Source: Mint, RBI

Context: With Indian exports plunging to an all time low, due to the COVID-19 pandemic, many Indian exporters are faced with multiple hardships. In this scenario, the Pharma sector comes as a breather to the exports industry.

Hardships for the Exporters

  • Cancellation requests of orders from the buyers
  • Escalation of fixed cost of the factories that are left with the labourers, who have no work. 
  • Delays in clearances of import containers leading to more expenses for exporters. 
  • Shipping lines have come to a halt, grounding of airlines has halted the transfer of urgent and less bulky goods. 
  • Warehouse capacity has also reached its limits.
  • Access to credit has also come as a major hurdle for the Exporters.
  • Decline in crude oil prices could further bring down the value of Indian exports.

Major Export destinations of India impacted by CVOID-19

  • For Engineering products, the top three export destinations are the US, the UAE and Germany which feature in the most hit countries of the world. 
    • These engineering products form a big share of the country’s export basket. 
  • For Tea exports,India's top export destinations such as the US, the UK, Japan and Iran are battling the havoc caused by the COVID-19 pandemic.

Invoking Force majeure 

  • Force majeure refers to events beyond anyone’s reach or control such as avalanches,hurricanes, and earthquakes
    • The Force majeure clause removes the liability on part of the party invoking it. 
    • So it becomes likely that many foreign companies will invoke it, as some local ones have done, in order to delay their payments.
  • But not all contracts include words such as pandemic and quarantine, thereby they still are a grey area to discover.

Relief measures taken by the Centre 

  • Foreign trade policy (FTP) has been extended to 31 March 2021
    • It seeks to create a favourable environment for Indian exports in terms of potential and performance.
    • Under it, relevant businesses enjoy tax benefits, marketing assistance, duty-free imports and the possibility of earning cashable scrips against exports of identified items. 
    • An online government platform for issuing key documents has been designed to facilitate shipments.


Foreingn Trade Policy (FTP) or Export Import (EXIM) Policy of India

AboutForeign trade in India is regulated by the Foreign Trade (Development and Regulation) Act, 1992 and is guided by the EXIM Policy of the Government of India.

  • FTP is a set of guidelines and instructions established by the Directorate General of Foreign Trade (DGFT) in matters related to the import and export of goods in India.


  • FTP 2015-20, aims at doubling the overseas sales to $900 billion by 2019-20.
  • FTP 2015-20 provides a framework for increasing exports of goods and services as well as generation of employment and increasing value addition in the country, in line with the ‘Make in India’ programme.
  • Integrating the foreign trade with “Make in India” and “Digital India” Programme.

Salient features

  • MEIS scheme: A single Merchandise Exports from India Scheme(MEIS) has been formulated by merging five existing schemes to promote merchandize exports.
    • The incentives are to be provided in the form of duty scrips as % of FOB (free on board) value of exports.
  • SEIS scheme: The Services from India Scheme(SFIS) has been replaced by Service Exports from India Scheme (SEIS). SEIS will be only for India based service providers and will be based on net foreign exchange earned.
    • Both the SEIS and MEIS schemes are applicable to SEZ units.
  • In order to ensure trade facilitation and ease of doing business, Paperless Trade and Online filling of forms has been provided.
  • E-commerce export is applicable to items of worth upto Rs 25,000 per consignment.
  • Provision for Export oriented units(EOUs), Export hardware technology park and software technology park.
  • The Duty free scrips (form of credits) are provided to the exporters under various export promotion schemes of the government.The scripts may be transferable or nontransferable.

Foreign Trade (Development and Regulation) Act,1992

  • The main objective of the Foreign Trade (Development and Regulation) Act is to provide the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India. The act has replaced the earlier law known as the Imports and Exports (Control) Act 1947.

Directorate General of Foreign Trade(DGFT)

  1. Directorate General of Foreign Trade (DGFT) organisation is an attached office of the Ministry of Commerce and Industry and is headed by Director General of Foreign Trade. 
  2. Right from its inception till 1991, when liberalization in the economic policies of the Government took place, this organization has been essentially involved in the regulation and promotion of foreign trade through regulation. 
  3. Keeping in line with liberalization and globalization and the overall objective of increasing exports, DGFT has since been assigned the role of “facilitator”. The shift was from prohibition and control of imports/exports to promotion and facilitation of exports/imports, keeping in view the interests of the country.
  4. DGFT is the main governing body in matters related to Exim Policy

Significance of India's pharmaceutical export sector amid COVID-19

  • Given the need for Medicines, health equipment, PPEs during the COVID-19 pandemic, India can emerge as an alternative to China for the manufacture of cost-efficient and quality products.
    •  India accounts for 10% of global pharmaceutical production by volume, but only 1.5% by value.
    • The discrepancy in Volume and Value highlights the relatively low prices but high demand for Indian pharma items globally. 
  • As per the Indian Pharmaceutical Alliance (IPA), the lobby group that represents India’s top 25 giants, has reiterated that the biggest companies are able to operate normally despite the crisis.
    •  Almost all the major drug firms have their units in Sikkim, and plants are operating at full capacity.
    • The problem of migrant labour, which is a concern for other industries, doesn’t ail the Pharma sector.
  • Lastly, with India's recent export of antimalarial drugs (Hydroxychloroquine) to the US,Brazil, the pharma industry has the ability to develop as a major exporter of affordable drugs.