Lok Sabha Question No. 1289 (UNSTARRED), answered on 2016-07-25
Subject: Trade Deficit
Ministry: COMMERCE AND INDUSTRY
Asked by: DUSHYANT SINGH

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY (DEPARTMENT OF COMMERCE)

## LOK SABHA UNSTARRED QUESTION NO. 1289 TO BE ANSWERED ON 25 TH  JULY, 2016

## TRADE DEFICIT

## 1289. SHRI DUSHYANT SINGH:

Will the Minister of COMMERCE & INDUSTRY ( वािणÏय एवं उɮयोग मंत्री ) be pleased to state:

- (a) the details of the overall trade deficit of India with other countries during the last three years and the current year;
- (b) the contribution of various sectors in India's trade deficit with other countries along with the export and import figures for each of them during the said period;
- (c) whether  the  electronics  imports  into  the  country  form  a  major  part  of  the  total  trade deficit of India;
- (d) if so, the details thereof along with the steps taken to boost electronic manufacturing for both domestic and export purposes; and
- (e) the  steps  taken  by  the  Government  to  boost  other  major  sectors  which  are  large contributors to the trade deficit of India?

## ANSWER

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## THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE AND INDUSTRY (INDEPENDENT CHARGE) (SMT. NIRMALA SITHARAMAN)

- (a) Total value of merchandise trade deficit of India with other countries during the last three years and current year is as follows:

| Year               |   Trade Deficit (Value in US $ Billion) |
|--------------------|-----------------------------------------|
| 2013-14            |                                 -135.8  |
| 2014-15            |                                 -137.68 |
| 2015-16            |                                 -118.63 |
| 2015-16 (Apr-May)* |                                  -10.59 |

Source: DGCI&S, *Provisional

- (b) The contributions of various sectors to India's merchandise trade deficit with other countries along with the exports and imports figures for last 3 years and the current year are as follows:

|                                                       | EXPORTS   | EXPORTS   | EXPORTS   | EXPORTS              | IMPORTS   | IMPORTS   | IMPORTS   | IMPORTS              | Trade Deficit   | Trade Deficit   | Trade Deficit   | Trade Deficit        |
|-------------------------------------------------------|-----------|-----------|-----------|----------------------|-----------|-----------|-----------|----------------------|-----------------|-----------------|-----------------|----------------------|
| Major Sectors                                         | 2013- 14  | 2014- 15  | 2015- 16  | 2016- 17 (Apr- May)* | 2013- 14  | 2014- 15  | 2015- 16  | 2016- 17 (Apr- May)* | 2013- 14        | 2014- 15        | 2015- 16        | 2016- 17 (Apr- May)* |
| Petroleum, Crude and Products                         | 63.2      | 56.8      | 30.5      | 4.1                  | 164.8     | 138.3     | 82.9      | 11.6                 | -101.6          | -81.5           | -52.4           | -7.5                 |
| Electronic Goods                                      | 7.8       | 6.3       | 5.9       | 1.0                  | 33.2      | 37.5      | 40.9      | 5.6                  | -25.4           | -31.3           | -35.0           | -4.6                 |
| Engineering Goods                                     | 63.9      | 73.1      | 60.6      | 10.6                 | 78.0      | 82.8      | 80.3      | 10.9                 | -14.1           | -9.8            | -19.7           | -0.3                 |
| Gems and Jewellery                                    | 41.4      | 41.3      | 39.4      | 7.3                  | 58.4      | 62.4      | 56.5      | 7.6                  | -17.0           | -21.1           | -17.1           | -0.3                 |
| Mica, Coal and Other Ores, Minerals including Process | 4.0       | 3.9       | 3.6       | 0.6                  | 25.0      | 26.3      | 20.4      | 3.1                  | -21.0           | -22.4           | -16.8           | -2.5                 |
| Organic and Inorganic Chemicals                       | 14.2      | 14.4      | 13.7      | 2.2                  | 23.4      | 25.1      | 23.0      | 3.7                  | -9.2            | -10.7           | -9.3            | -1.5                 |
| Fertilisers, Crude and Manufactured                   | 0.1       | 0.1       | 0.1       | 0.0                  | 6.3       | 7.4       | 8.1       | 0.7                  | -6.2            | -7.3            | -8.0            | -0.7                 |
| Plastic and Linoleum                                  | 6.1       | 5.7       | 5.8       | 0.9                  | 10.8      | 12.4      | 12.1      | 2.1                  | -4.6            | -6.7            | -6.4            | -1.2                 |
| Wood and Wood Products                                | 1.8       | 1.9       | 2.0       | 0.4                  | 5.1       | 5.5       | 5.0       | 0.7                  | -3.3            | -3.6            | -3.0            | -0.4                 |
| Pulp and Waste Paper                                  | 0.0       | 0.0       | 0.0       | 0.0                  | 0.8       | 0.9       | 1.0       | 0.2                  | -0.8            | -0.9            | -0.9            | -0.2                 |
| Newsprint                                             | 0.0       | 0.0       | 0.0       | 0.0                  | 0.9       | 0.8       | 0.8       | 0.1                  | -0.9            | -0.8            | -0.8            | -0.1                 |
| Iron Ore                                              | 1.6       | 0.5       | 0.2       | 0.1                  | 0.1       | 1.1       | 0.5       | 0.0                  | 1.5             | -0.5            | -0.3            | 0.1                  |
| All merchandise trade                                 | 314.4     | 310.4     | 262.0     | 42.9                 | 450.2     | 448.0     | 380.7     | 53.5                 | -135.8          | -137.7          | -118.6          | -10.6                |
| %share of Electronic Goods                            | 2.5       | 2.0       | 2.3       | 2.3                  | 7.4       | 8.4       | 10.7      | 10.5                 | 18.7            | 22.7            | 29.5            | 43.4                 |

Source: DGCI&S,   * Provisional

- (c) & (d)  The electronics imports/exports of the country contribute to the total trade deficit of India. As reflected in the above table, the t rade deficit due to Electronics items forms 18.7%, 22.7%, 29.5% and 43.4% of the total trade deficit of India during 2013-14, 2014-15, 2015-16 and 2016-17 (April-May), amounting to  US$ -25.4, -31.3, -35.0 and -4.6 billion in value terms respectively.

The  steps  taken  by  the  Government  to  boost  electronic  manufacturing  for  both  domestic  and export purposes are as under:

1. Promotion  of  electronics  hardware  manufacturing  is  one  of  the  pivotal  Flagship  Programmes under Digital India campaign of the Government.
2. The National Policy on Electronics (NPE 2012) was notified in October 2012 with the vision to create a globally competitive electronics design and manufacturing industry to meet the country's needs and serve the international market.
3. Modified  Special  Incentive  Package  Scheme  (M-SIPS)  provides  financial  incentives  to  offset disability and attract investments in the Electronics Systems Design and Manufacturing (ESDM) sector. The scheme was notified in July 2012. The scheme provides subsidy for investments in capital  expenditure  -  20%  for  investments  in  SEZs  and  25%  in  non-SEZs.  The  scheme  is available  for  both  new  projects  and  expansion  projects.  For  high  technology  and  high  capital investment  units  like  Fabs,  production  subsidy  @10%  is  also  provided.  The  incentives  are available for investments made in a project within a period of 10 years. The scheme is open to receive applications till 26.07.2020.
4. Electronics  Manufacturing  Clusters  (EMC)  Scheme  provides  financial  assistance  for  creating world-class infrastructure for electronics manufacturing units. The assistance for the projects for

setting up Greenfield Electronics Manufacturing Clusters is 50% of the project cost subject to a ceiling of Rs. 50 Crore for 100 acres of land. For larger areas, pro-rata ceiling applies. For lower extent,  the  extent  of  support  would  be  decided  by  the  Steering  Committee  for  Clusters  (SCC) subject  to  the  ceiling  of  Rs.  50  Crore.  For  setting  up  Brownfield  Electronics  Manufacturing Cluster, 75% of the cost of infrastructure, subject to a ceiling of Rs.50 Crore is provided.

5. Policy for providing preference to domestically manufactured electronic products in Government procurement is under implementation.
6. Electronic  Development  Fund  (EDF)  policy  has  been  approved  to  support  Daughter  Funds including Early Stage Angel Funds and Venture Funds in the area of Electronics System Design and  Manufacturing,  Nano-electronics  and  IT.  The  supported  Daughter  Funds  will  promote innovation, R&D and product development within the country.
7. A  meeting  of  State  IT  Ministers  and  State  Government  Officials  was  held  on  26.08.2014  to encourage them to actively promote electronics manufacturing. Several States have shown keen interest.
8. Approvals for all foreign direct investment up-to 100% in the electronic hardware manufacturing sector are under the automatic route.
9. Under the Electronics Hardware Technology Park (EHTP) Scheme, approved units are allowed duty free import of goods required by them for carrying on export activities, CST reimbursement and excise duty exemption on procurement of indigenously available goods, as per the Foreign Trade Policy.
10. Tariff Structure has been rationalized to promote indigenous manufacturing of electronic items.
11. Mandatory  compliance  to  safety  standards  has  been  notified  for  identified  Electronic  Products with the objective to curb import of sub-standard and unsafe electronics goods. As of now, 30 electronic products are under the ambit of this Order.
12. Government has approved setting up of two semiconductor wafer fabrication (FAB) manufacturing facilities in India.
13. Two  Schemes  for  skill  development  of  90,000  and  3,28,000  persons,  respectively    in  the electronics sector have been approved to provide human resource for the industry.
14. The Scheme to enhance the number of PhDs in the Electronic System Design and Manufacturing (ESDM) and IT/IT Enabled Services (ITES) sectors has been approved. 3000 PhDs are proposed to be supported under the Scheme.
15. Keeping in view the huge indigenous requirement on account of roadmap for digitalization of the broadcasting sector, Indian Conditional Access System (iCAS TM ) has been developed to promote indigenous manufacturing of Set Top Boxes (STBs). The iCAS TM is  available to domestic STB manufacturers at a price of USD 0.5 per license for a period of three years as against market price of USD 4-5 per license for other competing products. The implementation of iCAS TM in the cable networks has already started.
16. An Electropreneur park has been approved for providing incubation for development of ESDM sector which will contribute IP creation and Product Development in the sector.
17. National Centre of Excellence in Flexible Electronics (NCFlexE) is being set up in IIT Kanpur with the objectives to promote R&D; Manufacturing; Ecosystems; Entrepreneurship; International  Partnerships  and  Human  Resources  and  develop  prototypes  in  collaboration  with industry for commercialization.
18. National Centre of Excellence for Technology on Internal Security (NCETIS) is being set up at IIT-Bombay with the objective to address the internal security needs of the nation on continuous basis by delivering technology prototypes required for internal security and to promote domestic industry in internal security.
19. Centre  for  Excellence  on  Internet  of  Things  (IoT)  is  being  set  up  in  Bengaluru  jointly  with NASSCOM.
20. An  Incubation  Centre  with  focus  on  medical  electronics  is  being  set  up  at  Indian  Institute  of Technology, Patna.
21. An Incubation Centre with focus on consumer electronics is being set up at IIITM at Kochi.
22. The  Department  of  Electronics  and  Information  Technology  (DeitY)  provides  funding  under several schemes for promotion of R&D, including support for International Patents in Electronics &  IT  (SIP-EIT);  Multiplier  Grants  Scheme  and  Scheme  for  Technology  Incubation  and Development of Entrepreneurs (TIDE) in the area of Electronics, ICT and Management.
23. DeitY has approved a project to be implemented by Global Innovation and Technology Alliance (GITA) to promote Innovation, IP, R&D and commercialization of products, etc. in the ESDM sector  by  providing  funding  support  to  an  Industry,  for  doing  collaborative  research  with  an Academic Institute in the priority areas with a timeline of not more than two years.
24. DeitY has approved a project being implemented by Biotechnology Industry Research Assistance Council (BIRAC) to promote scientific and technological research in Medical Electronics sector in India to address the pressing challenges associated with the development of innovative medical electronics and making it available, accessible and affordable to the people at the bottom of the pyramid.
21. (e) Details of key steps taken by Government to boost exports, including for major sectors which are large contributors to the trade deficit of India, are as follows:
- i. The  New  Foreign  Trade  Policy  (2015 -20)  was  announced  on  1st  April,  2015  with  a  focus  on supporting both manufacturing and services exports and improving the 'Ease of Doing Business'.
- ii. In the light of the major challenges being faced by Indian exporters in the backdrop of the global economic  slowdown,  the  envisaged  revenue  outgo  under  MEIS  was  increased  from  Rs.  18000 Crore to Rs. 21000 Crore in October 2015 with accompanying enhancement in benefits on certain products and inclusion of certain additional items. On 04.05.2016, the Government has extended the market coverage to all countries in respect of 2787 lines.  Hence Landing Certificates shall not be  required  under  MEIS  w.e.f  04.05.2016.  This  step  has  been  taken  as  part  of  'Ease  of  Doing Business' and reduction of Transaction Cost of the exporters. Accordingly, revenue foregone under the scheme has been revised from Rs.21000 Crores per annum to Rs.22,000 Crores per annum.
- iii. The Government is implementing the Niryat Bandhu Scheme with an objective to reach out to the new  and  potential  exporters  including  exporters  from  Micro,  Small  &  Medium  Enterprises (MSMEs)  and  mentor  them  through  orientation  programmes,  counselling  sessions,  individual facilitation, etc., on various aspects of foreign trade for being able to get into international trade and boost exports from India.
- iv. By way of trade  facilitation  and  enhancing  the  ease  of  doing  business  Government  reduced  the number  of  mandatory  documents  required  for  exports  and  imports  to  three  each,  which  is comparable with international benchmarks. The trade community can file applications online for various trade related schemes. Online payment of application fees through Credit/Debit cards and electronic funds transfer from 53 Banks has been put in place.
- v. Further, the Government continues to provide the facility of access to duty free raw materials and capital  goods  for  exports  through  schemes  like  Advance  Authorisation,  Duty  Free  Import Authorization (DFIA), Export Promotion Capital Goods (EPCG) and drawback / refund of duties.

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