantra.net Team)

+91 9582627751

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including newspapers, Journals, Bare Acts, Case Material. Charted Secretary etc.

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