The Policy Thinking Behind Merchandise Export Incentive scheme in India

India’s export policy has evolved significantly over the last decade. From traditional export promotion measures to schemes focused on remission of embedded taxes and duties, the government has increasingly tried to make Indian products more competitive in international markets. One important milestone in this journey was the Merchandise Export Incentive scheme, commonly associated with the Merchandise Exports from India Scheme (MEIS) introduced under the Foreign Trade Policy 2015–20.

Although MEIS is no longer the current merchandise export incentive mechanism, understanding the policy thinking behind it is important for exporters, manufacturers, merchant exporters and businesses evaluating India’s Export Schemes and Incentives.

Why India Needed Merchandise Export Incentives

Exporters in India operate in a highly competitive international environment. The price of an Indian product in an overseas market is influenced not only by manufacturing costs but also by logistics, infrastructure, financing, compliance expenses and domestic taxes or duties that may not always be fully neutralised.

The policy rationale behind export incentives was therefore broader than simply providing financial support. The objective was to improve the international competitiveness of Indian products and encourage exporters to enter or expand in global markets.

India’s merchandise exports stood at US$437.70 billion in FY 2024–25, compared with US$437.07 billion in FY 2023–24. The Department of Commerce also reported that non-petroleum exports reached US$374.32 billion in FY 2024–25, a 6.07% increase over the previous year.

These figures demonstrate why merchandise exports remain strategically important for India’s economic policy.

What Was the Merchandise Exports from India Scheme?

The Merchandise Exports from India Scheme, or MEIS, was introduced under the Foreign Trade Policy 2015–20. It consolidated several earlier export promotion schemes into a more unified framework.

The underlying policy approach was to provide incentives for specified products exported to specified markets. Eligible exporters could receive duty credit scrips based on notified rates and conditions.

The policy was designed around the recognition that different products and markets could present different levels of difficulty for Indian exporters. Accordingly, the incentive structure was linked to notified product and market combinations rather than being a universal benefit for every export transaction.

For businesses, this made the Export Incentive Scheme framework an important part of export planning and financial calculations.

The Policy Thinking Behind MEIS

The most important aspect of MEIS was not merely the incentive itself but the policy objectives behind it.

1. Improving Price Competitiveness

International buyers compare suppliers from multiple countries. Even a relatively small cost disadvantage can influence sourcing decisions.

MEIS was intended to help address some of the competitive disadvantages faced by Indian merchandise exporters. By providing a duty credit benefit on eligible exports, the policy sought to strengthen the commercial position of Indian products in overseas markets.

For Indian manufacturers competing with suppliers from countries offering strong export-support ecosystems, this policy consideration was particularly relevant.

2. Encouraging Market Diversification

Export concentration can create risks. When exporters depend heavily on a limited number of markets, changes in demand, tariffs, geopolitical conditions or economic cycles can affect business performance.

The design of MEIS reflected a policy interest in encouraging exports to notified international markets. This complemented India's broader objective of expanding its presence across different geographical regions.

Market diversification continues to be an important consideration in India's trade strategy, with recent trade agreements opening additional opportunities for Indian goods.

3. Supporting Product Diversification

Another policy objective was to encourage exports across a wider range of merchandise categories.

India has traditionally exported products ranging from engineering goods and textiles to pharmaceuticals, chemicals, agricultural products, gems and jewellery. A broader export basket can reduce dependence on a limited number of commodities.

Recent government data shows the continuing transformation of India's merchandise export basket. For example, the share of electronic goods in merchandise exports increased from 2.02% in 2014–15 to 8.81% in 2024–25, while engineering goods accounted for 26.67% of merchandise exports in 2024–25.

This diversification demonstrates how export policy has increasingly focused on moving Indian businesses towards higher-value and more globally competitive products.

Why MEIS Was Eventually Replaced

Export incentive policies have to operate within international trade rules as well as domestic economic priorities. Over time, the policy focus shifted from direct export incentives towards mechanisms designed to neutralise specific embedded taxes and duties.

MEIS was subsequently replaced by the Remission of Duties and Taxes on Exported Products (RoDTEP) framework.

The underlying philosophy of RoDTEP is different. Instead of treating export incentives primarily as a broad reward for exports, the remission mechanism focuses on returning certain taxes, duties and levies that are not otherwise refunded or credited to exporters.

This represents a significant shift in policy thinking: from encouraging exports through incentives towards making exports more tax-neutral and internationally competitive.

From Export Incentives to Tax and Duty Remission

The transition from MEIS to RoDTEP is important for understanding the evolution of India's Export Schemes and Incentives.

Under the current framework, eligible exports can receive RoDTEP benefits at notified rates, subject to applicable value caps and conditions. DGFT maintains the applicable RoDTEP schedules and has issued subsequent notifications modifying and restoring rates and applicability for different categories of exporters.

RoDTEP benefits are issued through transferable electronic scrips that can be used for payment of basic customs duty, subject to the applicable rules.

For exporters, this means that understanding the applicable HS code, product description, rate, value cap and eligibility conditions is now more important than simply looking for a generic export incentive.

What Does This Mean for Indian Exporters Today?

Businesses should avoid treating historical schemes such as MEIS and current schemes such as RoDTEP as interchangeable.

An exporter should examine:

• The correct HS classification of the product
• Applicable export policy conditions
• Whether the product is covered under the relevant remission or incentive schedule
• Applicable rate and value cap
• Export documentation and shipping bill declarations
• Realisation and other applicable regulatory requirements
• Changes notified by DGFT and other authorities

The Department of Commerce's TradeStat database currently provides trade data through FY 2025–26, with the latest update shown as August 2026. Its Trade Intelligence and Analytics platform also provides commodity, country, sector and state-level export information.

Such data can help exporters make better decisions about product selection and target markets rather than relying solely on incentive availability.

The Bigger Policy Picture

The story of the Merchant Export Incentive scheme—a term sometimes used informally for merchandise export incentives—and MEIS reflects a larger transformation in India's trade policy.

The government has gradually moved from traditional export promotion towards a framework combining duty remission, trade agreements, market diversification, manufacturing competitiveness and digital trade facilitation.

India's total exports of merchandise and services reached an estimated US$825.26 billion in FY 2024–25. The Department of Commerce reported an estimated US$860.09 billion of cumulative exports for FY 2025–26, representing growth of approximately 4.22%.

This broader growth strategy means exporters need to understand not only individual schemes but also how different policy instruments fit into their overall international trade strategy.

How Exim Advisory Can Help

Export incentives can affect pricing, documentation, cash flow and compliance decisions. A small classification or documentation error can potentially affect eligibility or the amount of benefit available.

Exim Advisory assists businesses in understanding applicable Export Incentive Scheme provisions, documentation requirements and the regulatory framework governing India's export promotion measures.

For businesses evaluating Export Schemes and Incentives, professional review can help identify the relevant scheme, assess eligibility and ensure that export documentation is aligned with applicable requirements.

Conclusion

The policy thinking behind the Merchandise Export Incentive scheme was rooted in a straightforward economic objective: strengthen the competitiveness of Indian merchandise exports and encourage businesses to participate more actively in international trade.

MEIS itself is now part of India's export-policy history, but the policy challenges it attempted to address remain relevant. India's current approach places greater emphasis on remission of duties and taxes, trade facilitation, market access and competitive manufacturing.

For Indian exporters, the key lesson is that export benefits should not be viewed as isolated financial incentives. They are part of a wider trade-policy framework. Understanding current schemes, product eligibility, HS classification and compliance requirements is therefore essential for making informed export decisions.

Exim Advisory supports exporters and businesses in evaluating applicable export promotion measures and maintaining alignment with India's evolving foreign trade framework.

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