DEST Practice 11

Export promotion and the management of India's external trade are critical dimensions of economic policy, given that a country of India's size and ambition must integrate effectively into the global economy through both imports of capital goods, technology, and inputs required for efficient domestic production and exports that generate the foreign exchange needed to finance imports, service external debt, build foreign exchange reserves, and generate employment in export-oriented industries. India's merchandise exports have grown substantially over the past two decades, diversifying from a narrow base of primary commodities and labour-intensive manufactures to encompass a much broader range of products including engineering goods, pharmaceuticals and drugs, chemicals, textiles and apparel, gems and jewellery, refined petroleum products, software services, business process outsourcing services, and an expanding range of electronics and technology products. The Foreign Trade Policy issued by the Directorate General of Foreign Trade under the Ministry of Commerce and Industry provides the overarching framework for India's export and import policy, setting out the merchandise export targets, the incentive schemes available to exporters, the advance authorisation and export promotion capital goods schemes for duty-free import of inputs and capital goods used in export production, the status holder recognition programme that grants export houses benefits commensurate with their export performance, and the various product and market-specific export promotion schemes. The Remission of Duties and Taxes on Exported Products scheme, launched in 2020 to replace the earlier Merchandise Export from India Scheme, provides exporters with refunds of central and state taxes and levies that are embedded in the cost of their exported products but are not otherwise rebated under the GST or customs drawback mechanisms, ensuring that India's exports are not burdened by residual domestic taxes that reduce competitiveness in global markets. The Export Credit Guarantee Corporation provides credit risk insurance to Indian exporters against the risk of non-payment by foreign buyers due to commercial insolvency or political events in the buyer's country, and also provides guarantees to commercial banks that extend export credit to Indian exporters, enabling exporters to access pre-shipment and post-shipment credit at competitive interest rates. The Agriculture and Processed Food Products Export Development Authority, the Marine Products Export Development Authority, the Spices Board, the Tea Board, the Coffee Board, and the Rubber Board are commodity-specific export promotion bodies that provide market intelligence, quality certification, trade fair participation support, and promotional activities to producers and exporters of their respective commodities. India's obligations under the World Trade Organisation agreements, including the Agreement on Agriculture, the Agreement on Subsidies and Countervailing Measures, the Agreement on Trade Related Investment Measures, and the Agreement on Trade Related Aspects of Intellectual Property Rights, constrain the policy space available for certain forms of export promotion and domestic support to industries and agriculture, requiring the government to design its incentive schemes in ways that are compatible with WTO rules. The dispute settlement mechanism of the WTO has been used both to challenge trade-restrictive practices of other WTO members affecting India's exports and to defend India's own policies against challenges by trading partners.