What is Preferential market access (PMA) #
Preferential market access (PMA) is a trade policy tool that provides a certain advantage to select exporters from specific countries. In India, PMA has been used to boost the export of products, particularly from small and medium-sized enterprises (SMEs) and less developed regions of the country.
Background on Preferential Market Access (PMA) in India #
India has been seeking PMA for its exporters since the 1990s. In 2004, the government established the Market Access Initiative (MAI) scheme to provide financial assistance to exporters in promoting their products in foreign markets. However, it wasn’t until 2010 that the PMA policy was formally implemented in India. The PMA policy aimed to provide a competitive edge to Indian exporters, especially those from backward regions, by offering tariff exemptions or reductions, and increasing market access in select countries.
Examples of PMA Programs in India #
Under the PMA policy, India has entered into various bilateral and regional trade agreements with countries such as Nepal, Bhutan, Sri Lanka, Bangladesh, and Afghanistan. These agreements have granted Indian exporters preferential access to these markets, reducing their tariffs and allowing them to compete more effectively with other foreign exporters.
One notable example of PMA in India is the Generalized System of Preferences (GSP), which is a program that provides preferential market access to developing countries. India has been a beneficiary of the GSP program since the 1970s, and it allows for duty-free access to certain Indian products in the US market. The GSP program has been instrumental in boosting India’s exports to the US, particularly in sectors such as textiles, jewelry, and handicrafts.
Another significant PMA program is the Duty-Free Tariff Preference (DFTP) scheme. Under this scheme, least developed countries (LDCs) such as Bangladesh, Nepal, and Bhutan are granted duty-free access to the Indian market for many of their products. This has been beneficial for these countries’ exporters as they can now compete with other foreign exporters in India without the added burden of customs duties.
Moreover, the South Asian Free Trade Area (SAFTA) agreement has also provided preferential market access to Indian exporters in neighboring countries such as Bangladesh, Nepal, Bhutan, and Sri Lanka. SAFTA has helped Indian SMEs gain access to these markets by reducing their tariffs and other non-tariff barriers.
Benefits of PMA Policy for Indian Exporters #
The PMA policy has been beneficial for Indian exporters in several ways. First, it has provided a competitive edge to Indian exporters, especially those from less developed regions. The PMA policy has helped Indian exporters compete more effectively with other foreign exporters by reducing their tariffs and other non-tariff barriers. This has led to an increase in Indian exports, which has helped to boost the country’s economy.
Second, the PMA policy has also helped Indian SMEs gain access to foreign markets, which they may not have been able to enter without the policy. SMEs in India often face difficulties in accessing foreign markets due to lack of resources, technical know-how, and financial constraints. The PMA policy has provided SMEs with financial assistance and technical support, which has enabled them to compete more effectively with larger companies in foreign markets.
Third, the PMA policy has also helped to diversify India’s export basket. Indian exporters were earlier focused on a limited number of products, such as textiles and gems and jewelry. However, with the PMA policy, Indian exporters have been able to explore new markets and export new products, such as engineering goods and pharmaceuticals.
Expansion of PMA Policy to Africa #
In recent years, the PMA policy has been further extended to African countries. The India-Africa Forum Summit, held in 2015, provided a platform for India to expand its trade relations with African countries. As part of this initiative, India has launched the India-Africa Forum, which aims to strengthen economic cooperation between India and African countries.
Under the India-Africa Forum, India has provided preferential market access to African countries through the Duty-Free Tariff Preference (DFTP) scheme. This scheme grants duty-free access to the Indian market for many African products, providing an incentive for African exporters to do business with India. This has led to an increase in India-Africa trade, with both sides benefiting from the increased market access.
However, there have been some challenges with the expansion of the PMA policy to African countries. One of the main challenges is the lack of infrastructure in many African countries, which can make it difficult for Indian exporters to access these markets. Additionally, there are cultural and language barriers that can make it difficult for Indian exporters to do business in African countries. Nevertheless, the Indian government has taken steps to address these challenges by providing financial assistance and technical support to Indian exporters looking to do business in African countries.
Preferential market access (PMA) has been a successful policy tool for promoting Indian exports, particularly from SMEs and less developed regions. The PMA policy has provided a competitive edge to Indian exporters by reducing their tariffs and other non-tariff barriers. This has enabled Indian exporters to enter new markets and diversify their export basket, which has been beneficial for the Indian economy.
While the PMA policy has been successful in promoting Indian exports, there is still room for improvement. For instance, the Indian government could provide more financial assistance and technical support to Indian exporters looking to access foreign markets. Additionally, the government could explore new trade agreements with countries and regions that have not yet been covered by PMA programs.