The government is in the process of formulating appropriate measures to boost services exports, which will be part of the upcoming foreign trade policy (FTP), commerce secretary Anup Wadhawan said on Thursday.
The statement will likely reassure Covid-hit services exporters about continued policy support, albeit in different forms or structure, amid apprehension that the resource-strapped government may substantially reduce benefits for certain services. Exporters have been awaiting the notification of support for FY20 and FY21 under the Service Exports From India Scheme (SEIS).
Asked if the current SEIS would continue to be a part of the new FTP, Wadhawan told reporters: “When we firm up the new FTP, what we need to do for the services sector will be taken into account, based on stakeholders’ feedback and other inputs. And appropriate schemes and measures will be there for services exporters in the new FTP.”
Sources had earlier told FE that the commerce ministry was weighing a proposal to overhaul the SEIS to make it more broad-based and fool-proof so that a wider pool of businesses, especially Covid-hit MSMEs, get the succour. This revamped scheme, probably with a new name, could be part of the new five-year FTP, which would be effective from October 2021, they had said.
Under the extant SEIS, the government offers exporters duty credit scrips at 5-7% of the net foreign exchange earned, depending on the nature of services.
Sources had earlier said the government could also reduce benefits for consultancy and certain other professional services that it thought cornered a sizeable chunk of incentives without commensurate benefits. Moreover, a section of the government believes that since few players are grabbing most of the SEIS incentives, the scheme should be altered in such a fashion that it helps a large number of small businesses as well.
Already, services exporters have urged the government to release SEIS benefits for FY20 at the earliest, which could be to the tune of `3,000-4,000 crore.
The SEIS was introduced in the FTP for 2015-20; the validity of the FTP has now been extended up to September 2021.
Services exports dropped almost 6% year-on-year in FY21 to $203 billion due to the pandemic, while merchandise exports contracted by just over 7% to about $291 billion, according to a quick estimate by the commerce ministry. Services trade surplus has been substantially offsetting the merchandise trade deficit. Despite the pandemic, the overall trade deficit dropped to just $13 billion, thanks to an $86-billion surplus in services trade in FY21.