The government will announce a new five-year foreign trade policy this month, which is likely to include incentives for domestic value-added products, new rules for special economic zones (SEZs) and a probable review of free trade agreements (FTAs) that India had signed with various countries and group of nations.
Last week, commerce and industry minister Nirmala Sitharaman had said that the new foreign trade policy (2014-19) will be “different”.
The export policy is also likely to have incentives for “domestic value addition (DVA)” — the proportion of exports truly produced in India that will be dovetailed with the “Make in India” programme, which Prime Minister Narendra Modi will unveil later this month.
A higher DVA component in exports is important for job creation and boosting domestic manufacturing. “The DVA component in exports has been declining — alternatively the foreign value-added (FVA) portion of exports has been on the rise due to greater integration with the global supply chain,” Crisil, a credit rating and research firm, said in a recent research report.
In the textile sector, for instance, the FVA component of exports has more than doubled from 8% in 1995 to 18% in 2009. A similar trend was seen in electrical equipment and other manufacturing exports as well.
The government was also examining the tax policies governing SEZs including the minimum alternate tax (MAT) and the dividend distribution tax (DDT) levied on these export-focussed duty free enclaves.
“The SEZ norms could be relaxed and made more flexible to allow units to sell their products in India also,” a source said.
The SEZ developers have been demanding a roll-back of MAT, which was first imposed in 2012, as well as easing of the DDT on SEZs.