TABLE OF CONTENTS

GENERAL AGREEMENT ON TRADE IN SERVICES (GATS).........................................3

History................................................................................................................ 3
Purpose of the GATS........................................................................................... 4
Services.............................................................................................................. 6
Cross-border supply.............................................................................................. 6
Consumption abroad.............................................................................................. 6
Commercial presence............................................................................................. 6
Presence of natural persons...................................................................................... 6
Four modes of supply...................................................................................... 7
Basic obligations under the GATS.......................................................................8
Transparency:...................................................................................................... 8
Market Access:..................................................................................................... 9
National Treatment:............................................................................................... 9
Built-in agenda of the GATS...........................................................................10
Criticism........................................................................................................... 14

FOREIGN TRADE POLICY....................................................................................... 16

(2015-2020)......................................................................................................... 16
FOREIGN TRADE POLICY....................................................................................... 17
1. Introduction.................................................................................................. 17
2. The pre-reform period................................................................................... 18
2.1 Import policy trends................................................................................18
2.2 Export policy trends................................................................................19
3. THE POST REFORM-PERIOD..........................................................................20
3.1. Freer Imports and Exports......................................................................21
3.2. Rationalisation of Tariff Structure...........................................................21
3.3. Decanalisation........................................................................................ 21
3.4. Devaluation and Convertibility of Rupee on Current Account.................21
3.5. Trading Houses....................................................................................... 22
3.6. Special Economic Zones.........................................................................22
3.7. EOU Scheme........................................................................................... 23
3.8. Agriculture Export Zones........................................................................23
3.9. Market Access Initiative Scheme............................................................24
3.10. Focus on Service Exports......................................................................24
 3.11. Concessions and Exemptions...............................................................24
4. FOREIGN TRADE POLICY 2015-2020.............................................................26
4.1 Highlights of the foreign trade policy 2015-2020.......................................26
Digital incentives........................................................................................... 26
Trade facilitation............................................................................................ 26
Merchandise exports from india scheme (meis)............................................26
E-Commerce:................................................................................................. 27
Service export from India scheme (seis).......................................................27
Status holder................................................................................................. 28
Advance authorisation scheme.....................................................................28
Export promotion capital goods scheme.......................................................28
Export oriented unit scheme.........................................................................29
Quality complaints and trade disputes..........................................................29
NEWSPAPER ARTICLES......................................................................................... 30
REFERENCES........................................................................................................ 38
 GENERAL AGREEMENT ON TRADE IN
SERVICES (GATS)
The General Agreement on Trade in Services (GATS) is a
treaty of the World Trade Organization (WTO) that entered into
force in January 1995 as a result of the Uruguay Round
negotiations. The treaty was created to extend the multilateral
trading system to service sector, in the same way the General
Agreement on Tariffs and Trade (GATT) provides such a system
for merchandise trade.

All members of the WTO are signatories to the GATS. The basic
WTO principle of most favoured nation (MFN) applies to GATS
as well. However, upon accession, Members may introduce
temporary exemptions to this rule.

History

Before the WTO's Uruguay Round negotiations began in 1986,

public services such as healthcare, postal services, education,
etc. were not included in international trade agreements. Most
such services have traditionally been classed as domestic
activities, difficult to trade across borders, not withstanding the
fact that for example educational services have been
"exported" for as long as universities have been open to
international students. Nevertheless, foreign participation has
existed in many countries prior to the GATS.

Nonetheless, most service sectorsin particular, international

finance and maritime transporthas been largely open for
centuries, as necessary components of merchandise trade.
Other large sectors have undergone fundamental technical and
regulatory changes in recent decades, opening them to private
commercial participation and reducing barriers to entry. The
development of information technologies and the internet have
expanded the range of internationally tradeable service
products to include a range of commercial activities such as
medicine, distance learning, engineering, architecture,
advertising and freight forwarding.

While the overall goal of the GATS is to remove barriers to

trade, members are free to choose which sectors are to be
progressively "liberalised", i.e. marketised and privatised, under
which mode of supply a particular sector would be covered
under, and to what extent to which liberalisation will occur over
a given period of time. Members' commitments are governed
by a "ratchet effect", meaning that commitments are one-way
and should not be wound back once entered into. This reason
for this is the creation of a stable trading climate. Article XXI
allows Members to withdraw commitments and so far two
members have used this option (USA and EU). In November
2008, Bolivia notified that it will withdraw its health services
commitments.

Some activist groups consider that the GATS risks undermining

the ability and authority of governments to regulate
commercial activities within their boundaries, with the effect of
ceding power to business interests over the interests of
citizens. In 2003 'GATS watch' network published a critical
statement which was supported in 2003 by over 500
organisations in 60 countries.

Purpose of the GATS

The creation of the GATS was one of the landmark

achievements of the Uruguay Round, whose results entered
into force in January 1995. The GATS was inspired by essentially
the same objectives as its counterpart in merchandise trade,
the General Agreement on Tariffs and Trade (GATT): creating a
credible and reliable system of international trade rules;
ensuring fair and equitable treatment of all participants
(principle of non-discrimination); stimulating economic activity
through guaranteed policy bindings; and promoting trade and
development through progressive liberalization.

While services currently account for over 60 percent of global

production and employment, they represent no more than
20 per cent of total trade (BOP basis). This seemingly modest
share should not be underestimated, however. Many
services, which have long been considered genuine domestic
activities, have increasingly become internationally mobile.

This trend is likely to continue, owing to the introduction of new

transmission technologies (e.g. electronic banking, tele-health
or tele-education services), the opening up in many countries of
long-entrenched monopolies (e.g. voice telephony and postal
services), and regulatory reforms in hitherto tightly regulated
sectors such as transport. Combined with changing consumer
preferences, such technical and regulatory innovations have
enhanced the tradability of services and, thus, created a
need for multilateral disciplines.

The creation of the GATS was one of the landmark

achievements of the Uruguay Round, whose results entered
into force in January 1995. The GATS was inspired by essentially
the same objectives as its counterpart in merchandise trade,
the General Agreement on Tariffs and Trade (GATT): creating a
credible and reliable system of international trade rules;
ensuring fair and equitable treatment of all participants
(principle of non-discrimination); stimulating economic activity
through guaranteed policy bindings; and promoting trade and
development through progressive liberalization.

While services currently account for over 60 percent of global

production and employment, they represent no more than 20
per cent of total trade (BOP basis). This seemingly modest
share should not be underestimated, however. Many services,
which have long been considered genuine domestic activities,
have increasingly become internationally mobile. This trend is
likely to continue, owing to the introduction of new transmission
technologies (e.g. electronic banking, tele-health or tele-
education services), the opening up in many countries of long-
entrenched monopolies (e.g. voice telephony and postal
services), and regulatory reforms in hitherto tightly regulated
sectors such as transport. Combined with changing consumer
preferences, such technical and regulatory innovations have
enhanced the tradability of services and, thus, created a
need for multilateral disciplines.

All WTO Members, some 140 economies at present, are at the

same time Members of the GATS and, to varying degrees, have
assumed commitments in individual service sectors.

Services

The GATS applies in principle to all service sectors, with two

exceptions.

Article I (3) of the GATS excludes services supplied in the

exercise of governmental authority. These are services that
are supplied neither on a commercial basis nor in competition
with other suppliers. Cases in point are social security schemes
and any other public service, such as health or education that
is provided at non-market conditions.

Further, the Annex on Air Transport Services exempts from

coverage measures affecting air traffic rights and services
directly related to the exercise of such rights.

The GATS distinguishes between four modes of supplying

services: cross-border trade, consumption abroad, commercial
presence, and presence of natural persons.
Cross-border supply is defined to cover services flows from the
territory of one Member into the territory of another Member
(e.g. banking or architectural services transmitted via
telecommunications or mail);

Consumption abroad refers to situations where a service

consumer (e.g. tourist or patient) moves into another Member's
territory to obtain a service;

Commercial presence implies that a service supplier of one

Member establishes a territorial presence, including through
ownership or lease of premises, in another Member's territory
to provide a service (e.g. domestic subsidiaries of foreign
insurance companies or hotel chains); and

Presence of natural persons consists of persons of one Member

entering the territory of another Member to supply a service
(e.g. accountants, doctors or teachers). The Annex on
Movement of Natural Persons specifies, however, that Members
remain free to operate measures regarding citizenship,
residence or access to the employment market on a permanent
basis.

Four modes of supply

The GATS agreement covers four modes of supply for the
delivery of services in cross-border trade:

Supplier
Criteria
Presence

Mode 1: Service delivered within the Service supplier

Cross-border territory of the Member, not present
supply from the territory of another within the
Member territory of the
 Service delivered outside
Mode 2: the territory of the Member,
Consumption in the territory of another member
abroad Member, to a service
consumer of the Member

Service delivered within the

Mode 3:
territory of the Member,
Commercial
through the commercial
presence Service supplier
presence of the supplier
present within
the territory of
Service delivered within the the Member
Mode 4:
territory of the Member, with
Presence of a
supplier present as a natural
natural person
person

Note: From the document MTN.GNS/W/124, available on

the World Trade Organization Website, posted courtesy of
ISTIA

Basic obligations under the GATS

Obligations contained in the GATS may be categorized into two

broad groups: General obligations, which apply directly and
automatically to all Members and services sectors, as well as
commitments concerning market access and national treatment
in specifically designated sectors. Such commitments are laid
down in individual country schedules whose scope may vary
widely between Members. The relevant terms and concepts are
similar, but not necessarily identical to those used in the GATT;
for example, national treatment is a general obligation in goods
trade and not negotiable as under the GATS
(a) General obligations

MFN Treatment: Under Article II of the GATS, Members are

held to extend immediately and unconditionally to services or
services suppliers of all other Members treatment no less
favourable than that accorded to like services and services
suppliers of any other country. This amounts to a prohibition,
in principle, of preferential arrangements among groups of
Members in individual sectors or of reciprocity provisions which
confine access benefits to trading partners granting similar
treatment.

Derogations are possible in the form of so-called Article II-

Exemptions. Members were allowed to seek such exemptions
before the Agreement entered into force. New exemptions can
only be granted to new Members at the time of accession or, in
the case of current Members, by way of a waiver under Article
IX:3 of the WTO Agreement. All exemptions are subject to
review; they should in principle not last longer than 10 years.
Further, the GATS allows groups of Members to enter into
economic integration agreements or to mutually recognize
regulatory standards, certificates and the like if certain
conditions are met.

Transparency: GATS Members are required, inter alia, to publish

all measures of general application and establish national
enquiry points mandated to respond to other Member's
information requests.

Other generally applicable obligations include the

establishment of administrative review and appeals procedures
and disciplines on the operation of monopolies and exclusive
suppliers.

(b) Specific Commitments

Market Access: Market access is a negotiated commitment in

specified sectors. It may be made subject to various types of
limitations that are enumerated in Article XVI(2). For example,
limitations may be imposed on the number of services
suppliers, service operations or employees in the sector; the
value of transactions; the legal form of the service supplier; or
the participation of foreign capital.

National Treatment: A commitment to national treatment implies

that the Member concerned does not operate discriminatory
measures benefiting domestic services or service suppliers. The
key requirement is not to modify, in law or in fact, the
conditions of competition in favour of the Member's own service
industry. Again, the extension of national treatment in any
particular sector may be made subject to conditions and
qualifications.

Members are free to tailor the sector coverage and substantive

content of such commitments as they see fit. The commitments
thus tend to reflect national policy objectives and constraints,
overall and in individual sectors. While some Members have
scheduled less than a handful of services, others have assumed
market access and national treatment disciplines in over 120
out of a total of 160-odd services.

The existence of specific commitments triggers further

obligations concerning, inter alia, the notification of new
measures that have a significant impact on trade and the
avoidance of restrictions on international payments and
transfers.

Built-in agenda of the GATS

The GATS sets out a work programme which is normally
referred to as the built-in agenda. The programme reflects
both the fact that not all services-related negotiations could be
concluded within the time frame of the Uruguay Round, and
that Members have already committed themselves, in
Article XIX, to successive rounds aimed at achieving a
progressively higher level of liberalization (see below). In
addition, various GATS Articles provide for issue-specific
negotiations intended to define rules and disciplines for
domestic regulation (Article VI), emergency safeguards
(Article X), government procurement (Article XIII), and subsidies
(Article XV). These negotiations are currently under way.

At the sectoral level, negotiations on basic telecommunications

were successfully concluded in February 1997 and negotiations
in the area of financial services in mid-December 1997. In these
negotiations, Members achieved significantly improved
commitments with a broader level of participation.

Why was it necessary to introduce, apart from the

traditional concept of cross-border trade, three
additional modes of supply?

The supply of many services is possible only through the

simultaneous physical presence of both producer and
consumer. There are thus many instances in which, in order to
be commercially meaningful, trade commitments must extend
to cross-border movements of the consumer, the establishment
of a commercial presence within a market, or the temporary
movement of the service provider himself.

Does the GATS affect a Member's ability to pursue

national policy objectives?

The GATS expressly recognizes the right of Members to regulate

the supply of services in pursuit of their own policy objectives,
and does not seek to influence these objectives. Rather, the
Agreement establishes a framework of rules to ensure that
services regulations are administered in a reasonable, objective
and impartial manner and do not constitute unnecessary
barriers to trade.

What information is contained in services schedules?

Each WTO Member is required to have a Schedule of Specific

Commitments which identifies the services for which the
Member guarantees market access and national treatment and
any limitations that may be attached. The Schedule may also
be used to assume additional commitments regarding, for
example, the implementation of specified standards or
regulatory principles. Commitments are undertaken with
respect to each of the four different modes of service supply.

Most schedules consist of both sectoral and horizontal sections.

The Horizontal Section contains entries that apply across all
sectors subsequently listed in the schedule. Horizontal
limitations often refer to a particular mode of supply, notably
commercial presence and the presence of natural persons. The
Sector-Specific Sections contain entries that apply only to the
particular service.

When did Members' specific commitments enter into

force?

The majority of current commitments entered into force on 1

January 1995, i.e. the date of entry into force of the WTO. New
commitments have since been scheduled by participants in
extended negotiations (see below) and by new Members that
have joined the WTO.

Can specific commitments be withdrawn or modified?

Pursuant to Article XXI, specific commitments may be modified

subject to certain procedures. Countries which may be affected
by such modifications can request the modifying Member to
negotiate compensatory adjustments; these are to be granted
on an MFN basis.

Are there any specific exemptions in the GATS to cater

for important national policy interests?

The GATS permits Members in specified circumstances to

introduce or maintain measures in contravention of their
obligations under the Agreement, including the MFN
requirement or specific commitments. The relevant Article
provides cover, inter alia, for measures necessary to:

protect public morals or maintain public order;

protect human, animal or plant life or health; or

secure compliance with laws or regulations not inconsistent

with the -Agreement including, among others, measures
necessary to prevent deceptive or fraudulent practices.

Moreover, the Annex on Financial Services entitles Members,

regardless of other provisions of the GATS, to take measures for
prudential reasons, including for the protection of investors,
depositors, policy holders or persons to whom a fiduciary duty
is owed by a financial service supplier, or to ensure the
integrity and stability of the financial system. Finally, in the
event of serious balance-of-payments difficulties Members are
allowed to temporarily restrict trade, on a non-discriminatory
basis, despite the existence of specific commitments.

Are there special provisions for developing countries?

Developing country interests have inspired both the general

structure of the Agreement as well as individual Articles. In
particular, the objective of facilitating the increasing
participation of developing countries in services trade has been
enshrined in the Preamble to the Agreement and underlies the
provisions of Article IV. This Article requires Members, inter alia,
to negotiate specific commitments relating to the strengthening
of developing countries' domestic services capacity; the
improvement of developing countries' access to distribution
channels and information networks; and the liberalization of
market access in areas of export interest to these countries.

While the notion of progressive liberalization is one of the basic

tenets of the GATS, Article XIX provides that liberalization takes
place with due respect for national policy objectives and
Members' development levels, both overall and in individual
sectors. Developing countries are thus given flexibility for
opening fewer sectors, liberalizing fewer types of transactions,
and progressively extending market access in line with their
development situation. Other provisions ensure that developing
countries have more flexibility in pursuing economic integration
policies, maintaining restrictions on balance of payments
grounds, and determining access to and use of their
telecommunications transport networks and services. In
addition, developing countries are entitled to receive technical
assistance from the WTO Secretariat.

Are the results of the extended sectoral negotiations in

telecommunications and financial services legally
different from other sector-specific commitments?

No. The results of sectoral negotiations are new specific

commitments and/or MFN exemptions related to the sector
concerned. Thus, they are neither legally independent from
other sector-specific commitments nor constitute agreements
different from the GATS. The new commitments and MFN
exemptions have been incorporated into the existing Schedules
and Exemption Lists by way of separate Protocols to the GATS.
Why was a new services round necessary?

In services, the Uruguay Round was only a first step in a longer-

term process of multilateral rule-making and trade
liberalization. Observers tend to agree that, while the
negotiations succeeded in setting up the principle structure of
the Agreement, the liberalizing effects have been relatively
modest. Barring exceptions in financial and telecommunication
services, most schedules have remained confined to confirming
status quo market conditions in a relatively limited number of
sectors. This may be explained in part by the novelty of the
Agreement and the perceived need of Members to gather
experience before considering wider and deeper commitments.

Moreover, many administrations needed time to develop the

necessary regulation including quality standards, licensing
and qualification requirements that ensures that external
liberalization is compatible with, and conducive to, core policy
objectives (quality, equity, etc.) in socially or infrastructurally
important services.

More than ten years have passed since the Agreement's

inception, and the economic importance of services in terms
of production, income, employment and trade has continued
to rise. There thus appears ample scope for new and/or
improved commitments in new negotiations.

Criticism

The GATS agreement has been criticized for tending to

substitute the authority of national legislation and judiciary with
that of a GATS Disputes Panel conducting closed hearings. WTO
member-government spokespersons are obliged to dismiss
such criticism because of prior commitment to perceived
benefits of prevailing commercial principles of competition and
'liberalisation'.
While national governments have the option to exclude any
specific service from liberalisation under GATS, they are also
under pressure from international business interests to refrain
from excluding any service "provided on a commercial basis".
Important public utilities such as water and electricity most
commonly involve purchase by consumers and are thus
demonstrably "provided on a commercial basis". The same may
be said of many health and education services which are
sought to be 'exported' by some countries as profitable
industries.

This definition defines virtually any public service as being

"provided on a commercial basis" and is already extending into
such areas as police, the military, prisons, the justice system,
public administration, and government. Over a fairly short time
perspective, this could open up for the privatisation or
marketisation of large parts, and possibly all, of what today are
considered public services currently available for the whole
population of a country as a social entitlement, to be
restructured, marketised, contracted out to for-profit providers,
and eventually fully privatised and available only to those who
can pay for them. This process is currently far advanced in
most countries, usually (and intentionally) without properly
informing or consulting the public as to whether or not this is
what they desire.
FOREIGN TRADE POLICY
(2015-2020)
 FOREIGN TRADE POLICY
1. Introduction

Foreign Trade has been one of the most significant

determinants of economic development in a country. The
foreign trade of a country consists of inward and outward
movement of goods and services, which result into outflow and
inflow of foreign exchange from one country to another country.
During present times, International trade is a vital part of
development strategy and it can be an effective instrument of
economic growth, employment generation and poverty
alleviation in an economy.

According to Traditional Pattern of development show that

resources are transferred from the agricultural to the
manufacturing sector and then into services - sector in an
economy.

The Process of globalization has got momentum through the

process of economic Integration, and in the expansion of the
volume of International Trade. India has been a relatively
newcomer to the process of expansion of International Trade
since its opening up to world trade only began after the crisis in
1991. The opening up to International Trade should be seen as
a crucial aspect of the new approach to economic Policy and as
an Integral part of the process of reforms.

In 1991, the government introduced some changes in its Policy

on trade, foreign Investment, Tariffs and Taxes under the name
of "New Economic Reforms".

The main focus of these reforms has been on Liberalization,

openness and export promotion activity. India's foreign Trade
has export significantly changed in the Post - reforms period. In
absolute terms, Trade Volume rose and the composition of
exports has undergone several significant changes. In Post-
reform Period, the major contributor to exports growth has
been the manufacturing sector.
2. The pre-reform period

2.1 Import policy trends

A progressive tightening up of import policy took place in 1957.
The Open General License (except for poultry, fish, vegetables,
etc., from Pakistan) discontinued; instead limited quotas in
respect of essential commodities were granted to importers on
the basis of their actual imports during 1952-56. No fresh
licenses were issued in this period to established importers and
the conditions of issue of capital goods licenses on deferred
payment basis were made more stringent. The licenses were
given keeping in view the austerity measures and imports of
consumers goods being cut drastically and that of raw
materials and intermediate products being limited to the
minimum necessary for the maintenance of production. Capital
goods licensing continued to be confined to the highest priority
programmes. As a result, the imports came down drastically.

In the late 1950s, the government imports witnessed a

continuous upward trend, which included food imports. The
balance of payments position in 1959-60 was comparatively
better than the previous years. There was an increase in
exports as also a reduction in imports.

In 1960-61, both government and private imports showed an

increase. Imports of food grains, raw cotton and metals
contributed significantly. During this period, the government set
up 12 Export Promotion Councils to promote exports in
respective areas and special export schemes were also devised
and operated. In some cases, larger import licenses were
issued as part of export production.

The balance of payments once again came under considerable

pressure in 1964-65 due to rising debt service burden,
repayment to the IMF, increase in imports of food and goods for
development. In the pre-devaluation period of 1966, all imports
were either subject to discretionary import licensing or were
canalized by monopoly government trading organizations,
with some flexibility provided by changing OGL lists.

The products on OGL lists could only be imported by actual

users and could not be resold: they were entirely raw materials,
components or machines which were not domestically
produced and required by domestic producers. In this system
tariffs lost most of their relevance for regulating the quantity of
imports and for protecting local industries: their main function
was to raise revenue and to transfer quota rents from or to the
recipients of import licenses. After 1956, import licensing was
regularly tightened in response to steadily worsening foreign
exchange situation, and tariffs were increased very high levels
by early 1966.

In the late 1970s and early 1980s, the trade regime was based
on a complex system of licensing. Indias trade policy heavily
relied on quotas rather than on tariffs. Imports were regulated
through a licensing system without any policy prescriptions.
However, import licenses allocated reflect two major criteria:

1) the principle of essentiality, and

2) the principle of indigenous non-availability. Thus, the

imports, in terms of both magnitude and composition, were to
be permitted only if the firm in question certified to the
government that they were essential (as inputs or equipment
for production).

2.2 Export policy trends

Exports were largely neglected during the first and the second
five-year plans, which was justified on the ground that demand
for Indian exports was inelastic. Whilst the world merchandise
export was growing at 6.3 per cent per annum during the
1950s, exports from India stagnated. As the world merchandise
exports expanded relatively faster during the 1960s at 8.8 per
cent per annum, the growth rate of Indias exports improved
somewhat to 3.6 per cent per annum.
Clearly, the country failed to make the best use of the trade
possibilities available during the 1950s and 1960s. The share of
Indias exports in world exports declined sharply from 1.4 per
cent during the 1950s to 0.9 per cent during the 1960s. In order
to offset the detrimental effects of overvalued exchange rates
and other government policies on exports, various implicit and
explicit measures of export subsidisation have been adopted.
World exports registered a hefty growth rate of 20.4 per cent
per annum during the 1970s. Buoyancy of world demand and a
relatively favourable domestic policy provided an atmosphere
conducive to a rapid growth of exports from India.

Thus, Indias exports of merchandise and services grew at the

annual rate of about 18 per cent and 27 per cent respectively
during the 1970s. Joshi and Little (1994), while recognising the
importance of world demand, attributed the export growth of
the 1970s mainly to the depreciation of the real effective
exchange rate (REER), provision of export subsidy and a
relatively liberal import policy for export production. Despite
the high growth, Indias share in world merchandise exports
declined to 0.5 per cent during the 1970s from 0.9 per cent
during the 1960s. This is not surprising since the growth rate of
world exports remained higher than that of India during the
1970s.

The export boom of the 1970s, however, could not be

maintained during the first half of the 1980s. As the growth rate
of world exports turned negative in the aftermath of the second
oil price hike, Indias exports decelerated sharply. During the
second half of the 1980s, however, the world economy
recovered and Indias exports grew at a healthy pace (17.8 per
cent).

According to Joshi and Little (1994), there was a genuine

improvement in the export competitiveness of India during this
period due to a major depreciation of the REER and increased
export subsidies. This period also witnessed some doses of
industrial deregulation and liberalisation of capital goods
imports.

3. THE POST REFORM-PERIOD

The massive trade liberalisation measures adopted after 1991

mark a major departure from the relatively protectionist trade
policies pursued in earlier years. The current trade policy
reforms seem to have been guided mainly by the concerns over
globalisation of the Indian economy, improving competitiveness
of its industry, and adverse balance of payments situation.
Main features of trade policies (trade reforms) since 1991 are
as follows:

3.1. Freer Imports and Exports

Substantial simplification and liberalisation has been carried

out in the reform period. The tariff line wise import policy was
first announced on March 31, 1996 and at that time itself 6,161
tariff lines were made free.

Till March 2000, this total had gone up to 8,066. The Exim
Policy 2000-01 removed quantitative restrictions on 714 items
and the Exim Policy 2001- 02 removed quantitative restrictions
on the balance 715 items. Thus, in line with Indias
commitment to the WTO, quantitative restrictions on all import
items have been withdrawn.

3.2. Rationalisation of Tariff Structure

Acting on the recommendations of the Chelliah Committee, the

government has, over the years, reduced the maximum rate of
duty. The 1993-94, Budget had reduced it from 110 per cent to
85 per cent. The successive Budgets have reduced it further in
stages. The peak import duty on non-agricultural goods is now
only 12.5 per cent.
3.3. Decanalisation

A large number of exports and imports used to be canalised

through the public sector agencies in India. The supplementary
trade policy announced on August 13, 1991 reviewed these
canalised items and decanalised 16 export items and 20 import
items. The 1992-97 policy decanalised imports of a number of
items including newsprint, non-ferrous metals, natural rubber,
intermediates and raw materials for fertilisers.

However, 8 items (petroleum products, fertilisers, edible oils,

cereals, etc.) were to remain canalised. The Exim Policy, 2001-
02 put 6 items under special list rice, wheat, maize, petrol,
diesel and urea. Imports of these items were to be allowed only
through State trading agencies.

3.4. Devaluation and Convertibility of Rupee on Current

Account

The government made a two- step downward adjustment of 18-

19 per cent in the exchange rate of the rupee on July 1 and July
3, 1991. This was followed by the introduction of LERMS i.e.,
partial convertibility of rupee in 1992-93, full convertibility on
the trade account in 1993-94 and full convertibility on the
current account in August 1994.

Substantial capital account liberalisation measures have also

been announced. The exchange rate of the rupee is now
market-determined. Thus, exchange rate policy in India has
evolved from the rupee being pegged to a market related
system (since March 1993).

3.5. Trading Houses

The 1991 policy allowed export houses and trading houses to

import a wide range of items. The government also permitted
the setting up of trading houses with 51 per cent foreign equity
for the purpose of promoting exports.
The 1994-95 policy introduced a new category of trading
houses called Super Star Trading Houses. These houses are
entitled to membership of apex consultative bodies concerned
with trade policy and promotion, representation in important
business delegations, special permission for overseas trading
and special import licences at enhanced rate.

3.6. Special Economic Zones

A scheme for setting up Special Economic Zones (SEZs) in the

country to promote exports was announced by the government
in the Export and Import Policy of March 31, 2000. The SEZs are
to provide an internationally competitive and hassle-free
environment for exports and are expected to give a boost to
the countrys exports.

The Policy has provided provisions for setting up SEZs in the

public sector, joint sector or by State governments. It was also
announced that some of the existing Export Processing Zones
(EPZs) would be converted into Special Economic Zones.

Some of the distinctive features of SEZ scheme are:

(i) A designated duty-free enclave to be treated as foreign

territory for trade operations and duties and tariffs;

(ii) SEZ units could be for manufacturing services;

(iii) No routine examination of export and import cargo by

customs;

(iv) Sale in domestic market on full duty and import policy in

force;

(v) SEZ units to be positive net foreign exchange earners in

three years;

(vi) No fixed wastage norms;

(vii) Duty-free goods to be utilised within the approval period of
5 years;

(viii) Subcontracting of part of production and production

process allowed for all sectors, including jewellery units;

(ix) 100 per cent foreign direct investment through automatic

route in the manufacturing sector;

(x) 100 per cent income tax exemption for 5 years and 50 per
cent for 2 years thereafter and 50 per cent of the ploughed
back profit for the next 3 years;

(xi) External commercial borrowing through automatic route,

etc.

3.7. EOU Scheme

The Export Oriented Units (EOUs) scheme introduced in early

1981 is complementary to the SEZ scheme. It offers a wide
option in locations with reference to factors like source of raw
materials, ports of export, hinterland facilities, and availability
of technological skills, existence of an industrial base and the
need for a larger area of land for the project. The EOUs have
put up their own infrastructure.

3.8. Agriculture Export Zones

The Exim Policy 2001 introduced the concept of Agri- Export

Zones (AEZs) to give primacy to promotion of agricultural
exports and effect a reorganisation of our export efforts on the
basis of specific products and specific geographical areas.

The scheme is centered on the cluster approach of identifying

the potential products, the geographical region in which these
products are grown and adopting an end-to-end approach of
integrating the entire process right from the stage of production
till it reaches the market.
The AEZs would have the state-of-the-art services such as pre-
post harvest treatment and operations, plant protection,
processing, packaging, storage and related research and
development. The exporters in these zones can avail of the
various export promotion schemes under the Exim Policy
including recognition as a status holder.

3.9. Market Access Initiative Scheme

Market Access Initiative Scheme was launched in 2001- 02 for

undertaking marketing promotion efforts abroad. The key
features of the scheme are in- depth market studies for select
products in chosen countries to generate data for promotion of
exports from India, assist in promotion of India, Indian products
and Indian brands in the international market by display
through showrooms and warehouses set up in rental premises
by identified exporters, display in identified leading
departmental stores total exhibitions trade fairs, etc. The
scheme shall also assist quality up gradation of products as per
requirements of overseas markets, intensive publicity
campaigns, etc.

3.10. Focus on Service Exports

The amended Export-Import Policy, 2002-07, announced on

March 31, 2003, specifically emphasized service exports as an
engine of growth. It, accordingly, announced a number of
measures for the promotion of exports of services. For instance,
import of consumables, office and professional equipment,
spares and furniture upto 10 per cent of the average foreign
exchange export earning has been allowed.

The advance licence system has been extended to the tourism

sector. Under this, firms will be allowed duty-free import of
consumables and spares upto 5 per cent of their average
foreign exchange earnings of the previous three years, subject
to actual user condition.

3.11. Concessions and Exemptions

A large number of tax benefits and exemptions have been

granted during the 1990s to liberalise imports and promote
exports with the five year Exim Policy 1992-97 and Exim Policy
1997-2002 serving as the basis for such concessions.

These policies, in turn, have been reviewed and modified on an

annual basis in the Exim policies announced every year.
Successive annual Union Budgets have also extended a number
of tax benefits and exemptions to the exporters.

These include reduction in the peak rate of customs duty to 15

per cent; significant reduction in duty rates for critical inputs for
the Information Technology sector, which is an important export
sector; grant of concessions for building infrastructure by way
of 10-years tax holiday to the developers of SEZs;

Facilities and tax benefits to exporters of goods and

merchandise; reduction in the customs duty on specified
equipment for ports and airports to 10 per cent to encourage
the development of world class infrastructure facilities, etc.

A number of tax benefits have also been announced for the

three integral parts of the convergence revolution the
Information Technology sector, the Telecommunication sector,
and the Entertainment industry.
4. FOREIGN TRADE POLICY 2015-2020

4.1 Highlights of the foreign trade policy 2015-2020

Digital incentives
For reward schemes, facility of uploading digitally signed
documents by CA/CS/CoA being developed.
Uploading of documents for Chapter 4 and Chapter 5 of
FTP in the next phase.
Facility to upload documents in Exporter/Importer Profile.
No need to submit permanent records/ documents
repeatedly once uploaded.
Landing documents of export consignment as proofs for
notified market can be digitally uploaded.
Online inter-ministerial consultations for approval of export
of SCOMET items, Norms fixation, Import/ Export
authorisation.

Trade facilitation
Facility of 24*7 customs clearance for specified
imports/exports has been made available at 17 airports
and 18 sea ports across the country.
Time release Study by CBEC for measuring actual
performance.
3 mandatory documents for exports and imports.
Online complaint Registration and Monitoring.
Online filling for exports from EDI ports: Hard copy of
application/documents dispensed with.
Single window at customs.
Merchandise exports from india scheme (meis)
Schemes such as FPS/MLFPS/FMS/AIIS/IEIS and VKGUY
have been merged into a single scheme viz., MEIS with no
conditions attached thereof.
MEIS Entitlement: 2%/3%/5% of FOB value of notified
goods exported to notified markets.
FOB value of exports in free foreign exchange or FOB
value of exports given in the Shipping Bills in free foreign
exchange, whichever is less, shall be considered.
Supplies made from DTA units to SEZ units which were
eligible for FPS benefit hitherto have now been specifically
included in the ineligible categories.
The ineligible categories of sectors have been expanded.

E-Commerce:
Exports of notified goods using e-commerce upto Rs.
25,000 eligible for MEIS.
Can be exported in manual mode from FPO at Delhi,
Mumbai and Chennai.
Also through courier terminal at Delhi, Mumbai and
Chennai airports.
Required to submit express operator landing certificate/
online web tracking reports for MEIS.
Categories need to be expanded with inclusion of all
garments.

Service export from India scheme (seis)

Only Mode 1 and Mode 2 services eligible.
Under SFIS, the benefit was to Indian Service Providers
while SEIS applies to Service Providers located in India.
Service provider to have active IEC when rendering
services.
Export turnover of services unit under SEZ ineligible.
Scrip to be used for imports of goods, service tax
payment, EO default, Composition fee and fee.
 The entitlement rates under SEIS are substantially lower
than to the entitlement of 10% under SFIS scheme.
The list of notified services is largely the same as in case
of the SFIS scheme. However, the list of notified services
and the rates of rewards will be reviewed after
30.09.2015.

Status holder
Change in name: New name to be reflected at all places.
Criteria in USD
One Star Export house : US$ 3 Million
Two Star Export house : US$ 25 Million
Three Star Export house : US$ 100 Million
Four Star Export house : US$ 500 Million
Five Star Export house : US$ 2000 Million
Two star and above export houses shall be permitted to
establish Export Warehouses.
Three star and above export houses shall be entitled to
get benefit of Accredited Clients Programme as per the
guidelines of CBEC.
The status holders would be entitled to preferential
treatment and priority in handling of their consignments
by the concerned agencies.

Advance authorisation scheme

Imports under Advance Authorisation exempted from
Transition Product Specific Safeguard Duty also.
Eligibility for Authorisation on self declared norms reduced
from 500% to 300% for status holders.
Non status holder to be eligible for 300% or Rs 10 Cr
whichever more.
A detailed list of items issued which are in-eligible for
importation on self declaration basis.
Export promotion capital goods scheme
For indigenous sourcing of Capital Goods, the specific
Export Obligation reduced by 25% of the EO stipulated.
The limit on value of spares imported has now been
relaxed.
EO to be fulfilled through goods manufactured from EPCG
machine.
Export of restricted goods under the authorization now
allowed, subject to the approval from Exim Facilitation
Committee.
Validity of the authorization is now limited to 18 months
from the date of issue of such authorization.

Export oriented unit scheme

FTP permits an EOU, to export a prohibited item on a case
to case basis, provided raw materials are imported and
there is no procurement of raw material from DTA.
EOU units to achieve Positive NEE cumulatively in 5 years.
EOUs, EHTPs, STPs have been allowed to share
infrastructural facilities among themselves after getting
approval from Inter-Ministerial standing Committee.
Inter unit transfer of goods/services have been allowed
among EOUs, EHTPs, STPs and BTPs to facilitate group of
those units to source inputs centrally in order to obtain
bulk discounts.
EOUs have been allowed facility to set up warehouses
near the port of export.

Quality complaints and trade disputes

Anew chapter on Quality Complaints and Trade Disputes
introduced.
For resolving such disputes at a faster pace, a Committee
on Quality Complaints and Trade Disputes is being
constituted in22 offices with members from
EPCs/FIEO/APEDA/EICs.
 Quality Complaints and Trade Disputes proceedings will
only be reconciliatory in nature. Aggrieved part is free to
pursue any legal recourse.
NEWSPAPER ARTICLES
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