Economics

EXIM Policy

Submitted By,

Roll
Names no.
Chintan Shah IN 7078
Milind Shah IN 7079
Nimisha Shah IN 7080
Pratiti Shah IN 7081
Rishit Shah IN 7082
Ushma Shah IN 7083

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EXIM Policy

INDEX

SR PAG
N E
O. TOPIC NO.

1 PRE – 1991 SCENARIO OF FOREIGN TRADE 3

Brief Review of India’s Trade Policy 3
India’s Share In World Trade 8
General Provisions Regarding Imports And Exports 9
2 JOURNEY OF EXIM POLICY 16
Exim Policy, 1992-97 16
Exim Policy, 1997-2002 16
Modified Exim Policy, April 1998 18
Exim Policy 1999-2000 19
Exim Policy 2000-2001 19
Exim Policy 2001-2002 21
Exim Policy 2002-2007 21
Exim Policy, 2003-2004 23
Mini EXIM Policy, Jan 2004 23
Foreign Trade Policy, 2004-2009 24
3 HIGHLIGHTS OF EXIM POLICY & ITS IMPACT 28
Special Economic Zone (SEZ) 28
Duty Free Replenishment Certificate (DFRC) Scheme 31
Duty Entitlement Pass Book (DEPB) Scheme 32
Quantitative Restrictions (QR) 34
Agricultural Export Zones (AEZ) 37
Status Holders 38
Export Promotion Capital Goods Scheme (EPCG) 39
Deemed Exports 42
Advance License Scheme 43
4 EXIM BANK 45
5 EXPORTS, IMPORTS & TRADE BALANCE 49
6 INDIA V/S WORLD: ANNUAL EXPORT GROWTH RATE 50
7 FUTURE OF EXIM 51
8 BIBLIOGRAPHY 52

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PRE – 1991 SCENARIO OF FOREIGN TRADE

Exim is the principal financial institution in the country for co-ordinating working of
institutions engaged in financing exports and imports. The import policy in the post
independence period was guided by consideration of a growth oriented policy which should
ultimately lead us to the objective of self reliance:

a) Imports should be limited as far as possible so as to conserve foreign exchange.

b) Imports of those items were to be encouraged which would help the industrialization of
the economy and imports of such items which could be produced at home were
discouraged or completely banned. This distinction between essential and non-essential
items of imports were necessary in view of the fact that even the demand for imports of
capital goods and other equipment in a developing economy could be of such a
magnitude that it might become difficult to find foreign exchange for developmental
imports.

c) The nature of imports should be so modified that it helped export promotion, and thus
mitigate the deficit in the balance of payments position ultimately.

The government appointed the Import and Export Policy Committee headed by
Mr.Mudaliar in 1962 to review Government’s trade policy. The recommendations of the
committee were accepted by the government. Mr.V.P.Singh, the then Commerce Minister,
announced the Export Import policy on the 12th of April, 1985.It was here that for the first
time the Government announced the policy on a three year basis. The basic aim of the policy
was to facilitate production through easier and quicker access to imported inputs, impart
continuity and stability of Exim Policy, strengthen the export production base, facilitate
technological up gradation and affect all possible savings in imports.

 Brief Review of India’s Trade Policy

India’s foreign trade policy during the last five decades may be broadly split into
import substitution policy, export drive policy and export acceleration policy. The import
substitution was followed in the first two decades. With fears of external dominance, the
Indian planners adopted a somewhat introvert external trade strategy which relied on
encouraging domestic production for the domestic market with the help of high tariffs and
high degree of protection. Far from viewing foreign trade as an engine of growth, Indian
planners sought to minimise import demand by adopting an import substitution policy and
gave secondary place to exports primarily as a source to generate the foreign exchange
earnings to meet that part of the import bill not covered by external assistance. There were
controls over both imports and exports. However, this policy of import substituting
industrialisation and system of controls failed to produce rapid growth and self-reliance.

With the realisation of the drawbacks of the excessively inward-looking strategy on

one hand and the need for modernisation and technology upgradation on the other, certain
policy measures were initiated in the late seventies. Export incentives in the form of cash
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compensatory support (CCS), import replenishment (REP), duty drawback (DDS), market
development assistance (MDA) etc and export services in the form of export promotion
councils, commodity boards and specialised services institution were introduced. The strategy
towards a greater integration of the Indian economy with the rest of the world has been
pursued since then. In 1975-76 import policy was liberalised to make available imported
inputs for registered exporters. In mid-1980s the government adopted a three-year import-
export policy (1985-88) with the aim to provide easy access to imports, essential for
maximizing production and exports. The main policy changes were abolition of automatic
licensing, inclusion of 201 items of industrial machinery under capital goods import under
OGL, decentralisation of 53 import items and granting facility for import of capital goods
against REP license from Rs 1 lakhs to Rs 2 lakhs.

The second three-year policy (1988-91) carried forward the process of trade
liberalisation to make exports more competitive. The policy was designed to stimulate
industrial growth by providing easy access to essential imported capital goods, raw materials
and components to industry so as to sustain movements towards modernization, technological
upgradation and making Indian industry competitive internationally. The liberal imports of
capital goods and technology were viewed as a means to enable exporters to undertake
technological upgradation in order to compete more effectively in the international market.

In the 1990s many short run adjustments were made in the trade policy in order to
overcome the external sector crisis, which hit the country in 1991. Two major measures taken
in trade policies were (a) liberalisation of imports entailing successive expansion in the OGL
list and (b) linking expansion in exports to import liberalisation. CCS scheme was suspended;
REP license was substituted by EXIM scrips. The rupee was devalued in July 1991 and the
country saw transition towards the market-based exchange rate regime.

From Independence in 1947 till mid 1990s, India with some exceptions, always faced
deficit in its balance of payments i.e. imports always exceeded exports. This was
characteristic of a developing country struggling for reconstruction and modernization of its
economy. Imports galloped because of increasing requirements of capital goods, defence
equipments, petroleum products, and raw materials. Exports remained relatively sluggish
owing to lack of exportable surplus, competition in the international market, inflation at
home, and increasing protectionist policies, of the developed countries.

India embarked on the path of globalization in the early 1990s with the objective of
improving overall productivity, competitiveness and efficiency of the economy in order to
attain a higher growth profile. Concomitantly, industrial, financial and external sector reforms
were initiated with a view to creating an environment conductive for the expansion of trade.
As a result, growth in trade accelerated in the early part of the 1990s. This momentum
however could not be sustained in the face of various domestic bottlenecks and exogenous
constraints like East Asia crisis and slowdown in the US economy. These external factors
along with stagnation in investment rate, sluggish industrial growth and slow down in
manufacturing productivity, predicted India’s trade during the closing years of the 1990s.
Thus while the opening of the economy presented a range of opportunities and advantages to
the trade sector in India, the greater integration with the global economy has posed several
challenges as well.

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Since the initiation of economic reforms, India’s outward orientation has increased
considerably. The destination pattern of Indian exports has remarkably changed in the sense
that the importance of developing countries as an export market has increased considerably.
There are, however, concerns that the country the dramatic changes in exports of East Asia.
India’s experience has seemingly fallen short of expectation. India’s share in global trade did
not rise as impressively and the commodity structure of India’s export remained almost
unchanged until the mid 1990s.

Moreover, unlike the East Asian countries where industry has been the major driver
of exports growth, the contribution of industrial exports in India has been comparatively low.
This could perhaps be attributed to small scale industry reservations and inflexible labour
laws besides infrastructural bottlenecks. The labour cost in India however is one of the lowest
among the competitor countries. Given the export structure on India, the potential for higher
exports of manufactures, especially to the developed countries is high.

On the imports side, despite some initial apprehensions, liberalization has not
adversely affected India’s balance of payments. On the contrary, increased trade
liberalization along with the prudent management of capital account liberalization has
imparted with significant strength to the balance of payments since the mid 1990a. With the
increased competitiveness of Indian Industries imports of low and medium technology
intensive products have declined. At the same time, imports of high technology intensive
products and imports used for export production have increased. There is growing evidence
that accessibility to imports has a positive impact on the growth performance of the country.

In the 1990s, a liberalised trade regime was put in place, which marked a significant
turnaround from the earlier controlled regime. The challenge of restoring the macro-
economic balance initially was combined with a long term new trade policy which formed a
major ingredient of the economic reforms programme. It was recognised that trade policies
should form a part of an integrated policy framework if the aim was to improve the overall
productivity and efficiency of the economic system. Apart from devaluation of the exchange
rate and a switch over to a unified marked determined exchange system in 1993, the new
trade policy was characterised by a short negative list of imports and exports, lowering of the
level and dispersion of nominal tariffs, withdrawal of quantitative restrictions on imports and
phasing out of the system of import licensing. The new trade policy reforms also
encompassed significant changes in the system of export incentives, moving away from direct
subsidies to indirect export promotional measures.

The multi-pronged strategy undertaken in the beginning of the 1990s gradually had
its desired effects on the economy and ushered in a phase of a stable and high growth. The
rising exports combined with significant surge in capital flows provided opportunities for
further liberalization of essential imports from quantitative restrictions. The stability in the
exchange rate of the rupee maintained the competitiveness of Indian exports and at the same
time prevented the upsurge of cheap imports. The loss of the East European markets since the
early 1990s was successfully countered by diversifying into newer markets of developing
countries of Asia and the Organization of the petroleum Exporting Countries(OPEC).

The economic reform process introduced in the beginning of the 1990s wit focus on
liberalization had enabled increased integration of the Indian Economy with the rest of the
world. The growth rate of India’s trade is increasingly dependent on exogenous factors such
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as world trade growth, international price changes and developments in the competitor
countries. Cross currency exchange rates as well as solar-rupee exchange rate movements
also get reflected in the performance of India’s trade. Although the level and dispersion of
India’s tariff have considerably come down since the early 1990s it remains among the
highest as compared to emerging market economies.

It is increasingly being realised that the desirable structure of tariff rates should
comply with the basic principles of simplicity, transparency, stability and international
practices. As noted in the tenth plan document, the most effective means of encouraging
outward orientation is to lower tariffs on imports so that the anti-export bias corrected.
Further, it may be noted that as the duty rates fall, the need for refunds will commensurately
decline thereby bringing down the transaction cost.

It has been observed that in contrast to the structural and compositional shifts in
world trade towards higher technology intensive products, the commodity structure of
India’s exports remained largely unchanged until the mid 1990s. Although, of late India’s
exports have shown a steady trend towards higher technology content, India’s specialization
of in exports lies in manufacturing goods, especially to the developed markets remains high.
However, given the general trend of movement of terms of trade towards higher technology
intensive products, it may be imperative for India to move up the technology ladder.

At the same time, the policy of reservation for SSIs had declined successful small
scale units to expand and achieve economies of scale and upgrade technology. This in turn
has affected export growth, manufacturing production and employment generation.

A noteworthy fact is that despite significant liberalization of imports during the

1990s the overall balance of payments has been in surplus for most of the years with the
country foreign exchange reserves crossing US$ 100 billion mark. Thus, in contrast to fears
expressed at the time if the opening up of the economy, import, and liberalization policies
have in fact strengthened the country’s external sector since 1990-91. The implication is that
continued reduction in import tariffs will help in inducing greater efficiency and
competitiveness in the economy, while reducing avoidable transaction costs in trade. For the
future, the prospects of sustained growth in exports of goods and services are bright provided
the Indian economy can face the challenge of enhancing productivity and competitiveness in
an increasingly integrated global environment.

 Import Substitution: Cornerstone of Trade Policy

India adopted an inward looking development strategy after independence wherein

import substitution constituted a major element of both trade and industrial policies. The
focus in the initial stages of planned development was on stimulating home grown
industrialization, essentially based on the infant industry argument ,wherein production for
domestic market was shielded behind high tariff walls and high effective protection .this
policy not only underestimated the export possibilities but also the import intensity of the
import substitution process itself.

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Import substitution was the prime objective of India’s trade policy till the mid 1970’s.
This policy was largely based on the imports and exports act of 1947. Liberal incentives were
granted to firms if they were undertaking production of an imported item that was not
domestically produced.

Protective quotas however remained more or less intact and domestic industry continued
to be shielded from import competition. Production for exports cannot be isolated from
production for the home market and trade policy would have to be integrated with the policy
for domestic industrialization.

A three year export import policy was introduced in 1985 to provide a definite focus to
the trade sector. A major ingredient of this policy was the provision of easy access to
essential capital goods, raw materials and component from abroad since these were viewed as
a major incentive for exporters in undertaking technological up gradation for reducing cost
and improving quality.

In short prior to mid 1991, foreign trade of India suffered from strict bureaucratic and
discretionary control. Foreign exchange transactions were controlled by the government and
the Reserve Bank of India. Beginning mid1991 the government of India introduced a series of
reforms to liberalise and globalise the Indian economy. The process of globalisation is a
reality which cannot be denied and also should not be avoided .It needs to be managed so that
we can derive the maximum advantage from world markets.

 Balance of payment crisis, 1991

The balance of payment situation became very difficult in 1991-1992 despite of

softening of oil price in the world market. Even with a substantial import compression, the
pressure on the balance of payments persisted throughout the current financial year.

The government attempted to mobilize support for balance of payments for

multilateral financial institutions– the international monetary fund, the World Bank and the
Asian development bank.

Another important initiative taken by the government to meet the urgent need for the
balance of payments financing was the announcement of two schemes designed to encourage
the inflow of capital funds from abroad .The India development bond scheme and the
immunity scheme for repatriation of funds held abroad were introduced in October1991.

Foreign currency assets, which had declined to $1.1 billion at their lowest point in
june1991, had risen to $4.4 billion by February1992.

The build up of the reserves in the course of 1991-92 was necessary to restore
confidence in the system, but it also meant the additional resources mobilized from the
multilateral financial institutions and the IDB and immunity schemes were primarily used for
building up reserves and not to liberalize imports, which remain severely constrained in 1991-
92.

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Following adjustments were called for a broad based, rapid and sustained growth of exports.

• Reduction in the excess domestic demand-Domestic demand had to be restrained and

supply increased.
• Enhanced Competiveness-This required two changes, a change in the exchange rate of
rupee and a reduction in a relative prices of those products which were costly vis-à-
vis competing goods abroad. The first step was taken by means of a downward
adjustment of about 18 percent in the external value of the rupee .The second step
required a phasing down of import restrictions and a reductions in the high levels of
protection ,which characterize Indian industries.

• Deregulation-One of the obstacles to exports lied in the cumbersome administrative

procedures involved, arising from controls over imports and exports, exchange
control and also procedures.

Measures which were taken for lowering the inflation rate in the economy are:-

• Reducing subsidies and external support to production enterprises so as to make more

responsive to price and demand changes.

• Ensuring that buffer stock operations for food grains and interventions in agricultural
markets were counter cyclical.
• Encouraging savings to be high not only as a proportion of GDP but in relation to
demand for investment funds in the economy.

• Keeping entry barriers low in the industrial sector and improving industry’s access to
imported inputs at low tariffs.

 India’s Share In World Trade

In 1950, India accounted for 1.8 percent (1.85 percent of exports and 1.71 percent of
imports) of world trade, gradually declining to 0.53 percent by 1991; it marginally improved
to 0.61 percent in 1994. The decline in India’s share in world trade has not only been arrested
but reversed. Below table shows trends in India’s share in the world trade during the post-
Independence period. It is discernible that of late India’s share in world exports in on the
increase. It s noteworthy that India commands an important place in world trade in tea,
precious, and semi-precious stone, spices, iron ore, leather and coffee. The Foreign Trade
Policy, 2004 – 2009 has set an ambitious task of achieving 1.5 percent share in the world
trade by the year 2009.

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Selected Years (percent)

Year Exports Imports Trade

1950 1.85 1.71 1.78
1960 1.03 1.69 1.36
1970 0.64 0.65 0.65
1980 0.42 0.72 0.57
1990 0.52 0.66 0.59
1991 0.50 0.56 0.53
1992 0.53 0.61 0.57
1993 0.58 0.60 0.59
1994 0.60 0.63 0.61
1998 0.60 - -
2000 0.70 - -
2001 0.70 - -
2003 0.86 - -

Sources: Government of India, Economic Survey, 1996-1997, p.88, and Economic Survey,
2005-2006 p. S-95

 General Provisions Regarding Imports And Exports

Exports and Imports free unless regulated

2.1 Exports and Imports shall be free, except in cases where they are regulated by
the provisions of this Policy or any other law for the time being in force. The
itemwise export and import policy shall be, as specified in ITC(HS) published
and notified by Director General of Foreign Trade, as amended from time to
time.
Compliance with Laws
2.2 Every exporter or importer shall comply with the provisions of the Foreign
Trade (Development and Regulation) Act, 1992, the Rules and Orders made
thereunder, the provisions of this Policy and the terms and conditions of any
licence/certificate/permission granted to him, as well as provisions of any
other law for the time being in force. All imported goods shall also be subject
to domestic Laws, Rules, Orders, Regulations, technical specifications,
environmental and safety norms as applicable to domestically produced goods.
Interpretation of Policy
If any question or doubt arises in respect of the interpretation of any provision
contained in this Policy, or regarding the classification of any item in the

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ITC(HS) or Handbook (Vol.1) or Handbook (Vol.2), the said question or

doubt shall be referred to the Director General of Foreign Trade whose
decision thereon shall be final and binding.

If any question or doubt arises whether a licence/ certificate/permission has

been issued in accordance with this Policy or if any question or doubt arises
touching upon the scope and content of such documents, the same shall be
referred to the Director General of Foreign Trade whose decision thereon shall
be final and binding.
Procedure
The Director General of Foreign Trade may, in any case or class of cases,
specify the procedure to be followed by an exporter or importer or by any
licensing or any other competent authority for the purpose of implementing
the provisions of the Act, the Rules and the Orders made thereunder and this
Policy. Such procedures shall be included in the Handbook (Vol.1), Handbook
(Vol.2) and in ITC(HS) and published by means of a Public Notice. Such
procedures may, in like manner, be amended from time to time.

The Handbook (Vol.1) is a supplement to the EXIM Policy and contains

relevant procedures and other details. The benefits available under various
schemes of the Policy are given in the Handbook (Vol.1).
Exemption from Policy / Procedure
Any request for relaxation of the provisions of this Policy or of any procedure,
on the ground that there is genuine hardship to the applicant or that a strict
application of the Policy or the procedure is likely to have an adverse impact
on trade, may be made to the Director General of Foreign Trade for such relief
as may be necessary. The Director General of Foreign Trade may pass such
orders or grant such relaxation or relief, as he may deem fit and proper. The
Director General of Foreign Trade may, in public interest, exempt any person
or class or category of persons from any provision of this Policy or any
procedure and may, while granting such exemption, impose such conditions as
he may deem fit. Such request may be considered only after consulting ALC if
the request is in respect of a provision of Chapter-4 (excluding any provision
relating to Gem & Jewellery sector) of the Policy/ Procedure. However, any
such request in respect of a provision other than Chapter-4 as given above may
be considered only after consulting Policy Relaxation Committee.
Principles of Restriction
DGFT may, through a notification, adopt and enforce any measure necessary
for:-

• Protection of public morals.

• Protection of human, animal or plant life or health.
• Protection of patents, trademarks and copyrights and the
prevention of deceptive practices.
• Prevention of prison labour.
• Protection of national treasures of artistic, historic or
archeological value.
• Conservation of exhaustible natural resources.
• Protection of trade of fissionable material or material from which
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they are derived; and

• Prevention of traffic in arms, ammunition and implements of

war.
Restricted Goods
Any goods, the export or import of which is restricted under ITC(HS) may be
exported or imported only in accordance with a licence/ certificate/ permission
or a public notice issued in this behalf.
Terms and Conditions of a Licence / Certificate / Permission
Every licence/certificate/permission shall be valid for the period of validity
specified in the licence/ certificate/permission and shall contain such terms
and conditions as may be specified by the licensing authority which may
include:

a. The quantity, description and value of the goods;

b. Actual User condition;
c. Export obligation;
d. The value addition to be achieved; and

e. The minimum export price.

Licence/ Certificate/ Permission not a Right
No person may claim a licence/certificate/ permission as a right and the
Director General of Foreign Trade or the licensing authority shall have the
power to refuse to grant or renew a licence/certificate/permission in
accordance with the provisions of the Act and the Rules made thereunder.
Penalty
If a licence/certificate/permission holder violates any condition of the
licence/certificate/ permission or fails to fulfill the export obligation, he shall
be liable for action in accordance with the Act, the Rules and Orders made
there under, the Policy and any other law for the time being in force.
State Trading
Any goods, the import or export of which is governed through exclusive or
special privileges granted to State Trading Enterprise(s), may be imported or
exported by the State Trading Enterprise(s) as specified in the ITC(HS) Book
subject to the conditions specified therein. The Director General of Foreign
Trade may, however, grant a licence/certificate/permission to any other person
to import or export any of these goods.

In respect of goods the import or export of which is governed through

exclusive or special privileges granted to State Trading Enterprise(s), the State
Trading Enterprise(s) shall make any such purchases or sales involving
imports or exports solely in accordance with commercial considerations,
including price, quality, availability, marketability, transportation and other
conditions of purchase or sale. These enterprises shall act in a non
discriminatory manner and shall afford the enterprises of other countries
adequate opportunity, in accordance with customary business practices, to
compete for participation in such purchases or sales.
Importer-Exporter Code Number

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No export or import shall be made by any person without an Importer-

Exporter Code (IEC) number unless specifically exempted. An Importer-
Exporter Code (IEC) number shall be granted on application by the competent
authority in accordance with the procedure specified in the Handbook (Vol.1).
Trade with Neighbouring Countries
The Director General of Foreign Trade may issue, from time to time, such
instructions or frame such schemes as may be required to promote trade and
strengthen economic ties with neighbouring countries.
Transit Facility
Transit of goods through India from or to countries adjacent to India shall be
regulated in accordance with the bilateral treaties between India and those
countries.
Trade with Russia under Debt- Repayment Agreement
In the case of trade with Russia under the Debt Repayment Agreement, the
Director General of Foreign Trade may issue, from time to time, such
instructions or frame such schemes as may be required, and anything
contained in this Policy, in so far as it is inconsistent with such instructions or
schemes, shall not apply.
Actual User Condition
Capital goods, raw materials, intermediates, components, consumables, spares,
parts, accessories, instruments and other goods, which are importable without
any restriction, may be imported by any person. However, if such imports
require a licence/certificate/ permission, the actual user alone may import such
goods unless the actual user condition is specifically dispensed with by the
licensing authority.
Second Hand Goods
All second hand goods shall be restricted for imports and may be imported
only in accordance with the provisions of this Policy, ITC(HS), Handbook
(Vol.1), Public Notice or a licence/certificate/permission issued in this behalf.
Import of samples
Import of samples shall be governed by the provisions given in Handbook
(Vol.1).
Import of Gifts
Import of gifts shall be permitted where such goods are otherwise freely
importable under this Policy. In other cases, a Customs Clearance Permit
(CCP) shall be required from the DGFT.
Passenger Baggage
Bonafide household goods and personal effects may be imported as part of
passenger baggage. Samples of such items that are otherwise freely importable
under this Policy may also be imported as part of passenger baggage without a
licence/certificate/ permission. Exporters coming from abroad are also allowed
to import drawings, patterns, labels, price tags, buttons, belts, trimming and
embellishments required for export, as part of their passenger baggage without
a licence/certificate/ permission.
Import on Export basis
New or second hand capital goods, equipments, components, parts and
accessories, containers meant for packing of goods for exports may be
imported for export without a licence/certificate/permission on execution of
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Legal Undertaking/ Bank Guarantee with the Customs Authorities.

Re-import of goods repaired abroad
Capital goods, equipments, components, parts and accessories, whether
imported or indigenous, may be sent abroad for repairs, testing, quality
improvement or upgradation or standardisation of technology and re-imported
without a licence/certificate/permission.
Import of goods used in projects abroad
After completion of the projects abroad, project contractors may import,
without a licence/certificate/permission, used goods including capital goods
provided they have been used for at least one year.
Sale on High Seas
Sale of goods on high seas for import into India may be made subject to this
Policy or any other law for the time being in force.
Import under Lease Financing
Permission of licensing authority is not required for import of new capital
goods under lease financing.
Clearance of Goods from Customs
The goods already imported/shipped/arrived, in advance, but not cleared from
Customs may also be cleared against the licence/ certificate/ permission issued
subsequently.
Execution of BG/LUT
Wherever any duty free import is allowed or where otherwise specifically
stated, the importer shall execute a Legal Undertaking (LUT)/Bank Guarantee
(BG) with the Customs Authority before clearance of goods through the
Customs, in the manner as may be prescribed. In case of indigenous sourcing,
the licence/certificate/ permission holder shall furnish BG/LUT to the
licensing authority before sourcing the material from the indigenous
supplier/nominated agency.
Private/ Public Bonded Warehouses for Imports
Private/Public bonded warehouses may be set up in the Domestic Tariff Area
as per the terms and conditions of notification issued by Department of
Revenue. Any person may import goods except prohibited items, arms and
ammunition, hazardous waste and chemicals and warehouse them in such
private/public bonded warehouses. Such goods may be cleared for home
consumption in accordance with the provisions of this Policy and against
Licence/certificate/ permission, wherever required. Customs duty as
applicable shall be paid at the time of clearance of such goods. If such goods
are not cleared for home consumption within a period of one year or such
extended period as the custom authorities may permit, the importer of such
goods shall re-export the goods.
Free Exports
All goods may be exported without any restriction except to the extent such
exports are regulated by ITC(HS) or any other provision of this Policy or any
other law for the time being in force. The Director General of Foreign Trade
may, however, specify through a public notice such terms and conditions
according to which any goods, not included in the ITC(HS), may be exported
without a licence/ certificate/ permission.
Export of samples
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Export of samples shall be governed by the provisions given in Handbook

(Vol.1)
Export of Passenger Baggage
Bonafide personal baggage may be exported either along with the passenger
or, if unaccompanied, within one year before or after the passenger's departure
from India. However, items mentioned as Restricted in ITC(HS) shall require
a licence/certificate/permission, except in the case of edible items.
Export of Gifts
Goods, including edible items, of value not exceeding Rs.1,00,000/- in a
licensing year, may be exported as a gift. However, items mentioned as
restricted for exports in ITC(HS) shall not be exported as a gift, without a
licence/ certificate/ permission, except in the case of edible items.
Export of Spares
Warranty spares, whether indigenous or imported, of plant, equipment,
machinery, automobiles or any other goods may be exported upto 7.5% of the
FOB value of the exports of such goods along with the main equipment or
subsequently but within the contracted warranty period of such goods.
Third Party Exports
Third party exports, as defined in paragraph 9.56 shall be allowed under the
Policy.
Export of Imported Goods
Goods imported, in accordance with this Policy, may be exported in the same
or substantially the same form without a licence/certificate/ permission
provided that the item to be imported or exported is not mentioned as
restricted for import or export in the ITC(HS). Exports of such goods imported
against payment in freely convertible currency would be permitted against
payment in freely convertible currency.

Goods, including those mentioned as restricted item for import or export

(except prohibited items) in ITC(HS), may be imported under Customs Bond
for export in freely convertible currency without a licence/certificate/
permission.
Export of Replacement Goods
Goods or parts thereof on being exported and found defective/damaged or
otherwise unfit for use may be replaced free of charge by the exporter and
such goods shall be allowed clearance by the customs authorities provided that
the replacement goods are not mentioned as restricted items for exports in
ITC(HS).
Export of Repaired Goods
Goods or parts thereof on being exported and found defective, damaged or
otherwise unfit for use may be imported for repair and subsequent re-export.
Such goods shall be allowed clearance without a licence/certificate/
permission and in accordance with customs notification issued in this behalf.
Private Bonded Warehouses for Exports
Private bonded warehouse exclusively for exports may be set up in DTA as
per the terms and conditions of the notifications issued by Department of
Revenue. Such warehouse shall be entitled to procure the goods from domestic
manufacturers without payment of duty. The supplies made by the domestic
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EXIM Policy

supplier to the notified warehouses shall be treated as physical exports

provided the payments for the same are made in free foreign exchange.
Denomination of Export Contracts
All export contracts and invoices shall be denominated in freely convertible
currency and export proceeds shall be realised in freely convertible currency.
Contracts for which payments are received through the Asian Clearing Union
(ACU) shall be denominated in ACU Dollar. The Central Government may
relax the provisions of this paragraph in appropriate cases. Export contracts
and Invoices can be denominated in Indian rupees against EXIM
Bank/Government of India line of credit.
Realisation of Export Proceeds
If an exporter fails to realise the export proceeds within the time specified by
the Reserve Bank of India, he shall, without prejudice to any liability or
penalty under any law for the time being in force, be liable to action in
accordance with the provisions of the Act, the Rules and Orders made there
under and the provisions of this Policy.
Free movement of export goods No seizure of Stock
2.42. No seizure of stock shall be made by any agency so as to disrupt the
1 manufacturing activity and delivery schedule of export goods. In exceptional
cases, the concerned agency may seize the stock on the basis of prima facie
evidence. However, such seizure should be lifted within 7 days.
Export Promotion Council
2.43 The basic objective of export promotion councils is to promote and develop
the exports of the country. Each Council is responsible for the promotion of a
particular group of products, projects and services. The list of the councils,
and their main functions are given in Handbook (Vol.1).
Registration -cum-Membership Certificate
2.44 Any person, applying for (i) a licence/ certificate/ permission to import/
export, [except items listed as restricted items in ITC(HS)] or (ii) any other
benefit or concession under this policy shall be required to furnish
Registration-cum-Membership Certificate (RCMC) granted by the competent
authority in accordance with the procedure specified in the Handbook (Vol.1)
unless specifically exempted under the Policy.

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EXIM Policy

JOURNEY OF EXIM POLICY

India`s foreign trade is regulated by the foreign trade (Development and Regulation)
Act, 1992 which replaced the import and export (control) Act,1947. The act of 1992
empowers the central government to formulate and announce from time to time the export
and import policy and to amend it in like manner.

Prior to mid -1991, foreign trade of India suffered from strict bureaucratic and
discretionary controls. However, the new government which took over at the centre in June
1991 soon realised that India’s foreign trade policy must respond to the changes
(liberalisation and openness) sweeping across the world. To reduce controls, simplify
procedures and to create a congenial environment for trade, the government made a statement
on trade policy in parliament on august 13, 1991, ushering a new era in the foreign trade
policy of India. Instead of controls and regulations, the focus shifted to promotion and
development of foreign trade.

Before 1985-86, the annual export-import policy was announced at the beginning of
the financial year. In 1985-86 , a three year export-import policy was announced for the
period April 1985 through march 1988, providing a reasonable degree of stability to the
policy framework. On its expiry, the new policy for three years 1988-91 was announced in
March 1988 which laid even greater emphasis on promotion of exports.

 EXIM POLICY, 1992-97

On March 31, 1992, the government announced the export and import policy for a period
of five years (April 1, 1992 to march 31, 1997), coinciding with the period of eighth five year
plan. The chief controller of imports and exports was re-designated as director general of
foreign trade. EXIM Policy, 1992-97 made a conscious effort to dismantle various
protectionist and regulatory policies and accelerate India`s transition towards a globally
oriented economy. The export-import policy was further liberalised by the government on
March 31, 1993. Substantial concessions were announced to boost agricultural exports. The
government also announced a centrally sponsored scheme to set up industrial parks in
different states.

 EXIM POLICY, 1997-2002

The export and import policy, 1997- 2002 (coinciding with the period of ninth five year
plan) sought to consolidate the gains of the previous policy and further carry forward the
process of liberalisation by deregulating and simplifying procedures and removing
quantitative restrictions in a phased manner. It set an ambitious target of attaining an export
level of US$ 90-100 billion by the year 2002 and achieving 1 per cent share in world trade.

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EXIM Policy

Objectives:

The principal objectives of the policy were the following:

1. To accelerate the country`s transition to a globally – oriented vibrant economy to derive

maximum benefits from expanding global market opportunities.

2. To stimulate sustained economic growth by providing access to essential raw materials,

intermediates, Components, consumables and capital goods required for augmenting
production.

3. To enhance the technological strength and efficiency of Indian agriculture, industry and
services, thereby improving their competitive strength while generating new employment
opportunities, and encourage the attainment of internationally accepted standards of quality.

4. To provide consumers with good quality products at reasonable prices.

Salient Features:

Following were the salient features of the policy:

1. Exports and imports shall be free, except to the extent they are regulated by the provisions
of this policy.

2. The Central Government may in public, interest, regulate the import or exports of goods
by means of a negative list of imports or a negative list of exports, as the case may be.

3. The negative list may consist of goods, the import or export of which is prohibited,
restricted through licensing, or canalised.

4. Prohibited items in the Negative list of Imports shall not be imported and prohibited items
in the Negative list of exports shall not be exported.

5. Any goods, the export or import of which is restricted through licensing , may be exported
or imported only in accordance with a license issued in this behalf.

6. Any goods, the import or export of which is canalised, may be imported or exported by
canalising agency specified in the negative list.

7. No export or import shall be made by any person without an importer – exporter code
(IEC) number unless specifically exempted.

 MODIFIED EXIM POLICY, APRIL 1998

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EXIM Policy

The new government at the centre, which assumed office in March 1998, announced its
exports and import policy for the year 1998-99 on April 13, 1998. As part of the annual
export-import policy modification, the government freed from import restrictions a large
number of consumer goods and liberalised all major export promotion schemes. This new
dose of liberalisation of the trade regime by the new government was necessitated by the
commitments made by India at the World Trade Organisation (WTO). The timing of the
import policy liberalisation coincided with the scheduled review of India`s trade policy by
WTO on April 16 and 17, 1998. Apart from the general global pressure on India to remove
restrictions on imports, the US had filed a complaint with the WTO against India`s import
regime. The following were the main provisions of the modified Export-import policy
unveiled by the Commerce Minister on April 13, 1998.

1. 340 more items were shifted from restricted list to open general licence (OGL). Thus out
of the total number of 10, 202 items covered under the export-import policy, only 2200
remained on the restricted list.
2. The revised policy set an export growth target of 20 percent for the year 1998-99 which in
other words required total exports of the order of US$ 41.4 billion during 1998-99.
3. Zero –duty export promotion capital goods (EPCG) scheme was extended to all the
software exporters by lowering the threshold limit of importable capital goods from Rs 20
crore to Rs 10 lakhs. The lowering of the threshold limit was expected to help the software
companies to proliferate throughout the length and breadth of the country. In other words
they could import any capital goods without paying any import duty and in return sign an
export obligation of 5 times the value of capital goods on net foreign exchange earning
basis for a period of six years. In the case of garments, agriculture, food processing, gems
and jewellery, electronics leather, sport goods and toys the minimum limit was lowered to
Rs 1 crore.
4. In a bid to prevent cheap imports being dumped at unreasonable prices, the government set
up an anti-dumping cell called Directorate General (DG) of Anti-Dumping and Allied
Duties. The DG would be responsible for investigation into alleged cases of dumping as
well as subsidised cases. DG would be recommended Anti –Dumping duties where it is
found that dumped imports are causing harm to the domestic industry. Where harm is
caused to the domestic industry by subsidising exports of the exporting countries then the
DG would have the jurisdiction to investigate all such cases and recommend possible
imposition of countervailing duties. The DG would also advice the industry groups and
consumer for on how to go about collecting information and procedures involved in
making out a case for anti-dumping duties.
5. Other provisions include:

Delegation of powers to regional licensing offices, Doing away with the minimum value
addition of 33 percent under advance licensing scheme, Simplified procedures for
clubbing of advance license scheme and Private bonded warehouses to be set up to import,
stock and sell even negative list items.

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EXIM Policy

 EXIM POLICY 1999-2000

In its effort to further dismantle the import control regime and hasten the integration of
the Indian economy with the world economy, the government announced a revised export-
import policy on March 31, 1999 which came into force on April1, 1999.

The new export –import policy freed import of 894 items of consumer goods, agricultural
products and textile from licensing requirements. In other words a number of

Consumer items could now be imported license-free subject only to the payment of import
duty. Physical controls on imports were removed and the only control over imports was fiscal
in nature, i.e. adjusting import duty to regulate imports. These adjustments were to be made
within the upper limit prescribed by WTO.

Moreover, another 414items were removed from the restricted list, allowing these to be
imported against special import licenses. India`s international commitments require it to
remove licensing curbs on imports by the year 2003.

 EXIM POLICY 2000-2001

The union commerce and industry minister announced on march 31, 2000 the new
export-import policy of the government of India for the year 2000-2001. The export –import
policy envisaging a 20 percent export growth in dollar terms in 2000-2001, brought about a
major rationalisation in export promotion schemes and launched a series of sector specific
initiatives.

Export Promotion: In a major initiative to boost exports, the Government announced the
following measures:

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EXIM Policy

Special Economic Zones (SEZ): in the pattern of Chinese models the government announced
the setting up of two SEZs at Positra in Gujarat and Nangunery in Tamil Nadu ]. Industrial
units located in SEZs will be exempted from rules and regulations governing exports and
imports. The entire production will have to be exported from these zones. Sales from
Domestic Tariff Area (DTA) can be done only on full payment of custom duty. Several
Export Processing Zones (EPZs)will shortly be converted into SEZs. The EPZs located in
Kandla, Vizag and Kochi will be converted into SEZs immediately. It was further announced
that 100 percent foreign direct investment (FDI) would be allowed in all products in SEZs.

SEZs would be treated as if they are outside the customs territory of the country.
The units would be able to import capital goods and raw material duty free. The movement of
goods to and from SEZs would be unrestricted.

It is noteworthy that SEZs have played a crucial role in boosting China`s exports
and presently the country derives 40 percent of its exports from such zones. However,
Chinese SEZs are based on contract labour system (hire and fire policy). The commerce
minister while announcing the EXIM policy categorically ruled out any changes in labour
laws. Moreover, there is no systems of reservation of items for small scale industries in
China. It is unclear if the Government of India would allow the production of reserved item
for small industries in the SEZs. Still further there are various infrastructural bottlenecks like
power shortage, lack of transport facility and of course procedural delays. Hence the success
of SEZs in India is a moot question

Sector-Specific Packages: the Export-import policy 2000-2001 announced sector-specific

packages for sever core areas to boost export, viz. Gems and jewellery, pharmaceuticals,
agrochemicals, biotechnology, silk, leather and garments.

For the gems and jewellery exporters, the government announced a diamond-dollar
account (DDA) scheme export proceeds can be retained in a dollar account and the exporters
can use funds in this account for import of rough diamonds.

For agrochemicals, biotechnology and pharma units (considered as knowledge-

intensive), the government has allowed duty free imports of laboratory equipment, chemicals
and reagents upto 1% of the FOB value of exports. Similarly the government increased duty
free import of trimmings, embellishments and other items from 2 to 3% of the total export
value

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EXIM Policy

Involvement of State Governments in Export Promotions: Since the stages forgo taxes (mainly
sales tax) on exports, they have little incentive to promote exports. [1] the 2000-2001 export
-import policy announced financial incentives to states based on their export performance.
An incentives scheme with an initial outlay of Rs. 250 crores to secure states involvement in
the national export drive was unveiled. The states can use the funds for export promotions
activities such as infrastructure development. The commerce and industry minister said that
he would request the state to treat all units exporting more than 50 percent of their turnover as
public utility services. This would enable them to keep their international commitment on
delivery schedule.
Furthermore, the minister observed that the recent spectacular growth of software exports
was, apart from India’s knowledge in high-tech, due to hands off policy of government
towards this sector .A similar approach to hardware electronics is called for.
Import liberalisation: The export import policy 2000 to 2001 lifted quantitative restrictions
on 714 commonly used items (agricultural products and consumer durables ) which can now
be freely imported. Thus, commodities like meat, milk powder, coffee, tea, fish, pickles,
cigars , cigarettes, television , radio , tape recorders , foot wares & umbrellas can be imported
freely from April 1, 2000. However most of these items will attracts peak rates of basic
import duty.
The lifting of licensing and quota restrictions on 714 import items was in line with India’s
WTO obligations. The government promised to abolish licensing and quota curbs on the
remaining 715 items (such liquor, cars etc) in April 2001.
Many critics of new policy fear that that removal of licensing and quota restriction will lead
to surge in imports of these items, hurting the domestic industry. However, it is noteworthy
that import restrictionare being phased out since 1966 but no extraordinary growth has
occurred in the import of freed items. The commerce minister maintain that anti-dumping and
anti-subsidy tariffs and other safeguards would be used if there is sudden search in imports,
causing serious injuries to the domestic industry.

 EXIM Policy, 2001-2002

The union commerce And industry minister unveiled on march 31, 2001, the export –import
policy for the year 2001-2002.
Removal of Quantitative restrictions: The process of removal of import restrictions , which
began in 1991, was completed in a phased manner bye the Export-Import Policy 2001-2002
with the removal of restriction on the remaining of 715 items. This was in tune with the
commitments made to the WTO. Out of these 715 items 342 were textile products, 147 were
agricultural products and 226 were other manufactured products.
However, import of agricultural products like wheat, rice, maze, copra and coconut oil was
placed in the category safe trading . the nominated state trading enterprise will conduct the
import of this commodity solely as per commercial consideration . similarly, import of
petroleum products including petrol , diesel & ATF was placed in the category of state
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EXIM Policy

trading in all 27 out of 715 items taken of the quantitative restrictions list were put under the
state trading category.
The minister was confident that the Indian market will not swamped by imported brands of
commonly used articles. To prevent dumping, government will take recourse to anti-dumping
duties and other non-tariff barriers. Arrangements have been made to track, collate and
analyse data on 300 sensitive items which mainly comprise farm goods and items produced
by small scale sectors.
Agricultural Export Zones: With a view to boost agricultural exports and provide
remunerative returns to the farming community, the Export-Import policy proposed the
setting up of agricultural export zones. Three such zones are proposed to be set up in
himanchal Pradesh , jammu Kashmir (to promote export of apples) and Maharashtra.
Government will make efforts to provide improved access to the produce/products of the
agriculture and allied sectors in the international market. State governments have been asking
to identify product specific agricultural export zones for development for export of specific
products from a geographically contiguous area.

 EXIM Policy , 2002-2007

The EXIM Policy 2002-07 was unveiled on march 31, 2002. The policy entailed several
institutional, infrastructural and fiscal measures intended to promote exports which are
conductive to the economic development of the country. The following were the salient
features of the policy.
Special Economic zones (SEZs): Offshore banking units (OBUs) were permitted in SEZs .
Units in SEZ were permitted to undertake hedging of commodity price risks, provided such
transactions are undertaken by the units on stand-alone basis. This will impart security to the
returns of the unit.
It has also been decided to permit external commercial borrowings (ECBs) for tenure of less
than three years in SEZs. The detailed guidelines will be worked out by RBI. This will
provide opportunities for accessing working capital loan for these units internationally
competitive rates.
Employment Generation: In an effort to generate additional employment , the following
announcements were made pertaining to agricultural and small industry sectors.
Exports restrictions like registration and packaging requirement were removed forthwith on
butter, wheat & wheat products, coarse grains groundnuts oil and cashew to Russia .
Quantitative and packaging restrictions on wheat and its products, butter, pulses, grains and
flour of barley, maize, bajra, ragi and jowar had already been removed on march 5, 2002.

• Restrictions on export of all cultivated varieties of seed, except jute and onion, were
removed.
• To promote export of agriculture and agriculture-based products, 20 agriculture export
zones were notified.
• In order to promote diversification of agriculture, transport subsidy shall be available for
export of fruits, vegetables, floriculture, poultry and dairy products.
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EXIM Policy

• 3 percent special DEPB rate was announced for primary and processed foods exported in
retail packaging of 1 kg or less
• An amount of Rs 5 crore under Market Access Initiative (MAI)
• Was earmarked for promoting cottage sector exports coming under te KVIC.
• The units in the handicrafts sector can also access funds from MAI scheme for
development of website for visual exhibition of their product.
• Under the export of Promotion Capitals Goods (EPCG) scheme, these units will not be
required to maintain average level of exports, while calculating the export obligation.
• These units shall be entitled to the benefit of Export House Status on achieving lower
average export performance of Rs 5 crore as against Rs 15 crore for others.
• The units in handicraft sector will be entitled to duty free imports of an enlarged list of
items as embellishments up to 3 percent of FOB value of their exports.
• With a view to encouraging further development of centers of economics and export
excellence such as Tirupur for hosiery, wollen blanket in Panipat, wollen knitwear in
Ludhiana, following benefits shall be available to small scale sector:
1. Common service providers in these areas shall be entitled for facility of EPCG scheme.
2. The recognized associations of units in these areas will be able to access the funds under
the Market Access initiative scheme for creating focused technological services and
marketing abroad.
3. Such areas will receive priority for assistance for identified critical infrastructure gaps
from the scheme on Central Assistance to States.
4. Entitlement for Export House Status at Rs 15 crore for others.

Technology Upgradation: Electronic Hardware Technology Park(EHTP) scheme was

modified to enable the sector to face the zero duty regime under ITA(Information Technology
Agreement)-1.The units shall be entitled to following facility.

• Net Foreign Exchange as a Percentage of Exports (NFEP) positive in 5 years.

• No other export obligation for units in EHTP.
• Supplies of ITA-1 items having zero duty in the domestic market to be eligible for
counting of export obligation.

Growth-oriented: The status holders shall be eligible for the following new/special facilities.

• License/Certificate/Permissions and customs clearance for both exports imports on self-

declaration basis.
• Fixation of input-output norms on priority.
• Priority finance for medium and long-term capital requirement as per conditions notified
by rbi.
• Exemption from compulsory negotiation of documents through banks. The remittances,
however, would continue to be received through banking channels.
• 100 percent retention of foreign exchange in Exchange Earners Foreign Currency (EEFC)
account.
• Enhancement in normal repatriation period from 180 days to 360 days.

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EXIM Policy

 EXIM Policy, 2003-2004

It had the following provisions:

• The policy provided a massive thrust to export of services by introducing duty free export
facility for the service sector units having a minimum foreign exchange earning of Rs 10
lakh.
• Encouragement of corporate sector with proven credential to sponsor Agri-Export Zones
for boosting farm exports.
• EPCG scheme made more flexible and attractive so that even the small scale sector could
set up and expand its manufacturing base for exports.
• Fixing of input-output norms for status holders on priority basis within a period of 60 days
and permission to status holders in Software Technology Parks India(STPI) for free
movement of professional equipments.
• Simplification and codification of rules, regulations and procedures application on SEZ
and EOU units by putting all these rules and regulations in one place, thus greatly
facilitating both potential investors and existing units.
• To increase the overall competitiveness of export clusters, a scheme for upgradation of
infrastructure in existing clusters/industrial locations would be implemented.
• Extension of Duty Free Replenishment Certificate(DFRC)scheme to deemed exports and
reduction in its value addition norms from 33 percent to 25 percent.

 Mini EXIM policy, Jan 2004

Preceding the dissolution of the 13th Lok Sabha on Feb. 6, 2004 the government of India
announced mini EXIM policy on Jan 28, 2004. It included facilitation and simplification
measure to sustain the momentum of export growth. Specifically it was aimed at providing
boost to exports of gems and jewellery, encouraging tourism and making energy generation
cheaper. Highlights of new policy were.

• Free import of gold and silver for export purpose permitted. In other words, gold and silver
can now be imported without paying any commission to channelling agents. (in 10997, the
government authorized three canalizing agencies viz MMTC, STC and HHEC, and eight
banks to import gold and silver for sales in the domestic market ). Likewise, import of
rough, uncut and semi polished diamonds will not be valued for export obligations.
Quantitative restriction on gold and silver imports has also been lifted. Government also
announced the introduction of a gold card for creditworthy exporters to make available
cheaper foreign currency debt on easier terms.

• Duty free import facility available to star hotels extended the heritage, one and two star
hotels and stand alone restaurants. All these hotels have been allowed duty free import
equivalent to 5% of their export earnings in three preceding years.

• Restriction on import of electrical energy lifted

• Online license electronic fund transfer facility for exporters. These measures are expected
to reduce transaction cost for exporters and make export administration transparent
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EXIM Policy

 FOREIGN TRADE POLICY, 2004-2009

In radical move the government of India announced on August 31 2004 a new forign
trade policy for the period 2004-09, replacing the hitherto nomenclature of EXIM policy by
foreign Trade policy. A vigorous export led growth strategy of doubling India’s share in
global merchandise trade in the next 5 years , with a focus on the sector having prospectus for
export expansion and potential for employment generation, constitute the mail plank of the
policy. These measures are expected to enhance international competiveness and aid in
further increasing the acceptability on Indian exports.

Objective and strategy

The new FTP takes an integrated view of the overall development of India’s foreign
trade and essentially provides a roadmap for the development of this sector. It is built around
two major objectives of doubling India’s share of global merchandise trade by 2009 and using
trade policy as an effective instrument of economic growth with a thrust on employment
generation. Key strategies to achieve these objectives, inter alia, include: unshackling of
controls and creating an atmosphere of trust and transparency; incidence of all levies on input
used in export products; facilitating development of India as a global hub of manufacturing,
trading and services; identifying and nurturing special focus area to generate additional
employment opportunities, particularly in semi urban and rural areas; facilitating
technological and infrastructural up gradation of the Indian economy, epically and ensuring
that domestic sector are not disadvantage in trading agreements upgrading the infrastructural
network related to the entire foreign trade chain to international standards revitalizing the
board of trade by redefining its role and inducting into it experts on trade policy and
activating Indian embassies as key players in export strategies.

Special focus initiatives

The FTP 2004 has indentified certain thrust sector having prospects for export
expansion and potential for employment generation. These thrust sector include agriculture,
handlooms and handicraft, gems and jewellery and leather footwear sector. Sector specific
policy initiatives for the thrust sector include for agriculture sector introduction of new
scheme called vishesh krishi upaj yojana to boost export exports of fruit, vegetables, flowers
minor forest produce and their value added products. Under the scheme exports of these
products qualify for duty free credit entitlement for importing inputs and other goods under
EPCG scheme permitting the installation of capital goods imported under EPCG for
agriculture anywhere ASIDE scheme for development of AEZ’s, liberalization of import of
seeds bulbs tuberts and planting material and liberalization of the exports of plant portion,
derivatives and extract to promote export of medicinal plants and herbal produce

The special focus initiatives for handlooms and handicraft sector include extension of
facilitating like enhancing duty free imports of trimming and embellishment for handlooms
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EXIM Policy

and handicrafts exemption of samples from CVD authorizing handicraft export promotion
council to import trimmings embellishment and samples for small manufacturing and
establishment of a new handicraft special economic zone.

New Export Promotion scheme

A new scheme to accelerate growth of export called the target plus has been
introduced. Under the scheme exporters achieving a quantum growth in exports are entitled to
duty free credit based on incremental exports substantially higher than the general actual
export target fixed. Rewards are granted based on a tired approach. For incremental growth of
over 20%, 25% and 100%, the duty free credit are 5%, 10%, and 15% of f.o.b value of
incremental exports. Another new scheme called vishesh kishi upaj yojana has been
introduced to boost exports of fruits, vegetables and flower. Exports of these products qualify
for duty free credit entitlement equivalent to 5% of f.o.b value of exports. The entitlement is
freely transferable and can be used for import of a variety of input and goods. To accelerate
growth in export of service so as to create a powerful and unique served from India brand
instantly recognized and respected the world over the earlier duty free export credit scheme
for service has been revamped and re –cast into the served from India scheme. Individual
service providers who earn foreign exchange of at least 5 lakh, and other service providers
who earn foreign exchange of at least Rs. 10 lakh are eligible for a duty-credit entitlement of
10% of total foreign exchange earned by them. In the case of hotels it is 5%. Hotels and
restaurants can use their duty credit entitlement for import of good items and alcoholic
beverages. To make India into global trading hub a new scheme to establish Free trading and
warehousing zones has been introduced to create trade related infra to facilitate the import
and export of goods and service with freedom to carry out trade transaction in convertible
currency. Besides permitting FDI up to 100% in the development outlay of Rs 100 cr and five
lakh sq. mts built up area. Units in the FTWZ qualify for all other benefits as applicable for
SEZ units.

 Simplification, rationalization and modification of ongoing schemes:

EPCG scheme has been further improved upon by providing additional flexibility for
fulfilment of export obligation, facilitating and providing incentives for technological up
gradation, permitting transfer of capital goods to group companies and managed hotels, doing
away with the requirement of certificate from central excise and improving the viability of
specified projects by calculating their exports obligating based on concessional duty
permitted to them. Import of second hand capital goods without any restriction on age has
been permitted and the minimum depreciated value for plant and machinery to be re located
into India has been reduced from Rs 50 cr to Rs 25 cr. The new policy has been allowed
transfer of the import entitlement under duty free replenishment certificate scheme in respect
of fuel to the marketing agencies authorized by the ministry of petroleum and natural gas to
facilitate sourcing of such import by individual exporters.

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EXIM Policy

The Duty Entitlement passbook scheme will continue until replaced by a new scheme to
be drawn up in consultation with exports. Additional benefits have been provided to EOU ,
including exemption from service tax in proportion to their goods and service, permission to
retain 100% of exports earnings in export earners foreign currency accounts, extension of
income tax benefits on plant and machinery to DTA unit which convert to EOU, EHTP, STP,
BTP units allowing imports of capital goods on self certification basis and permission to
dispose of leftover material and fabrics up to 2% of c.i.f value or quantity of import on
imports on payment of duty on transaction value only. Minimum investment criterion has
been waived for handicraft, agriculture, floriculture. The FTP propose setting up to BTP’s by
granting all facilitates of 100% EOUs. The FTP 2004 has introduced a new rationalization
scheme of categorization of status holders as star export houses with benchmarking for
exports performance varying from Rs15 cr to Rs 5000cr.

 Simplification of rules and procedure and institutional measures:

Policy measures announced to further rationalize/simplify the rule and procedure include
exemption for exporters with minimum turnover of Rs 5cr and good track record from
furnishing bank guarantee in any of the scheme service tax exemption for exporters of all
goods and service uniformly to 24 months reduction in number of return of returns and forms
to be filled delegation of more power to zonal and regional offices and time bound
introduction of electronic data interface. Institutional measures proposed in the FTP 2004
include revamping and revitalizing the board of trade setting up of council to map
opportunities for key service in key markets and setting up of common facility centres for use
of professional home based service providers in state and district level towns.

 Annual supplement 2005-06 to the foreign trade policy 2004-05

The union commerce and industry minister announcement on april 8 2005, the 2005-06
supplement to the five year foreign trade policy, giving a big boost to exports from
agriculture and manufacturing sector. Auto components pharmaceutical’s gems and jewellery
and seafood exports firms stood to gain the most. Highlights of the annual supplement were
as follows

• Push to exports of farm, marine, manufacture and pharma products

• Exports cess on farm commodities abolished

• Infra imitative to reduce port congestion

• Imports by hotels, other service industry made duty free

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EXIM Policy

• Setting up of interstate trade council mooted

• Procedure simplified cut transaction costs aayat niryat introduced

HIGHLIGHTS OF EXIM POLICY & ITS

IMPACT

SPECIAL ECONOMIC ZONE (SEZ)

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EXIM Policy

Special economic zone is a particular area inside a state which acts as foreign territory for
tariff and trade operations. Govt. provides tax exemption (IT, Excise, customs, sales etc.),
subsidised water and electricity etc.

SEZ can be sector specific or multi product SEZ. It helps in the development of infrastructure
of the area around the SEZ, provides employment to people, makes the exports more viable.
All this will helps the country's products to become more competitive vis-a-vis providing all
round development of region.

It should be noted that if 100 acres are allotted for SEZ, then only 30-35% of area is used for
setting up plants. rest of the area is used to provide housing facilities, malls, multiplexes etc.
Also Tax exemption is for specific period say for 10 yrs or so

Units in SEZ would be permitted to It has also been decided to permit Special Economic
Zones (SEZs)

Offshore Banking Units (OBUs) shall be permitted in SEZs. Detailed guidelines are being
worked out by RBI. This should help some of our cities emerge as financial nerve centres of
Asia & undertake hedging of commodity price risks, provided such transactions are
undertaken by the units External Commercial Borrowings (ECBs) for a tenure of less than
three years in SEZs. The detailed guidelines will be worked out by RBI. This will provide
opportunities for accessing working capital loan for these units at internationally competitive
rates.

The SEZ scheme has undergone few changes:

• FDI permitted under automatic route for all manufacturing sectors, except a small
negative list.
• No licence required to set up units for items reserved under SSI.
• Units in SEZs can bring back their proceeds in 365 days and retain 100 per cent of
proceeds in EEFC account.
• No CR waiver is required for sending sample goods for participation in exhibitions.
• SEZ developers will be given infrastructure status under the Income-Tax Act, as
provided in the Finance Bill, 2001, and will be entitled to concessional duty for procuring
goods for setting up SEZs.

All the necessary steps were initiated to give permission to set up SEZs to the States, the
private sector and the joint sector.

Special Economic Zones Scheme

• Sales from Domestic Tariff Area (DTA) to SEZs to be treated as export. This would
now entitle domestic suppliers to Drawback/ DEPB benefits, CST exemption and
Service Tax exemption.
• Agriculture/Horticulture processing SEZ units will now be allowed to provide inputs
and equipments to contract farmers in DTA to promote production of goods as per the
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EXIM Policy

requirement of importing countries. This is expected to integrate the production and

processing and help in promoting SEZs specialising in agro exports.
• Foreign bound passengers will now be allowed to take goods from SEZs to promote
trade, tourism and exports.
• Domestic sales by SEZ units will now be exempt from SAD.
• Restriction of one year period for remittance of export proceeds removed for SEZ
units.
• Netting of export permitted for SEZ unit provided it is between same exporter and
importer over a period of 12 months.
• SEZ units permitted to take job work abroad and exports goods from there only.
• SEZ units can capitalise import payables.
• Wastage for subcontracting/exchange by gem and jewellery units in transactions
between SEZ and DTA will now be allowed.
• Export/import of all products through post parcel/courier by SEZ units will now be
allowed.
• The value of capital goods imported by SEZ units will now be amortised uniformly
over 10 years.
• SEZ units will now be allowed to sell all products including gems and jewellery
through exhibitions and duty free shops or shops set up abroad
• Goods required for operation and maintenance of SEZ units will now be allowed duty
free.

According to the Exim Policy (1997-2002), SEZs may be set up for manufacture of goods
and rendering of services, production, processing, assembling, trading, repair, remaking,
reconditioning, re-engineering, including of making of gold/silver/platinum jewellery and
articles.

An SEZ is a specially delineated `duty free' enclave and shall be deemed to be foreign
territory for trade operations, duties and tariffs.

Thus, there should be necessary `check posts' and Customs duty vigilance as in the case of
airport and ports. However, there are many advantages, and of course, one or two
disadvantages.

In a major step towards achieving sustained, quantum growth in exports, Special Economic
Zones (SEZs) will soon be established in different parts of the country, as in China.
Announcing the annual Export & Import (Exim) Policy for 2000-2001 at a press conference
here today, Shri Murasoli Maran, Union Minister of Commerce and Industry, said that India's
first two Special Economic Zones would come up in the States of Gujarat and Tamil Nadu.
The SEZs would come into operation very soon, with the basic idea being to establish the
Zones as areas where export production could take place free from all rules and regulations
governing imports and exports and to give them full operational flexibility. The movement of
goods to and from the SEZs would be unrestricted and without any hindrance and any State
government or corporate entity or individual may furnish proposals for setting up such Zones
in the country. Land for the first two SEZs in Gujarat and Tamil Nadu has already been
earmarked, the Minister said. Observing that India, by not following vigorous policies, was
ceding billions of dollars in FDI to its East Asian neighbours each year (investment flows that
otherwise would have come to India), Shri Maran expressed the hope that with the
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EXIM Policy

establishment of the SEZs, procedural constraints and delays would be taken care of and
foreign direct investment in the export sector would become attractive. The units in the SEZs
would be able to import capital goods and raw materials duty-free and would also be able to
access the same from the Domestic Tariff Area (DTA) without payment of terminal excise
duty. The entire production of the units in these SEZs would be exported and DTA sales
would be permitted on payment of full applicable customs duty. The minimum size of the
SEZs would be 400 to 500 hectares or more. Shri Maran also announced that immediately,
the existing Export Process Zones at Santa Cruz, Kandla, Vizag and Cochin would be
converted into SEZs, although the area of these existing Zones were limited due to historical
reasons

Major advantages

• SEZs may export goods and services, including agro-products, partly processed
jewellery, sub-assemblies and components. It may also export by-products, rejects, waste
from the production process.
• SEZs may import all types of goods without payment of duty. This includes capital
goods, but not prohibited items for imports.
• Even SEZ units can lease capital goods from a domestic/foreign leasing company.
• But, both the SEZ unit and domestic foreign lease company shall jointly file the
documents to enable import/procurement of the capital goods.
• SEZs may procure goods required by it without payment of Duty from bonded
warehouses in the DTA set up under the policy.
• SEZ units may import goods for creating a central facility for use by software
development units, without payment of duty.
• SEZs may also import gold/silver/platinum and specified goods from DTA through the
nominated agencies for setting up units without duty, but subject to government
conditions.
• SEZ gem and jewellery units, with the Development Commissioner's permission, shall be
entitled to personal carriage of gold/silver/platinum jewellery, precious, semi-precious
stones and articles.
• They can export jewellery, including branded jewellery, which is also permitted for
display/sale in the permitted shops set up abroad.
• SEZs may bring back sold goods for repair and replacement.
• Goods may be transferred to DTA for replacement/repair/testing or calibration, quality
testing and R&D purposes under intimation to the Customs authorities.
• SEZ units, with the maintained records and prior intimation to Customs authority, may
supply or sell samples in the DTA for display/market promotion on payment of
applicable duties.
• Remove samples on furnishing a suitable undertaking to customs authorities for bringing
the goods back within a stipulated time without payment of duty.
• No duty shall be payable if the goods are destroyed with the permission of Customs
authorities.
• SEZs may subcontract a part of their production or production process through units in
the DTA.
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EXIM Policy

Major disadvantages

• The SEZ shall execute a legal undertaking with the Development Commissioner that if it
fails to achieve positive foreign exchange earnings, it will be liable to penalty in terms of
the legal undertaking, or under any other law for the time being in force.
• SEZ units may be debonded with the approval of the Development Commission.
Debonding shall be subjected to payment of applicable Customs and excise duties and
the imported and indigenous capital goods, raw materials, finished goods in stock, and so
on.

DUTY FREE REPLENISHMENT CERTIFICATE (DFRC) SCHEME

DFRC Scheme announced in 2002-07 EXIM Policy has been continued in 2003-04 Policy.
Henceforth supplies made under Deemed Export Scheme in terms of Para 8.2 of the EXIM
Policy would also be entitled for benefit of DFRC Scheme. Import of inputs against DFRC
License (issued against supplies made under Deemed Export Scheme) shall also be permitted
from sea-ports, airports, ICDs and CFSs specified in the DFRC Notification as usual. For this
purpose, DFRC licence issued under Deemed Export Scheme shall inter-alia contain details
of excise certified invoice number and date with value of supplies in Indian rupees. All other
conditions of the DFRC Scheme remain unchanged.

In order to monitor revenue outflow under DFRC scheme, the concerned Custom Houses
shall send a monthly report containing details of CIF value of goods imported and amount of
duty foregone under the Scheme on the 10th of the succeeding month to JS(DBK). The first
such report shall be sent by 10th May, 2003.

Duty Free Replenishment Certificate is issued to a merchant-exporter or manufacturer-

exporter for the import of inputs used in the manufacture of goods without payment of basic
customs duty, and special additional duty. However, such inputs shall be subject to the
payment of additional customs duty equal to the excise duty at the time of import.

Duty Free Replenishment Certificate shall be issued only in respect of export products
covered under the SIONs as notified by DGFT. However, DFRC shall not be issued in
respect of SIONs which are subject to "actual user" condition or where the input is allowed
with prior import condition or where the norms allow import of acetic anhydride, ephedrine
and pseudo ephedrine in the Handbook (Vol-II).

Duty Free Replenishment Certificate shall be issued for import of inputs, as per SION, having
same quality, technical characteristics and specifications as those used in the end product and
as indicated in the shipping bills. The validity of such licences shall be 18 months. DFRC and
or the material(s) imported against it shall be freely transferable

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EXIM Policy

• Validity of DFRC to be extended from 12 months to 18 months.

• Dispensing with the need of technical characteristics for inputs except for items in the
sensitive list.
• Automatic calculation of CIF value under DFRC scheme without reference to
international price of individual inputs.
• Provision incorporated for claim of DFRC against advance payment.
• Coverage of additional ports under DFRC
• Split up facility extended to DFRC scheme to give operational flexibility to the holder
of DFRC.

The Duty Free Replenishment Certificate shall be subject to a minimum value addition of
33%.

The export products, which are eligible for modified VAT, shall be eligible for CENVAT
credit. However, non excisable, non dutiable or non centrally vatable products, shall be
eligible for drawback at the time of exports in lieu of additional customs duty to be paid at the
time of imports under the scheme.

The exporter shall be entitled for drawback benefits in respect of any of the duty paid
materials, whether imported or indigenous, used in the export product as per the drawback
rate fixed by Directorate of Drawback (Ministry of Finance). The drawback shall however be
restricted to the duty paid materials not covered under SION.

DUTY ENTITLEMENT PASS BOOK (DEPB) SCHEME

DEPB Scheme announced in 2002-07 EXIM Policy has been continued. In this regard earlier
Customs Notification No.45/2002-Cus. dated 22.4.2002 and DOR Circular No.24/2002-Cus.
dated 6.5.2002 refers. Henceforth, supplies made by DTA units to units in SEZ would be
entitled for DEPB benefits. The area of the Special Economic Zone shall be a Customs
Station and all the functions relating to the enforcement of the Customs Act shall be
controlled by the Commissioner of Customs with the assistance of proper officers of
Customs. The goods entered into the SEZ from the DTA shall be under the cover of a Bill of
Export. This Bill shall be registered in the SEZ Customs formation and assigned a running
serial number. Thereafter the goods shall be examined by the Customs Officers posted in the
SEZ like a normal export consignment. These goods shall be eligible for DEPB benefit & the
DEPB scrips shall be issued by the licensing authority to the SEZ Unit receiving supplies
from DTA Unit on the basis of a disclaimer certificate given by the DTA Unit in favour of
SEZ Unit. This is because it has now been decided to treat supplies made by DTA Unit to a
unit in SEZ as exports for the purpose of granting DEPB benefit.

For the purpose of allowing DEPB benefit against DEPB licenses issued for supplies to SEZ
units, verification of the DEPB license shall be done in the same manner as specified in
earlier DOR Circular No.14/99-Cus. dated 15.3.99 excepting that in case of supplies made to
SEZ units, the Bill of Export and other related documents shall be verified. Since the port of

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EXIM Policy

registration in respect of such DEPB license would be the place where the receiver SEZ unit
is located, import against such DEPB scrips shall be permitted either from the same Custom
House or from any other place notified in DEPB Custom Notification No.45/2002 against
TRA in terms of para 6 of DOR Circular No.85/99-Cus. dated 23.12.99 and also in terms of
DOR Circular No.66/2001-Cus. dated 19.11.2001 when the Custom House of receiver SEZ
unit is a non-notified place. For this purpose, both Commissioner Incharge of Customs House
(who issues TRA) and the Custom House receiving the TRA shall follow the procedure as
specified in DOR Circular No.66/2001.

Objectives

The objective of DEPB is to neutralise the incidence of Customs duty on the import content
of the export product. The neutralisation shall be provided by way of grant of duty credit
against the export product.

Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value
of exports, made in freely convertible currency. The credit shall be available against such
export products and at such rates as may be specified by the Director General of Foreign
Trade by way of public notice issued in this behalf, for import of raw materials,
intermediates, components, parts, packaging material etc.

The holder of DEPB shall have the option to pay additional customs duty, if any, in cash as
well.

Validity

The DEPB shall be valid for a period of 12 months from the date of issue.

Transferability

The DEPB and/or the items imported against it are freely transferable. The transfer of
DEPB shall however be for import at the port specified in the DEPB, which shall be the port
from where exports have been made. Imports from a port other than the port of export shall
be allowed under TRA facility as per the terms and conditions of the notification issued by
Department of Revenue.

Applicability of Drawback

Normally, the exports made under the DEPB Scheme shall not be entitled for drawback.
However, the additional customs duty/excise duty paid in cash on inputs under DEPB shall
be adjusted as CENVAT Credit or Duty Drawback as per rules framed by the Department of
Revenue. In cases, where the additional customs duty is adjusted from DEPB, no benefit of
CENVAT/ Drawback shall be admissible.

In another major initiative to boost agri and allied products exports, Shri Jaitley said that
fixation of DEPB rates for selected agro products would factor in the cost of inputs such as
fertilisers, pesticides and seeds. This would help the farmers to use the required inputs in a
scientific manner to boost productivity and quality

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EXIM Policy

QUANTITATIVE RESTRICTIONS (QR)

Quantitative Restrictions are explicit limits usually by volume on the amount of a specified
commodity that may be imported into a country sometimes also indicating the amounts that
may be imported from each supplying country. Compared to tariffs the protection afforded by
QR’s tend to be more predictable being less affected by changes in competitive factors.
Quotas have been used at times to favour preferred sources of supply.

Quantitative Restrictions were being maintained ever since 1947 on balance of payments
grounds under the GATT to which we were a signatory. We participated in the Uruguay
Round negotiations and became a founder-member of WTO and subscribed to all the
Agreements but we continued to maintain QRs on the same balance of payments grounds.

However, with the improvement in the balance of payments position, certain members of the
WTO had disputed our need or justification to continue Quantitative Restrictions for BOP
reasons. India could negotiate with most of the trading partners, with the exception of USA,
to arrive at a mutually agreeable solution for phasing out these Quantitative Restrictions.

The USA filed a dispute and the Dispute Settlement Panel constituted in November 1997
ruled against India. India filed an appeal before the Appellate Body of WTO against the
findings of the Panel but the Appellate Body also upheld the findings of the Panel challenged
by India. Consequently, we are now obliged to withdraw Quantitative Restrictions.

An agreement was signed between India and USA for determining the reasonable period of
time, under which the Quantitative Restrictions on the remaining 1429 tariff lines were to be
removed by April 1, 2001, of which 714 before April 1, 2000.

The tariff line-wise import policy was first announced on March 31,1996 and at that time
itself 6161 tariff lines were made free. Since then 1905 tariff lines have been made free till
now. In this connection, I would like to point out that the QRs in respect of these 1429 tariff
lines were withdrawn preferentially for imports from SAARC countries with effect from
August 1, 1998 itself.

It is to be noted that tariff protection will continue to be available. Further in the event of
unfair trade practices like dumping or subsidisation of exports by other countries causing
injury to the Indian industry, adequate protection under anti-dumping or anti-subsidy
mechanisms or if there is a sudden surge in imports causing serious injury to the industry,
protection under safeguard provisions will always be available. The industry can always
approach either the Anti-dumping Directorate or the Safeguard Directorate for appropriate
relief.

Removal of QR
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EXIM Policy

The process of removal of import restrictions, which began in 1991, has been completed in a
phased manner with removal of restrictions on 715 items. Out of these 715, 342 are textile
products, 147 are agricultural products including alcoholic beverages and 226 are other
manufactured products including automobiles.

Import of agricultural products like wheat, rice, maize, other coarse cereals, copra and
coconut oil has been placed in the category of State Trading. The nominated State Trading
Enterprise will conduct the imports of these commodities solely as per commercial
considerations. Similarly, import of petroleum products including petrol, diesel and ATF has
also been placed in the category of State Trading. Import of urea will also be done through
the mechanism of State Trading.

Care has been taken to ensure a level playing field to domestic producers vis-à-vis imports. In
conformity with the "National Treatment Principle" of GATT, imports have also been made
subject to the following domestic regulations:

(i) Import of all food products will be subject to compliance of all the provisions of Food
Adulteration Act and Rules there under;

(ii) Import of meat and poultry products will be subject to compliance of all the provisions of
Meat Food Product Order;

(iii) Import Tea Waste will be subject to compliance of Tea Waste (Control Order);

(iv) No import of textile material using the prohibited dyes like azo dye shall be allowed. For
this purpose, a pre-shipment inspection certificate has been made mandatory.

In view of road safety and environment considerations, imports of second hand automobiles
have been allowed subject to the following conditions:

(i) Import of automobiles older than three years is not allowed;

(ii) Imported vehicles need to conform to Central Motor Vehicle Rules;

(iii) Import of left hand drive vehicles not allowed;

(iv) For ensuring the requirements, pre shipment as well as post shipment certification made
mandatory;

(v) Imported automobiles to have a minimum residual life of five years and the importer to
ensure supply of spares and service during this period; and

(vi) Such imports allowed only through customs port at Mumbai.

Similarly, import of new automobiles allowed subject to following conditions:

(i) Import allowed only from the country of manufacture;

(ii) Import of left hand drive vehicles not allowed;

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EXIM Policy

(iii) Imported vehicles to conform to the provisions of Motor Vehicles Act, 1988;

(iv) Prototype of vehicle to be approved by notified agencies in India; and

To ensure that import of agricultural products do not lead to unwanted infiltration of exotic
diseases and pests in the country, it has been decided to subject import of primary products of
plant and animal origin to 'Bio Security & Sanitary and Phyto-Sanitary Permit' to be issued by
Deptt. of Agriculture and Cooperation. This permit will be based on Import Risk Analysis of
the product to be conducted on scientific principles, in accordance with the WTO agreement
on Application of Sanitary and Phyto-Sanitary Measures.

Impact of removal of QRs on imports

The Government has been unilaterally liberalizing imports since 1991 by removing
Quantitative Restrictions(QRs) on imports (Box6.3). The EXIM Policy 2001 has completed
this process by dismantling QRs on BOP grounds on the remaining 715 items from April 1,
2001.Apprehensions have, therefore, been expressed

that such removal of QRs may result in a surge and dumping of imports in the country, thus
affecting adversely the domestic industry. However, the apprehensions are not borne out by
actual import growth over this period. Import data for the full financial year 2000-01 on 714
items, restrictions on which were removed with

effect from 31.3.2000, do not reveal any surge in their imports following removal of such
restrictions. Out of 714 items, no imports were made for 151 items either before or after
removal of QRs. Only 92 items recorded imports worth more than Rs 5 crore. Diamonds and
semiprecious stones constituted 35 per cent of these imports and another 14 per cent was
contributed by imports of telephonic/telegraphic equipment,

industrial vacuum cleaners and cathode ray picture tubes, items necessary for domestic
industrial activity. Although some growth was seen in the import of prepared foodstuff,
beverages and tobacco, plastic and rubber, leather products, glassware, ceramic products and
products like footwear and umbrellas, instruments and apparatus, the absolute quantum of
imports was not significant in relation to the

aggregate domestic production of these items. Further, the monitoring reports on imports of
300 sensitive items, for the current financial year so far also do not indicate any unusual surge
in imports of these items. The total imports of these

sensitive items (in Dollar terms) during the first nine months of the current financial year
have increased by only 2.1 per cent due mainly to higher imports of edible oils, cotton &
silk, spices , rubber and marble & granite.

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EXIM Policy

AGRICULTURAL EXPORT ZONES (AEZ)

In a fast changing international trade environment and with a view to providing

remunerative returns to the farming community in a sustained manner the concept of the
agri export zones (AEZ) was floated. These zones have been set up for end to end
development for export of specific products from a geographically contiguous area.

AEZ are to be identified by the State Government, who would evolve a comprehensive
package of services provided by all State Government agencies, State agriculture
universities and all institutions and agencies of the Union Government for intensive delivery
in these zones. Corporate sector with proven credentials would be encouraged to sponsor
new agri export zone or take over already notified agri export zone or part of such zones for
boosting agri exports from the zones.

Services which would be managed and co-ordinated by State Government/corporate sector

and would include provision of pre/post harvest treatment and operations, plant protection,
processing, packaging, storage and related research & development etc. APEDA will
supplement, within its schemes and provisions, efforts of State Governments for facilitating
such exports.

Units in AEZ would be entitled for all the facilities available for exports of goods in terms
of provisions of the respective schemes.

Agri Export

Unless we ensure that the rural sector and Indian farmers receive visible benefits from
economic reforms and the process of globalization, it may not be possible to accelerate
economic growth. You would recollect that we had introduced the Scheme of Agro Export
Processing Zones (AEZ) in the 2002-2007 Policy for end to end development of export of
specific products from a geographically contiguous area. We are gratified that there has been
an enthusiastic response to the scheme from the States and the rural community. As many as
45 AEZs have been notified so far in different parts of the country. We want to further
accelerate this process. Agriculture and allied products is our core competence. Not only is it
diversified with a large variety of crops, fruits, vegetables and flourishing dairy sector, but we
are among the world leaders in output of many products.

One of the limiting factors in the increase in agricultural productivity and quality and for
protecting it from the vagaries of monsoon is the lack of or inadequate investment in this
sector for bringing to the farmer the latest technology and knowledge and for setting up
critical infrastructure in the form of water harvesting and soil management, better quality of
seeds and optimal use of inputs, adoption of scientific pre and post harvest treatment and
storage and establishment of linkage with international marketing. In spite of the enthusiasm
shown by many of the State Governments, availability of investible resources in creation of
such critical infrastructure even in the AEZs has been a constraint. In view of this, we
propose to also facilitate and promote association of corporate with proven credentials in the
implementation of AEZs in order to give a boost to productivity and quality of specified agro

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EXIM Policy

products leading to accelerated exports. For this purpose, we are having consultations with
Ministry of Finance who are receptive to the idea, to provide appropriate incentives to enable
investments by these corporates to infrastructure, agricultural extension, processing, packing,
storage, R&D and other facilities relating to exports in the approved AEZs.

Another major initiative to boost agri and allied products exports will be the modification of
norms for fixing DEPB rates for export of agriculture, horticulture and allied products. In
fixing DEPB rates for such products, we shall take into account inputs such as fertilizers,
pesticides, certified seeds etc. used by the farmers prior to processing of the products for
exports. This would also ensure that the Indian farmer uses the required inputs in a scientific
manner to boost productivity and quality. To begin with, this facility will be extended only to
selected products on the basis of the recommendation of an Inter-Ministerial Committee.

STATUS HOLDERS

"Status holder" means an exporter recognised as "Export House/Trading House/Star trading

House/ Super Star Trading House" or service provider recognised as "Service Export House,
International Service Export House, International Star Service Export House International
Super Star Service Export House" by the Director General of Foreign Trade.

Over the last few decades certain areas of strength have emerged in the export sector. Definite
export surpluses have emerged in sectors like food grains, sugar, yarn, garments, steel,
cement, aluminium & petroleum products and pharmaceuticals. Certain Small & Medium
Enterprises (SMEs) and other units in DTA have been exporting more than 75% of their
production. Similarly export oriented units and units in export processing zones have been
contributing significantly to exports. Certain industrial clusters have evolved on their own
without any significant official assistance, each of them collectively producing goods and
services worth more than Rs.1,000 crore per year and exporting a substantial part thereof.
Status certificates have been issued to units on the basis of their export performance.

Keeping the above in mind, the status holders shall be eligible for the following new/ special
facilities:

• Licence/Certificate/Permissions and Customs clearances for both imports and exports

on self-declaration basis.
• Fixation of Input-Output norms on priority;
• Priority Finance for medium and long term capital requirement as per conditions
notified by RBI;
• Exemption from compulsory negotiation of documents through banks. The remittance,
however, would continue to be received through banking channels;
• 100% retention of foreign exchange in EEFC account;
• Enhancement in normal repatriation period from 180 days to 360 days.
• Status holders with a minimum export turnover of Rs 250 mn entitled to duty-free
import of capital goods, spares, office equipments and consumables, upto 10% of the
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EXIM Policy

incremental growth in exports subject to their achieving more than 25% growth in
value of exports.
• Status holders to be given Annual Advance Licence facility to enable them to plan for
their imports of raw material and components on an annual basis and take advantage
of bulk purchases.

EXPORT PROMOTION CAPITAL GOODS SCHEME (EPCG)

The Export Promotion Capital Goods Scheme (EPCG) has been for several years now
instrumental in promoting exports. The high growth rate of East Asian countries was
facilitated by the transformation of their exports from producing cheap-labour intensive to
high technology intensive manufacturing goods.

The Exim Policy has announced a series of steps to make the EPCG scheme more flexible
and attractive, so that even the small-scale sector can set up and expand its manufacturing
base for exports. This is considered essential, as manufactured goods account for more than
77 per cent of India's total exports in the last five years.

Thus, allowing the import of up to 10-year-old capital goods for pre- and post-production,
removal of use conditions, and allowing import of spares to facilitate the upgradation of
existing plant and machinery will make export sectors, such as textile, more competitive.

Further, the rationalisation of export obligation and dispensing with the existing condition of
imposing an additional export obligation of 50 per cent for products in the higher value chain
will provide flexibility.

Moreover, the relatively low value exports obligation will be a boon to investment in the
domestic economy. Therefore, the EPCG scheme along with the reduction of transaction cost
through the EDI will give a boost to the manufacturing sector and over all export growth.

• The scheme shall now allow import of capital goods for pre-production and post-
production facilities also.
• The Export Obligation under the scheme shall now be linked to the duty saved and
shall be 8 times the duty saved.
• To facilitate upgradation of existing plant and machinery, import of spares shall also
be allowed under the scheme.
• To promote higher value addition in exports, the existing condition of imposing an
additional Export Obligation of 50% for products in the higher product chain to be done away
with.
• Greater flexibility for fulfilment of export obligation under the scheme by allowing
export of any other product manufactured by the exporter. This shall take care of the
dynamics of international market.
• Capital goods upto 10 years old shall also be allowed under the scheme.

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EXIM Policy

• To facilitate diversification into the software sector, existing manufacturer exporters

will be allowed to fulfil export obligation arising out of import of capital goods under the
scheme for setting up of software units through export of manufactured goods of the same
company.
• Royalty payments received from abroad and testing charges received in free foreign
exchange to be counted for discharge of export obligation under EPCG scheme.

The scheme allows import of capital goods for pre production, production and post
production (including CKD/SKD thereof as well as computer software systems) at 5%
Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital
goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from
the date of issuance of licence. Capital goods would be allowed at 0% duty for exports of
agricultural products and their value added variants.

However, in respect of EPCG licences with a duty saved of Rs.100 crore or more, the same
export obligation shall be required to be fulfilled over a period of 12 years.

In case CVD is paid in cash on imports under EPCG, the incidence of CVD would not be
taken for computation of net duty saved provided the same is not Cenvated.

The capital goods shall include spares (including refurbished/ reconditioned spares), tools,
jigs, fixtures, dies and moulds. EPCG licence may also be issued for import of components of
such capital goods required for assembly or manufacturer of capital goods by the licence
holder.

Second hand capital goods without any restriction on age may also be imported under the
EPCG scheme.

Spares (including refurbished/ reconditioned spares), tools, refractory’s, catalyst and

consumable for the existing and new plant and machinery may also be imported under the
EPCG scheme .

However, import of motor cars, sports utility vehicles/ all purpose vehicles shall be allowed
only to hotels, travel agents, tour operators or tour transport operators whose total foreign
exchange earning in current and preceding three licensing years is Rs 1.5 crores. However,
the parts of motor cars, sports utility vehicles/ all purpose vehicles such as chassis etc cannot
be imported under the EPCG Scheme

Spares (including refurbished/ reconditioned spares), tools, spare refractory’s, catalyst &
consumable for the existing plant and machinery may also be imported under the EPCG
Scheme subject to an export obligation equivalent to 8 times of duty saved to be fulfilled over
a period of 8 years reckoned from the date of issuance of license

The export obligation for such EPCG licences would be eight times the duty saved. The duty
saved would be the difference between the effective duty under the aforesaid Customs
Notification and the concessional duty under the EPCG Scheme.

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EXIM Policy

The scheme covers manufacturer exporters with or without supporting manufacturer(s)/

vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers. The
following conditions shall apply to the fulfilment of the export obligation:-

The export obligation shall be fulfilled by the export of goods capable of being manufactured
or produced by the use of the capital goods imported under the scheme.

The export obligation may also be fulfilled by the export of same goods, for which EPCG
licence has been obtained, manufactured or produced in different manufacturing units of the
licence holder/specified supporting manufacturer (s).

When Capital Goods are imported for pre/ post- production or license is taken for import of
spares, the license holder shall fulfil the export obligation by export of products manufactured
from the plant / project to which the pre/ post- production capital goods/ spares are related.

The import of capital goods for creating storage and distribution facilities for products
manufactured or services rendered by the EPCG licence holder would be permitted under the
EPCG Scheme.

The export obligation under the scheme shall be, over and above, the average level of exports
achieved by him in the preceding three licensing years for same and similar products except
for categories mentioned in Handbook

Alternatively, export obligation may also be fulfilled by exports of other good(s)

manufactured or service(s) provided by the same firm/company or group company/ managed
hotel which has the EPCG licence.

However, in such cases, the additional export obligation imposed under EPCG scheme shall
be over and above the average exports achieved by the unit/company/group company/
managed hotel in preceding three years for the original and the substitute product(s) /service
(s) even in cases where the average is exempt for the substitute product (s)/ service (s).

The incremental exports to be fulfilled by the licence holder for fulfilling the remaining
export obligation can include any combination of exports of the original product/ service and
the substitute product (s)/ service (s). The exporter of goods can opt to get the export
obligation re-fixed for the export of services and vice versa.

The licence can also opt for the re-fixation of the balance export obligation based on 8 times
of the duty saved amount for the CIF value in proportion to the balance Export obligation
under the scheme

The aforesaid facilities shall only be available to manufacturer exporters/ service provider on
all the licences where export obligation period including extended export obligation period is
valid on the date of application. In this regard, exports made only on or after submission of
application for alternate item and/ or re-fixation of the export obligation based on duty saved
amount will be taken into account for fulfilment of export obligation.

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EXIM Policy

The export obligation under the scheme shall be, in addition to any other export obligation
undertaken by the importer, except the export obligation for the same product under Advance
Licence, DFRC, DEPB or Drawback scheme.

The export obligation can also be fulfilled by the supply of ITA-1 items to the DTA provided
the realization is in free foreign exchange.

Royalty payments received in freely convertible currency and foreign exchange received for
R& D services shall also be counted for discharge under the EPCG scheme. Payment
received in rupee terms for the port handling services, in terms of Chapter 9 of the Foreign
Trade Policy shall also be counted for export obligation discharge under the Scheme.

DEEMED EXPORTS

Deemed Exports" refers to those transactions in which the goods supplied do not leave the
country.

The following categories of supply of goods by the main/ sub-contractors shall be regarded as
"Deemed Exports" under this Policy, provided the goods are manufactured in India:

• Supply of goods against Advance Licence/DFRC under the Duty Exemption

/Remission Scheme;
• Supply of goods to Export Oriented Units (EOUs) or units located in Export
Processing Zones (EPZs) or Special Economic Zone (SEZs) or Software Technology
Parks (STPs) or to Electronic Hardware Technology Parks (EHTPs);
• Supply of capital goods to holders of licences under the Export Promotion Capital
Goods (EPCG) scheme;
• supply of goods to projects financed by multilateral or bilateral agencies/funds as
notified by the Department of Economic Affairs, Ministry of Finance under
International Competitive Bidding in accordance with the procedures of those
agencies/ funds, where the legal agreements provide for tender evaluation without
including the customs duty;
• supply of capital goods, including in unassembled/ disassembled condition as well as
plants, machinery, accessories, tools, dies and such goods which are used for
installation purposes till the stage of commercial production and spares to the extent of
10% of the FOR value to fertiliser plants.
• supply of goods to any project or purpose in respect of which the Ministry of Finance,
by a notification, permits the import of such goods at zero customs duty coupled with
the extension of benefits under this chapter to domestic supplies;
• Supply of goods to the power and refineries not covered in (f) above.
• Supply of marine freight containers by 100% EOU (Domestic freight containers-
manufacturers) provided the said containers are exported out of India within 6 months
or such further period as permitted by the Customs; and
• Supply to projects funded by UN agencies.
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EXIM Policy

Benefits for Deemed Exports

Deemed exports shall be eligible for the following benefits in respect of manufacture
and supply of goods qualifying as deemed exports

• Advance Licence for intermediate supply/ deemed export.

• Deemed Exports Drawback.
• Refund of Terminal Excise duty.

ADVANCE LICENSE SCHEME

An advance licence is granted for the import of inputs without payment of basic customs
duty. Such licences shall be issued in accordance with the policy and procedure in force on
the date of issue of the licence and shall be subject to the fulfilment of a time-bound export
obligation, and value addition as maybe specified. Advance licences maybe either value
based or quantity based.

As per the latest amendments to the EXIM Policy, the facility of Back to Back Inland Letter
of Credit has been introduced, to enable an Advance Licence holder to source his inputs from
domestic suppliers.

Value based advance license

Under a value based advance licence, any of the inputs specified in the licence maybe
imported within the total CIF value indicated for those inputs, except inputs specified as
sensitive items.

Under a value based advance licence, both the quantity and the FOB value of the exports to
be achieved shall be specified. It shall be obligatory on the part of the licence holder to
achieve both the quantity and FOB value of the exports specified in the licence.

Amendments to the Advance License Scheme

The Advance License Scheme has been expanded and liberalised with the amendments made
to the EXIM Policy, announced on 31st March 1995.

• Modvat credit can be taken on inputs which go into the manufacture of export
products, under the Advance License Scheme.
• Expansion of the concept of Advance Intermediate License, which hitherto was only
quantity based to value based.
• Advance licenses can now be transferred after the export obligation has been fulfilled,
and the bank guarantee or

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EXIM Policy

• Drawbacks are permitted in respect of duty paid materials, which are imported or
indigenous.
• Import of mandatory spares upto 5% of the CIF value of the license is now allowed.
• The list of sensitive items has been pruned. Flexibility has also been granted to the
exporter for using the unutilized CIF value of sensitive items for importing non-
sensitive items.

On the 1st of March, 1995, the Engineering Products Export (Replenishment of Iron and Steel
Intermediates) scheme was announced as an alternative to the International Price
Reimbursement Scheme, which was withdrawn in April 1994. Under the new scheme,
primary steel producers would be able to import intermediates like coal and fuel, using
advance licences, and then provide steel to engineering exporters at international prices.

EXIM BANK

Exim Bank is managed by a Board of Directors, which has representatives from the
Government, Reserve Bank of India, Export Credit Guarantee Corporation (ECGC) of India,
a financial institution, public sector banks, and the business community.

Functions

Exim Bank plays four-pronged role with regard to India's foreign trade: those of a
coordinator, a source of finance, consultant and promoter.

Exim Bank is the Coordinator of the Working Group Mechanism for clearance of Project and
Services Exports and Deferred Payment Exports (for amounts above a certain value currently
US$ 100 million).

The Working Group comprises Exim Bank, Government of India representatives (Ministries
of Finance, Commerce, External Affairs), Reserve Bank of India, Export Credit Guarantee

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EXIM Policy

Corporation of India Ltd. and commercial banks who are authorised foreign exchange
dealers.

Exim Bank plays a pivotal role in promoting and financing project exports. Promoting Trade
and Investment Promotion Agencies. Exim Bank offers Rediscounting Facility to commercial
banks, enabling them to rediscount export bills of their SSI customers.

We also offer Refinance of Supplier's Credit, enabling commercial banks to offer credit to
Indian exporters of eligible goods, who in turn extend them credit over 180 days to importers
overseas.

Term loans for export production: Exim Bank provides term loans/deferred payment
guarantees to 100% export oriented units, units in free trade zones and computer software
exporters. In collaboration with International Finance Corporation, Washington, Exim Bank
provides loans to enable small and medium enterprises upgrade export production capability.
Facilities for deeded exports; Deemed exports are eligible for funded and non- funded
facilities from Exim Bank.

Overseas Investment finance: Indian companies establishing joint ventures overseas are
provided finance towards their equity contribution in the joint venture.

Finance for export marketing: This programme, which is a component of a World Bank loan,
helps exporters implement their export market development plans.

Guaranteeing of Obligations : Exim Bank participates with commercial banks in India in the
issue of guarantees required by Indian companies for the export contracts and for execution of
overseas construction and turnkey projects.

Advantages of EXIM

Over the last four decades India has recorded remarkable expansion and diversification in
practically all areas of industrial development. India's vast resources-human, agricultural,
mineral and industrial- have been fully exploited for this purpose. The New Industrial Policy
has helped in catalyzing foreign investment into India. The total amount of foreign direct
investment approval which was Rs 5,341 million in 1991, swelled to Rs 141,871.9 million in
1994. Of the total FDI approvals, 80% are in the priority sectors such as power, oil refineries,
electronics and electrical equipment, chemicals, telecommunications, food processing etc.

Policy Resolution of 1956 and the Statement on Industrial Policy of 1991 provide the basic
framework for the overall industrial policy of the Government in regard to the manufacturing
industries. In the initial stages of the country's development, growth of industry was regulated
through the granting of industrial licenses and other industrial approvals. The Industries
(Development and Regulation) Act, 1951 was the principal legislation providing the legal
basis for industrial licensing. The industrial policy announced on 24th July, 1991
substantially dispensed with industrial licensing, announced measures facilitating foreign
investment and technology transfers, and threw open the areas hitherto reserved for the public
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EXIM Policy

sector.

The private sector can now operate in all areas except those of strategic concern such as
defence, railway transport and atomic energy. The list of industries reserved for the public
sector now stands reduced to 6. Private participation is permitted in some specific areas in
this list as well, such as mining; oil exploration, refining and marketing; and parts of the
railway transport sectors.

The requirement of obtaining an industrial license for manufacturing activity is limited to:

1. Industries reserved for the pubic sector.

2. 16 industries of strategic, social or environmental concern.
3. Industries reserved for the small scale sector.

All other industries are exempt from licensing, and only subject to the location restrictions of
metropolitan areas.

Exports-Imports Free Unless Regulated: Exports and imports shall be free, unless regulated
by FTI or any other law enforced. The item wise export and import policy shall be specified
in ITC notified by DGFT as amended from time to time OLD: exports and imports shall be
free, except in cases where they are regulated by the provision of this policy or any other law
from the time being enforced.

Restricted Goods: Any goods, export or import of which is restricted under ITC may be
exported or imported only in accordance with an authorisation or in terms of a public notice
issued in this regard OLD. any goods, export or import of which is restricted under ITC may
be exported or imported only in accordance with license/ certificate/ permission or in terms of
a public notice issued in this behalf

Employment Generation: The second objective of the FTP was providing thrust to
employment generation particularly in semi-urban and rural areas. The FTP
announced special focus initiatives in the employment intensive areas of agriculture,
handicrafts, handlooms, gems & jewellery and leather & footwear sectors. The employment
generation has been encouraging not only in these sectors, but in other sectors across the
board. A study commissioned by the Ministry reveals that exports generated an
incremental direct employment of 10 lakh jobs in the year 2004-05, over the previous year.
The total employment generated during the year corresponding to export activity valued at 78
billion was 1 crore jobs - 86 lakhs of direct employment, and 14 lakhs of indirect employment
in the logistics, transport and related sectors. The study further reveals that if we achieve our
target of 150 dollars over the next four years, we shall be adding a further 1 crore jobs: 85%
of it direct employment, and 15% indirectly associated jobs.

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EXIM Policy

Sector Wise Performance: Sectors registering positive growth during 1998-99 include cereal
and gems and jewellery. Commodities showing positive growth include tea, rice leather,
footwear, gems and jewellery, manufacture of metals, readymade garments, etc. During the
current year, so far (April-May’99) a number of items such as leather, footwear, gem &
jewellery, textiles, handicrafts and carpets have shown positive growth. Among the
importable, edible oil, precious and semi-precious stones, electrical machinery, project goods,
gold and silver have registered significant growth during 1998-99. Imports for April-July’99
show a rise of only 1.01 per cent in dollar terms, while imports in July’99 show a decline of
5.84 per cent in dollar terms. Engineering goods and chemicals are the main items showing a
fall in imports which is a cause for concern. Gold and silver imports have also fallen.

Issues

Infrastructure: In the Custom Notification No. 138/91 dated 20.10.90 as amended from time
to time, allows import of duty free capital goods for creating central facility to Software
Technology Parks of India (STPI) and do not include other service providers in the private
sector. With the advancement of technologies in electronics and computer software, the cost
to create such infrastructure required for export is becoming exorbitant. Therefore, it is
necessary that private and public organisations interested in providing infrastructure/common
facilities should also be included for duty exemption to import capital goods, etc. The Service
Provider in view of capital imported would undertake the export obligations as provided for
capital goods in the STP Scheme. The scheme was discussed in the DGFT/CBEC which need
to be implemented immediately.

Anti- Dumping: Where any article is exported from any country or territory to India at less
than its normal value then upon the importation of such article to India the central Govt. may
be notification in the official gazette impose an anti dumping duty not exceeding the margin
of dumping in relation to such article. For purpose of identification, assessment and collection
of Anti Dumping Duty on dumped articles and for determination of injury, the Govt. has
appointed Additional Secretary to the Govt. of India Ministry of Commerce as designated
Authority for purpose of above rules.

It is to be understood that imposition of Anti Dumping Duty is based on Commodity to

Commodity, country to country and suppliers in Exporting countries

Others: THE first Export-Import (Exim) policy of the new millennium coinciding with the
Tenth Plan has evoked enthusiastic response from the exporting community and some policy
analysts for its perceived new initiatives to drive export growth.

It is essential that the modalities of granting transport subsidy be finalised without delay.
Together with a depreciating rupee, transport assistance can provide that little extra push
necessary in case of commodities facing a marginal price disparity. However, an Exim policy
for a five-year period, which merely liberalises exports and removes procedural irritants, is
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EXIM Policy

unlikely to provide any significant boost to export earnings of farm goods. A coordinated
effort by various ministries at the Centre including finance, food and agriculture is necessary.

There are instances of export efforts thwarted by customs authorities. In their drive to
increase revenue, some customs houses pressurise exporters not to use DEPB licence, but pay
up customs duty on raw material import.

A strong input delivery system, advise on agronomic practices and market intelligence is key
to success. AEZs must make use of information technology to deliver benefits to primary
producers in the area.

In sum, intentions of the new Exim policy are laudable. But how far these intentions will be
translated into action remains to be seen. Having removed the cobwebs that hitherto
restrained farm exports, the Government must now proceed to invest export products with
competitive edge in terms of cost and quality.

Exim Bank signed pact with IFC

Exim Bank of India has signed an agreement with International Finance Corporation (IFC),
Washington, a member of the World Bank group, under the Global Trade Finance
Programme (GTFP) of IFC. This arrangement will enable Exim Bank to confirm letters of
credit, guarantees and other trade instruments issued by approved banks in more than forty
countries of Central Asia, Central and Eastern Europe, Latin America and the Caribbean,
West Asia and North Africa as also other regions of Asia and Africa. The Exim Bank Chief
General Manager, Prabhakar, and the IFC Associate Director, Mamta H. Shah, signed the
agreement on December 14, 2007.

EXPORTS, IMPORTS & TRADE

BALANCE

Expor Impor
Year ts ts Trade Exports Imports Exports Imports
($ ($ Balanc (% (% (% to (% to
mln.) mln.) es change) change) GDP) GDP)
($
mln.)
1990- 1814 23464 -5316 9.25 10.59 5.72 7.39

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EXIM Policy

91 8
1991- 1799
92 8 19551 -1553 -0.83 -16.68 6.73 7.31
1992- 1743
93 7 20583 -3146 -3.12 5.28 7.13 8.42
1993- 2221
94 3 23305 -1092 27.39 13.22 8.06 8.45
1994- 2633
95 7 28662 -2325 18.57 22.99 8.14 8.86
1995- 3184
96 2 36730 -4888 20.9 28.15 8.92 10.29
1996- 3349
97 8 39165 -5667 5.2 6.63 8.62 10.08
1997- 3504
98 9 41535 -6486 4.63 6.05 8.52 10.1
1998- 3321
99 1 42379 -9168 -5.24 2.03 7.98 10.18
1999- 3676
00 0 49799 -13039 10.68 17.51 8.15 11.04
2000- 4414
01 7 50056 -5909 20.1 0.52 9.58 10.86
2001- 4395
02 8 51567 -7609 -0.43 3.02 9.16 10.75
2002- 5282
03 3 61533 -8710 20.17 19.33 10.38 12.09
2003- 6388
04 6 78203 -14316 20.94 27.09 10.61 12.99
2004- 8350 1114
05 2 72 -27970 30.7 42.54 12 16.03
2005- 1030 1491
06 75 44 -46068 23.44 33.8 12.79 18.51
2006- 1262 1904
07 46 38 -64192 22.48 27.69 13.86 20.9

INDIA V/S WORLD: ANNUAL EXPORT

GROWTH RATE

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EXIM Policy

FUTURE OF EXIM

The new five-year Exim policy is expected to bring about a positive growth in exports in the
days to come. The policy was the result of a paradigm shift from narrow issues of mere
procedural formalities to much larger aspects of exports which would work as the ``true
engine of growth''. The policy was clear and required involvement of the state government to
make it successful. Adequate measures have been taken to curtail transaction costs. the
concept of using special economic zone (SEZ) and agriculture export zones to boost exports
of goods, services and agricultural products is a positive step. Processed foods such as marine
products, coconuts, cashews, areca nuts and fruits like mangoes need to be encouraged. In
order to catch up with the changing world scenario in the export trade, he felt that there was a
requirement of a mindset change in government officials as well as in the industry. The
participants concentrate on policy-related matters and understand the subject thoroughly and
make use of seminars and workshops to update them with the latest changes and techniques.
referring to the SEZ for Goa. It is required to have a proper study by international
consultants, and the involvement of competent persons to push the proposal further Goa has a
natural advantage and it can have a unique SEZ in the service sector.

Prospects For Indian Export: For the period April-July’99, exports registered a growth of
4.04 per cent in dollar terms and 8.45 per cent in rupee terms over April- June’98. The world
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EXIM Policy

merchandise exports declined by 2 per cent during 1998, the strongest decrease since 1982. In
fact, if we see the export performance of all the south Asian and south east Asian countries, it
was negative for most of them including China. Only in the case of Philippines, the export
performance was good due to its electronics sector and the FTZs. The export growth has been
picking up in the current fiscal. However, the demand situation per se has not improved since
the east Asian crisis and the fall in commodity prices worldwide is still far from over. An
improvement in these factors will help increase exports from India

Future Lies In Service Sectors: This is a very important sector for the future. We have
already included the 161 services under EXIM POLICY. They will be able to avail of
facilities under schemes like EPCG, Star and Super Star Houses, EPZs, etc. Unlike the goods
sector, there is no possibility of any of these schemes to be considered as WTO inconsistent
in the services sector as the general commitments in services sector till now are only
extension of MFN. With services emerging as the major sector in our GDP
and India showing proven competitiveness in many services, the Future growth depends on
how we use the opportunities thrown open by a more open services commitments by some of
our trading partners and negotiating for the removal of barriers in this sector.

One Percent Share In World Exports: The demand situation in the world for India’s exports
have not been favourable in the last two years. The government is trying to increase the
supply situation by laying emphasis on improving infrastructure, credit to exporters and
policy implification. Government also working towards creating an environment for second
generation reforms. If we include services sector and informal trade which crosses our
borders, the share of India in world exports would definitely be higher.

BIBLIOGRAPHY

 Book on Foreign Trade of India: 1947-2007 (Chapter 2 & 3)

 Centre for Monitoring Indian Economy – Foreign Trade &

Balance of Payments (August 2007)

 www.economictimes.com (25th July 2006)

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EXIM Policy

 www.exim.indiamart.com

 www.eximbank.com

 www.commerce.nic.in

 www.thehindubusinessline.com

 www.rediff.com

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