DGFT: Suggestions on digital trade exports under new Foreign Trade Policy

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DGFT: Suggestions on digital trade exports under new Foreign Trade Policy

Garima Prakash

@GarimaP

June 22, 2021

Public Policy

286

The Directorate General of Foreign Trade (DGFT) is reviewing the Foreign Trade Policy (2015-2021), with the objective of formulating a new Foreign Trade Policy (FTP) which will come into effect once the current FTP (2015-2021) expires in September 2021. Based on member inputs, NASSCOM had submitted its comments to DGFT on the ongoing FTP review - here and here.

In furtherance of ongoing discussions in this regard, NASSCOM has submitted additional inputs to the DGFT with focus on increasing digital trade and e-commerce exports. e-Commerce and digital trade are on a growth trajectory and have a cascading effect on all sectors of the economy with the potential to reshape the Indian economy as we move forward into the next decade. With India being amongst the fastest growing economy of the world, it is crucial to have government intervention in policy matters to facilitate digital exports.

Digital exports of goods and services present an opportunity for Indian exporters to expand their market access with minimal upfront costs, by leveraging the infrastructure already in existence via e-commerce platforms or other digital platforms. This opportunity can be better realised by providing certain benefits to digital trade exporters under the new Foreign Trade Policy (FTP).

Key highlights of our submission include the following:

1. Creation of a Digital Trade Export Promotion Fund (DTEPF)

The creation of a Digital Trade Export Promotion Fund (DTEPF) is being suggested with the objective of enabling and empowering micro and small value service and product exporters. It is imperative to recognise the potential of digital exports of small value services and goods exporters, and to encourage and enable them for growth. The Fund is suggested to be used to educate, recognise, and reward micro and small value goods and services exporters using the digital medium for exports of goods or services, with focus on:

B2C and freelancer led cross-border e-commerce exports of goods and services by micro and small enterprises;
Tier 3-6 locations including north-eastern states;
Export clusters and aspirational districts; and
Women entrepreneurs;

Funds from the DTEPF may be used for giving incentives directly to small and micro exporters in the following ways:

Spreading awareness on digital trade and exports.
Capacity building of handicrafts, artisanal and tribal goods and small value services exporters.
Providing education on digital tools, digital platforms, branding, packaging, marketing etc.
Building innovative models of assisted commerce, digital talent portal for exporters.
Providing seed stage funding for most promising and innovative products/services focused on exports.

The framework for implementation of DTEPF includes setting up an advisory council to take decisions on disbursement of funds. Sources of funds may be either through a government and industry partnership or fully funded by the government. It is also suggested that certain eligibility criteria and benefit caps may be placed, to ensure that the fund is utilised for the exporters that need it the most.

2. Expanding the scope of Market Access Initiative (MAI) Scheme

The expansion of the scope of the MAI is being suggested to include incentives to micro and small services exporters. Service exporters, just like goods exporters, need boost and support for exporting and growing their market share. The services export industry needs to continue to keep its exports competitive in the international markets.

The export of many services involves incurring certain fixed costs to access international markets, such as, high-end software, membership fee, subscriptions etc. This increases the cost of providing the service thus making the export less competitive. Moreover, a strong brand image amongst buyers in the destination country is imperative for increasing services exports. For this, MSME exporters need support on digital marketing and branding strategies as well as intellectual property protection.

The existing framework of Market Access Initiative under the Foreign Trade Policy 2015-2021 covers benefits for the enhancement of exports through accessing new markets or increasing the share in existing markets by quality upgradation, brand building and promotion, research, and development etc. However, currently MAI extends only certain benefits to goods exporters. Our submission seeks to extend the scope of this scheme to include direct benefits to individual micro and small service exporters.

The new MAI is proposed to cover:

Licensing fees paid for acquiring a software essential for the provision of a service, such as, software for web-designing, application development etc. This will help the exporters in providing high quality services.
Membership fee for getting associated with reputed organisations/associations or other bodies. This will help exporters in building credentials and brand image.
Fixed costs incurred for implementation of security features such as, procuring end-to-end encryption software, software for data protection, implementing authentication features etc.
Subscription fees for accessing digital platforms that connect seller to buyer. This will help service exporters to access new markets.

The disbursement of benefits under the new proposed MAI is suggested to be in a re-imbursement format. A fully digitised application procedure should be notified, a mechanism for verification of relevant documents and proof of expenditure should be put in place and capping of benefits per exporter per annum may be considered.

3. Expanding the reach of India Post for exports

India Post is the preferred international logistics service for Indian MSME exporters. However, Foreign Post Offices (FPO) that offer better end-to-end timelines are present only in 28 notified locations. Hence, it is required to increase the number of FPOs so that the majority of MSMEs, located in industrial and manufacturing clusters, can start exporting "Made in Products". NASSCOM has suggested that, for the locations that cover majority of export volumes, either new FPOs should be established or capacity should be increased in the existing FPOs. This will benefit e-commerce exports with respect to faster deliveries, which is an important factor for e-commerce exports.

For more information, kindly write to garima@nasscom.in.

#ftp #dgft #trade #import #export #exportpolicy #foreigntrade #foreigntradepolicy #internationaltrade

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Garima Prakash

Manager, Public Policy and Government Affairs

Reach out to me for all things policy about e-commerce, international trade, export controls, start-ups and fintech