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TABLE OF CONTENTS
TITLE
INTERNATIONAL TRADE
INTRODUCTION
ADVANTAGES OF EXPORTING
DISADVANTAGES OF EXPORTING
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TREND AND VOLUME OF INDIN EXPORTS
EXPORT INCENTIVES
Export credits
Export analysis
Export imperatives
CONCLUSION
BIBLIOGRAPHY
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INTERNATIONAL TRADE
International trade is in principle not different from domestic trade as the motivation and
the behavior of parties involved in a trade does not change fundamentally depending on
whether trade is across a border or not. The main difference is that international trade is
typically more costly than domestic trade. The reason is that a border typically imposes
additional costs such as tariffs, time costs due to border delays and costs associated with
country differences such as language, the legal system or a different culture.
International trade uses a variety of currencies, the most important of which are held as
foreign reserves by governments and central banks. Here the percentage of global
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cumulative reserves held for each currency between 1995 and 2005 are shown: the US
dollar is the most sought-after currency, with the Euro in strong demand as well.
Another difference between domestic and international trade is that factors of production
such as capital and labor are typically more mobile within a country than across
countries. Thus international trade is mostly restricted to trade in goods and services, and
only to a lesser extent to trade in capital, labor or other factors of production. Then trade
in good and services can serve as a substitute for trade in factors of production. Instead of
importing the factor of production a country can import goods that make intensive use of
the factor of production and are thus embodying the respective factor.
INTRODUCTION
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In economics, an export is any good or commodity, transported from one country to
another country in a legitimate fashion, typically for use in trade. Export goods or
services are provided to foreign consumers by domestic producers.[1] Export is an
important part of international trade. Export of commercial quantities of goods normally
requires involvement of the customs authorities in both the country of export and the
country of import. The advent of small trades over the internet such as through Amazon
and e-Bay have largely bypassed the involvement of Customs in many countries due to
the low individual values of these trades. Nonetheless, these small exports are still subject
to legal restrictions applied by the country of export. An export's counterpart is an import.
The first and the primary reason for export are to earn foreign exchange. The
foreign exchange not only brings profit for the exporter but also improves the
economic condition of the country.
Secondly, companies that export their goods are believed to be more reliable than
their counterpart domestic companies assuming that exporting company has
survive the test in meeting international standards.
Thirdly, free exchange of ideas and cultural knowledge opens up immense
business and trade opportunities for a company.
Fourthly, as one starts visiting customers to sell one’s goods, he has an
opportunity to start exploring for newer customers, state-of-the-art machines and
vendors in foreign lands.
Fifthly, by exporting goods, an exporter also becomes safe from offset lack of
demand for seasonal products.
Lastly, international trade keeps an exporter more competitive and less vulnerable
to the market as the exporter may have a business boom in one sector while
simultaneously witnessing a bust in a different sector.
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No doubt that in the age of globalization and liberalizations, Export has became of the
most lucrative business in India. Government of India is also supporting exporters
through various incentives and schemes to promote Indian export for meeting the much
needed requirements for importing modern technology and adopting new technology
from MNCs through Joint ventures and collaboration.
ADVANTAGES OF EXPORTING
DISADVANTAGES OF EXPORTING
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1. The economy of India is the fourth largest in the world, with a GDP of $3.63
trillion at PPP, and is the tenth largest in the world with a $691.9 billion at 2004
USD exchange rates and has a real GDP growth rate of 6.2% at PPP.
2. Growth in the Indian economy has steadily increased since 1979, averaging
5.7% per year in the 23-year growth record.
3. Indian economy has posted an excellent average GDP growth of 6.8% since
1994 India, the fastest growing free-market democracy in the world, registered a
growth rate of 8.2 percent in FY 2004.
4. India has emerged the global leader in software and business process
outsourcing services, raking in revenues of US$12.5 billion in the year that ended
March 2004.
6. Export revenues from the sector are expected to grow from $8 billion in 2003
to $46 billion in 2007.
7. India’s foreign exchange reserves are over US$ 102 billion and exceed the
forex reserves of USA, France, Russia and Germany. This has strengthened the
Rupee and boosted investor confidence greatly.
9. Reserve money growth had doubled to 18.3% in 2003-04 from 9.2 in 2002-03,
driven entirely by the increase in the net foreign exchange assets of the RBI.
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10. Reserve money growth declined to 6.4% in the current year to January 28,
2005.
11. During the current financial year 2004-05, broad money stock (M3) (up to
December 10, 2004) increased by 7.4 per cent (exclusive of conversion of non-
banking entity into banking entity, 7.3 per cent)
12. Economics experts and various studies conducted across the globe envisage
India and China to rule the world in the 21st century.
EXPORT PROCEDURE
OPEN A CURRENT ACCOUNT WHICH DEALS WITH FOREIGN EXCHANGE
• Obtain an importer-exporter code number from regional licencing authority
• Get registered wit EPC or FIEO
• Obtain RCMC
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Certificate of origin to be obtained by the exporter from authorities like
export inspection agency
Shipment advise to importer
Presentation of documents to the bank for negotiation
Dispatch of documents by the exporters bank to the importers bank after
scrutiny
Receipt of payment by the exporter against the documents submitted
Rebate of central excise duty, duty drawback and export benefits
Documents Required
Certain documentation takes place while exporting from India. Special documents may
be required depending on the type of product or destination. Certain export products may
require a quality control inspection certificate from the Export Inspection Agency. Some
food and pharmaceutical product may require a health or sanitary certificate for export.
Shipping Bill/ Bill of Export is the main document required by the Customs Authority for
allowing shipment. Usually the Shipping Bill is of four types and the major distinction
lies with regard to the goods being subject to certain conditions which are mentioned
below:
The following are the documents required for the processing of the Shipping Bill:
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• 4 copies of the packing list mentioning the contents, quantity, gross and net
weight of each package.
• 4 copies of invoices which contains all relevant particulars like number of
packages, quantity, unit rate, total f.o.b./ c.i.f. value, correct & full description of
goods etc.
• Contract, L/C, Purchase Order of the overseas buyer.
• AR4 (both original and duplicate) and invoice.
• Inspection/ Examination Certificate.
The formats presented for the Shipping Bill are as given below:
Note: - For the goods which are cleared by Land Customs, Bill of Export (also of 4 types
- white, green, yellow & pink) is required instead of Shipping Bill.
In case of Post Parcel, no Shipping Bill is required. The relevant documents are
mentioned below:
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• Prescriptions regarding the minimum and maximum sizes of the parcel with
its maximum weight :
Minimum size: Total surface area not less than 140 mm X 90 mm.
Maximum size: Lengthwise not over 1.05 m. Measurement of any other side of
circumference 0.9 m./ 2.00 m.
Maximum weight: 10 kg usually, 20 kg for some destinations.
• Commercial invoice - Issued by the seller for the full realisable amount of goods
as per trade term.
• Consular Invoice - Mainly needed for the countries like Kenya, Uganda,
Tanzania, Mauritius, New Zealand, Burma, Iraq, Ausatralia, Fiji, Cyprus, Nigeria,
Ghana, Zanzibar etc. It is prepared in the prescribed format and is signed/
certified by the counsel of the importing country located in the country of export.
• Customs Invoice - Mainly needed for the countries like USA, Canada, etc. It is
prepared on a special form being presented by the Customs authorities of the
importing country. It facilitates entry of goods in the importing country at
preferential tariff rate.
• Legalised/ Visaed Invoice - This shows the seller's genuineness before the
appropriate consulate/ chamber of commerce/ embassy. It do not have any
prescribed form.
• Certified Invoice - It is required when the exporter needs to certify on the invoice
that the goods are of a particular origin or manufactured/ packed at a particular
place and in accordance with specific contract. Sight Draft and Usance Draft are
available for this. Sight Draft is required when the exporter expects immediate
payment and Usance Draft is required for credit delivery.
• Packing List - It shows the details of goods contained in each parcel/ shipment.
• Certificate of Inspection - It shows that goods have been inspected before
shipment.
• Black List Certificate - It is required for countries which have strained political
relation. It certifies that the ship or the aircraft carrying the goods has not touched
those country(s).
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• Weight Note - Required to confirm the packets or bales or other form are of a
stipulated weight.
• Manufacturers/ Supplier's Quality/ Inspection Certificate.
• Manufacturer's Certificate - It is required in addition to the Certificate of Origin
for few countries to show that the goods shipped have actually been manufactured
and is available.
• Certificate of Chemical Analysis - It is required to ensure the quality and grade
of certain items such as metallic ores, pigments, etc.
• Certificate of Shipment - It signifies that a certain lot of goods have been
shipped.
• Health/ Veterinary/ Sanitary Certification - Required for export of foodstuffs,
marine products, hides, livestock etc.
• Certificate of Conditioning - It is issued by the competent office to certify
compliance of humidity factor, dry weight, etc.
• Antiquity Measurement - Issued by Archaeological Survey of India in case of
antiques.
• Transhipment Bill - It is used for goods imported into a customs port/ airport
intended for transhipment.
• Shipping Order - Issued by the Shipping (Conference) Line wh about the
reservation of space of shipment of cargo through the specific vessel from a
specified port and on a specified date.
• Cart/ Lorry Ticket - It is prepared for admittance of the cargo through the port
gate and includes the shipper's name, cart/ lorry No., marks on packages, quantity,
etc.
• Shut Out Advice - It is a statement of packages which are shut out by a ship and
is prepared by the concerned shed and is sent to the exporter.
• Short Shipment Form - It is an application to the customs authorities at port
which advises short shipment of goods and required for claiming the return.
• Shipping Advice - It is prepared in aligned document to be used to inform the
overseas customer about the shipment of goods.
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EXPORT POLICIES OF INDIA
The foreign trade of India is guided by the Export Import (EXIM) Policy of The
Government of India and is regulated by the Foreign Trade (Development and
Regulation) Act, 1992.
There is an Export Promotion Capital Goods (EPCG) Scheme under which exporters are
allowed to import capital goods (including computer systems) at concessionary customs
duty, subject to fulfillment of specified export obligations. Service industries enjoy the
facility of zero import duty under the EPCG Scheme. Likewise, hospitals, air cargo,
hotels and other tourism-related industries. Software units can use data communication
network to export their products.
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Market Access Initiative [MAI]
Marketing Development Assistance [MDA]
Towns of Export Excellence
Target plus Scheme.
Served from India Scheme
Service Export Promotion Council
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Niger seeds
Gum karaya
Iron ore, manganese ore and chrome ore
Crude oil
4. Freely Exportable Items: can be exported without an export license from DGFT.
Military stones as notified by DGFT
Exotic birds such as, bangali, finches, white finches and zebra
Bones and bones product
Basmati rice
Indian exporting industries are growing rapidly. The sectors mentioned are improving
day by day and they are more focused towards the export part.
Agriculture
Leather & leather products
Paper & paper products
Handicrafts
Apparels and textiles
Plastics & plastic products
Chemicals
Engineering goods
Gems & jewelry
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UAE 2586.26 2500.28 3336.12 5093.42
Hong Kong 2635.60 2374.42 2620.11 3258.92
UK 2275.73 2168.23 2502.89 3041.27
China 830.03 955.19 1980.61 2967.05
Germany 1887.42 1794.45 2112.15 2529.07
Singapore 862.41 975.62 1425.27 2122.14
Belgium 1456.00 1395.36 1666.15 1810.62
Japan 1782.20 1515.58 1868.86 1718.88
Italy 1299.51 1210.64 1360.60 17.08.33
Bangladesh 874.41 1005.59 1179.05 1650.43
Sri Lanka 630.48 633.04 923.37 1323.88
France 1016.88 948.22 1076.88 1293.22
Netherlands 875.80 866.82 1050.63 1281.11
Indonesia 394.87 535.53 828.20 1126.19
Saudi Arabia 809.61 829.25 943.19 1122.93
Spain 663.03 679.51 812.59 994.10
Iran 221.96 253.89 656.43 920.02
Malaysia 601.10 776.33 751.32 891.32
Thailand 528.69 635.29 713.04 829.62
Total (incl. others) 44147.44 43976.01 52856.28 63622.50
% % SHARE IN
PRODUCTS US$ MILLION
CHANGE TOTAL
2007-08 2008-09 2008-09
52856.2 63622.5
All Commodities 20.37 100
8 0
10537.6
Gems & Jewellery 9053.38 16.39 16.56
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Textiles 5942.47 6469.28 8.87 10.17
Readymade garments 5704.68 6104.53 7.01 9.59
Drugs, Pharma & fine
2567.16 3124.83 17.60 4.91
chemicals
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Machinery & Instruments 2013.65 2778.88 38.00 4.37
Manufacturer of Metals 1852.42 2414.37 30.34 3.79
Ores & minerals 2001.23 2346.88 17.27 3.69
Prim. & semi fin iron &
1625.69 2146.13 32.01 3.37
steel
Leather & leather
1853.12 2030.69 9.58 3.19
manufactures
Transport equipment 1337.36 1897.49 41.88 2.98
Plastic & linoleum products 1224.84 1743.74 42.36 2.74
Electronic goods 1255.99 1690.88 34.63 2.66
Marine Products 1435.27 1323.99 -7.75 2.08
Dyes & Intermediates 712.69 1024.89 43.81 1.61
Rubber manufactured
485.08 587.30 21.07 0.92
products
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During the last five year period i.e. 2004-2008, Indian exports have done very well in
comparison to the performance recorded by some of the major exporting nations both
developed as well as emerging markets. In fact, India’s average annual growth rate of
merchandise exports at 25.0 percent was the third fastest after Russia (28.5 percent) and
China (26.8 percent). In the face of global slowdown and financial crisis, Indian exports
have shown a good measure of resilience during 2008 as the deceleration in the exports
growth was less marked in case of India as compared to a sharp decline in exports growth
recorded by other leading exporting countries like USA, Germany, Japan, China etc. In
fact, India recorded a marginally higher growth rate of 21.8 percent during 2008 as
compared to 21.5 percent during 2007. As compared to this, export growth of China, the
fastest growing economy in the world, in 2008 dropped sharply to 17.2 percent as
compared to 25.8 percent in 2007 reflecting a greater effect of the global slowdown on its
exports.
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DIRECTION OF INDIA’S EXPORTS
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TREND AND VOLUME OF INDIAN EXPORTS
(Value in Rs. Crore)
An export target of US $ 200 billion was set for the year 2008-09. As against this, exports
reached a level of US $ 168.7 billion during the year registering a growth of 3.5 percent.
The set back was primarily on account of global recession which resulted, as per WTO,
in shrinkage of world trade, in volume terms, to 2 percent in 2008 from a growth of 6
percent in 2007.
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Despite the recent setback faced by India’s export sector, our merchandise exports
recorded a Compound Annual Growth Rate (CAGR) of 21.5 percent during the five year
period from 2004-05 to 2008-09. Performance of export during these five year Policy
period clearly reflects a significantly higher trend of growth of exports as compared to the
preceding five years when the exports increased by a lower CAGR of 14.0 percent.
EXPORT INCENTIVES
The Government of India has framed several schemes to promote exports and to obtain
foreign exchange. These schemes grants incentive and other benefits. The few important
export incentives, from the point of view of indirect taxes are briefed below:
Free trade zones
Electronic hardware technology park/software technology park
Advanced license/duty exemption entitlement scheme
Export promotion capital goods scheme
Deemed exports
Manufacture under bond
Duty drawback
EXPORT CREDITS
Export credit is providing pre-shipment and post-shipment credit either in Indian rupees
or in foreign currency to an exporter. The credit is given for short term i.e. up to 6
months, medium/ long term which extends more than 6 months according to the
eligibility of the products and projects. Usually medium/ long term export credit is given
after inspecting the supplier's credits.
To promote the export promotion drive, the Government of India established Export
Credit Guarantee Corporation of India Limited (ECGC) in 1957 to cover the risk of
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exporting on credit. This organization offers a range of services to exporters. They are as
mentioned below:
• It provides credit risk insurance covers to the exporters against there loss in export
of goods and services.
• It offers guarantees to the banks and financial institutions in order to enable the
exporters to obtain better facilities from them.
• It provides Overseas Investment Insurance to the Indian companies investing in
joint ventures abroad as equity of loan.
The Export Promotion Councils are non-profit organizations registered under the
Indian Companies Act or the Societies Registration Act, as the case may be. They are
supported by financial assistance from the Government of India.
ROLE : The main role of the EPCs is to project India's image abroad as a reliable
supplier of high quality goods and services. In particular, the EPCs encourage and
monitor the observance of international standards and specifications by exporters.
The EPCs keep abreast of the trends and opportunities in international markets for
goods and services and assist their members in taking advantage of such opportunities
in order to expand and diversify exports.
FUNCTIONS: The major functions of the EPCs are as follows:
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4. To organize participation in trade fairs, exhibitions and buyer-seller meets
in India and abroad.
6. To build a statistical base and provide data on the exports and imports of
the country, exports and imports of their members, as well as other relevant
international trade data.
The Federation of Indian Export Organizations (FIEO), non profit organizations set up by
the Ministry of Commerce, Govt. of India in 1965 to co-ordinate and focus the efforts of
all organizations in the country engaged in export promotion. The Federation has evolved
into a key player in the promotion of trade, investment and collaboration. FIEO provides
the content, direction and thrust to India’s expanding international trade. FIEO represents
the interest of professional government recognized exporting firms, consultancy firms,
service exporters, banks, export management training institutes etc. FIEO members
representing large, medium & small scale exporting units contribute more around 70%
global exports of our country. Its membership comprises of exporting firms with strong
credentials, called Government-recognized Export House, Star Export House, Trading
House, Star Trading House and Premier Trading House besides Consultancy firms.
Representation from wide spectrum of industry:
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FIEO provides a unique platform to the businessmen dealing in Multi Products. FIEO
membership is offered to exporters dealing in various goods and services and nearly all
the products fall under its gamut. It is the only body authorized in India to register
exporters not covered under any other Export Promotion Council of India. With customer
oriented approach, the confidence and satisfaction of the business community on FIEO
has grown which has reflect in the continuous rise in membership.
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The scope of the Federation reaches out throughout India. It has a well established
network throughout India and has offices at all major business centers of India.
FIEO works as a partner of the Government of India in providing inputs on various trade
policy issues and also acts a strong linkage between the Government and the Industry. It
takes up problems /issues of its members, organizes capacity building courses to provide
a conducive domestic atmosphere and to increase their competitive edge on one hand and
organizes international activities to give its members a global reach. FIEO is the one stop
organization for any foreign investor, buyer or seller looking for a trade partner in India.
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The global slowdown has affected India’s exports by way of
Strengths
Weakness
Opportunities
• Huge export markets such as Europe, America, Africa, and others for Indian cars
Threats
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Export Imperatives:
Internal Factors:
External Factors:
CONCLUSION
If there is any sector in India’s economy that has suffered the most in the current global
economic downturn it is the export sector. It has been recording consistent fall for the last
10 months now. In July, it registered a 28% fall. The overall growth in exports in 2008-
09 has been just 3.4 % against over 20 % in the preceding 4 years. In volume terms it was
$168 billion in 2008-09. The persistent fall in exports is due to contraction of world
demand in countries which import goods and services from India. Protectionist measures
adopted by the western countries have complicated the situation.
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The exporters will now be able to import machinery and technology that they
need to improve their competitiveness in the manufacturing sector, in certain
cases duty free.
Exporters will also be provided with adequate finances in dollars for this purpose
by cutting down transaction costs
With these measures the Government hopes to achieve the annual export growth rate of
15% in 2010 and 2011 against just 3.4 % recorded in 2008. In volume terms it will be
raised from last years $ 168.7 billion to $ 200 billion by March 2011. In the next three
years this growth is targeted to rise to about 25 percent per annum. By 2014 India’s
exports of goods and services is expected to be doubled.
BIBLOGRAPHY
Indiamart.com
Indianindustry.com
Surfindia.com
Commerce.nic.in
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