Export Promotion: SEZs, RoDTEP and Beyond

The tools India uses to help exporters, from special economic zones and duty refunds to export credit and the Foreign Trade Policy.

Governments around the world help their exporters compete. India uses a range of tools, some of which have had to change to fit global trade rules.

Special Economic Zones

The Special Economic Zones Act, 2005 created areas with special rules for exporters: duty-free imports of inputs, simpler procedures and, for many years, tax holidays. SEZs attracted investment, especially in IT services. But many did not achieve the scale of China’s zones, and tax benefits for new units ended in 2020. Reform of SEZ rules has been under discussion.

Duty refunds

Exported goods should not carry domestic taxes, since other countries’ exporters do not. India uses:

Duty drawback: refunds of customs duties paid on imported inputs.
RoDTEP (Remission of Duties and Taxes on Exported Products), introduced in 2021, which refunds embedded taxes such as those on fuel and electricity that GST does not reimburse.

RoDTEP replaced an older scheme, MEIS, which a WTO panel ruled in 2019 was a prohibited export subsidy.

Export credit and insurance

EXIM Bank finances exports and overseas projects.
ECGC insures exporters against the risk of buyers not paying.
Interest equalisation schemes have subsidised loans for small exporters.

Foreign Trade Policy

India’s Foreign Trade Policy 2023 focused on:

Simplifying procedures and moving to digital processes.
Promoting districts as export hubs.
Supporting e-commerce exports by small businesses.
Encouraging rupee trade settlement.

Does export promotion work?

It helps offset costs and risks that exporters face.
But subsidies must follow WTO rules, and poorly targeted support can waste money.
Many economists argue that the biggest boosts come from better infrastructure, lower logistics costs, stable policies and competitive exchange rates, rather than subsidies.

The small exporter

A craftsman in Moradabad sells brass items to buyers in Europe through an e-commerce platform. Under export promotion schemes, he gets refunds of some embedded taxes and can insure against non-payment, making it less risky to take on foreign orders.

Thinking exporters are simply given subsidies

Much export support involves refunding taxes and duties so exporters are not at a disadvantage, not direct subsidies. WTO rules limit outright export subsidies.

Key takeaways

SEZs offered exporters special rules, but many fell short of expectations.
Duty drawback and RoDTEP refund taxes embedded in exports.
RoDTEP replaced MEIS after a WTO ruling.
Infrastructure, logistics and stable policy matter as much as incentives.