India’s foreign trade policy

GROUP: ODD
MBA (IB)
INTRODUCTION:

 Traditional objective was protection of domestic

market from foreign competition.
 Until 1980, not interested in exporting its goods
and services abroad and not ready to open its
economy to foreign investments.
 The aim of its economic policy was to ensure the
country’s independent development (the
swadeshi) principle
 In 1980’s India was one of the most closed
economies in the world.
CONTD
 The idea of a Free Trade Zone was abhorrent.
Therefore, India was left out of the Asian
economic boom.
 With the Soviet Union’s collapse and the first Gulf
War, as well as the implementation of the
International Monetary Fund’s 1991 Structural
Adjustment Program, India launched a new policy
of privatization , deregulation and globalization of
its economy, and a multifaceted trade policy.
CONTD
 India signed regional, bilateral and multinational
trade agreements including SAARC, OPEC,
US,EU, south Asian neighbors, south east Asian
nations.

 Indian international trade policy is a good

example of the central contradiction in India’s
economic policy . its new policies on trade helps
to increase the growth rate by 3%
FOREIGN TRADE POLICY OF INDIA

 In India, the main legislation concerning foreign

trade is the
Foreign Trade (Development and Regulation) Act
, 1992
. The Act provides for the development and
regulation of foreign trade by facilitating imports
into, and augmenting exports from, India and for
matters connected therewith or incidental thereto .
AS PER THE PROVISIONS OF THE ACT, THE GOVERNMENT :-

(I) MAY MAKE PROVISIONS FOR FACILITATING AND

CONTROLLING FOREIGN TRADE;

(II) MAY PROHIBIT, RESTRICT AND REGULATE EXPORTS AND

IMPORTS, IN ALL OR SPECIFIED CASES AS WELL AS SUBJECT
THEM TO EXEMPTIONS;
CONTD

iii) is authorised to formulate and announce

an export and import policy and also amend
the same from time to time, by notification in
the Official Gazette;

(iv) is also authorised to appoint a 'Director

General of Foreign Trade' for the purpose of
the Act, including formulation and
implementation of the export-import policy.
OBJECTIVES

•To double the percentage share of global

merchandise trade within the next five
years.

•To act as an effective instrument of

economic growth by giving a thrust to
employment generation.
STRATEGIES :
•Removing government controls and creating an
atmosphere of trust and transparency to promote
entrepreneurship, industrialization and trades.

• Simplification of commercial and legal

procedures and bringing down transaction costs.

• Simplification of levies and duties on inputs used

in export products.
CONTD:
• Facilitating development of India as a global hub
for manufacturing, trading and services.
• Generating additional employment opportunities,
particularly in semi-urban and rural areas, and
developing a series of ‘Initiatives’ for each of these
sectors
•. Facilitating technological and infrastructural
up gradation of all the sectors of the Indian economy,
especially through imports and thereby increasing value
addition and productivity, while attaining global
standards of quality.
CONTD:

 Neutralizing inverted duty structures and ensuring

that India's domestic sectors are not disadvantaged
in the Free Trade Agreements / Regional Trade
Agreements / Preferential Trade Agreements that
India enters into in order to enhance exports.

 Up gradation of infrastructural network, both

physical and virtual, related to the entire Foreign
Trade chain, to global standards.
CONTD

 Revitalizing the Board of Trade by redefining its

role, giving it due recognition and inducting foreign
trade experts while drafting Trade Policy.

 Involving Indian Embassies as an important

member of export strategy and linking all
commercial houses at international locations
through an electronic platform for real time trade
intelligence, inquiry and information dissemination.
 The FTP has identified certain thrust sectors
having prospects for export expansion and
potential for employment generation. These
thrust sectors include: (i) Agriculture; (ii)
Handlooms & Handicrafts; (iii) Gems &
Jewellery; and (iv) Leather & Footwear.
Accordingly, specific policy initiative for these
sectors has been announced.
FOR THE AGRICULTURE SECTOR :-

 A new scheme called "Vishesh Krishi Upaj Yojana (Special

Agricultural Produce Scheme)" to boost exports of fruits,
vegetables, flowers, minor forest produce and their value added
products has been introduced. Under the scheme, exports of these
products qualify for duty free credit entitlement (5 per cent of
Free On Board (f.o.b) value of exports) for importing inputs and
other goods;

 Duty free import of capital goods under Export Promotion

Capital Goods (EPCG) scheme, permitting the installation of
capital goods imported under EPCG for agriculture anywhere in
the Agri- Export Zone (AEZ)
CONTD:

 Utilizing funds from the 'Assistance to States for

Infrastructure Development of Exports (ASIDE)
scheme' for development of AEZs;

 Liberalization of import of seeds, bulbs, tubers

and planting material, and liberalization of the
export of plant portions, derivatives and extracts
to promote export of medicinal plants and herbal
products
FOR THE HANDLOOMS AND HANDICRAFT SECTOR :

 Enhancing to 5 per cent of Free On Board (f.o.b) value of

exports duty free import of trimmings and embellishments for
handlooms and handicrafts;

 Exemption of samples from countervailing duty (CVD);

 Authorizing Handicraft Export Promotion Council to import

trimmings, embellishments and samples for small
manufacturers; and

 Establishment of a new Handicraft Special Economic Zone.

FOR THE GEMS AND JEWELLERY SECTOR :-

Permission for duty free import of consumables for metals other than gold and
platinum up to 2 per cent of Free On Board (f.o.b) value of exports;

 Duty free re-import entitlement for rejected jewelery allowed up to 2 per cent of
f.o.b value of exports;

 Increase in duty free import of commercial samples of jewelry to Rs. 1 lakh; and

 Permission to import of gold of 18 carat and above under the replenishment

scheme
FOR THE LEATHER AND FOOTWEAR SECTOR,

For the leather and footwear sector, the

specific policy initiatives are mainly in the
form of reduction in the incidence of customs
duties on the inputs and plants and machinery
1ST ANNUAL SUPPLEMENT APRIL 2005

 It provided for an active involvement of the State

Governments in creating an enabling environment for
boosting international trade, by setting up an Inter-State
Trade Council. Also, different categories of advance
licences were merged into a single category for
procedural facilitation and easy monitoring. The
supplement provided renewed thrust to agricultural
exports by extension of 'Vishesh Krish Upaj Yojna' to
poultry and dairy products and removal of cess on
exports of all agricultural and plantation commodities
2ND ANNUAL SUPPLEMENT APRIL 2006

 announced the twin schemes of 'Focus Product' and

'Focus Market'. To further meet the objective of
employment generation in rural and semi urban areas,
export of village and cottage industry products were
included in the 'Vishesh Krishi Upaj Yojana', which
was renamed as "Vishesh Krishi and Gram Udyog
Yojana". Also, a number of measures were introduced
in order to achieve the objective of making India a
gems and jewellery hub of the world.
CONTD

. These include:-
 (i) allowing import of precious metal scrap and

used jewellery for melting,refining and reexport;

 (ii) permission for export of jewellery on

consignment basis;
 (iii) permission to export polished precious and

semi precious stones for treatment abroad and

re-import in order to enhance the quality and
afford higher value in the international market.
3RD ANNUAL SUPPLEMENT APRIL 2007

 (i) exemption from service tax on services (related to exports)

rendered abroad;
 (ii) service tax on services rendered in India and utilized by
exporters would be exempted/remitted;
 (iii) categorization of exporters as 'One to Five Star Export
Houses' has been changed to 'Export Houses & Trading
Houses', with rationalization and change in export
performance parameters;
 (iv) expansion of ceiling, scope and coverage under the 'Focus
Market Scheme (FMS)' and 'Focus Product Scheme (FPS)'.
4TH ANNUAL SUPPLEMENT
 Import duty under the EPCG scheme is being reduced from 5% to 3%,
in order to promote modernization of manufacturing and services
exports.

 Income tax benefit to 100% EOUs available under Section 10B of

Income Tax Act is being extended for one more year, beyond 2009.

 To promote export of sports and toys and also to compensate

disadvantages suffered by them, an additional duty credit of 5% over
and above the credit under 'Focus Product Scheme' is being provided.
CONTD:

 Our export of fresh fruits and vegetables and floriculture suffers

from high incidence of freight cost. To neutralize this
disadvantage, an additional credit of 2.5% over and above the
credit available under Visesh Krishi and Gram Udyog Yojana
(VKGUY) is proposed.

 Interest relief already granted for sectors affected adversely by the

appreciation of the rupee is being extended for one more year.

 DEPB scheme is being continued till May 2009.

TRADE FACILITATION MEASURES 26TH FEBRUARY
2009,
 DUTY CREDIT SCRIPS under DEPB scheme to be issued without
waiting for realization of export proceeds;

 Special package of Rs. 325 crore for leather and textiles sector;

 STCL, DIAMOND INDIA, MSTC, GEM & JEWELLERY EPC and

STAR TRADING HOUSES added as nominated agencies for import
of precious metals;

 Gem and Jewellery export: import restrictions on worked corals

removed;
CONTD:

 Bhilwara and Surat recognized as towns of export excellence

for textiles and diamonds;

 Threshold limit for recognition as premier trading houses

reduced to Rs. 7500 crore;

 Under EPCG scheme, export obligation extended till 2009-10

for exports during 2008-09;

 DEPB/DUTY CREDIT SCRIP utilization extended for

payment of duty for import of restricted items also;
CONTD:

 Procedure for claiming duty drawback refund & refund of

terminal excise duty further simplified;

 Re-credit of 4% SAD for VKGUY, FPS and FMS allowed;

 A new office of DGFT to be opened at Srinagar;

 Value cap under DEPB revised for two products;

 Electronic message transfer facility for advance

authorization and EPCG to be established;
CONTD

 Gem & Jewellery units in EOU to be allowed – personal carriage of

gold up to 10 kg; Advance licenses issued prior to 1.4.2002 requiring
MODVAT/CENVAT certificate dispensed with;

 Export obligation period against advance authorizations extended up

to 36 months;

 Reimbursement of additional duty of excise levied on fuel to be

admissible for EOUS;

 Early refund of service tax claims & further simplification of refund

procedures on the anvil;
Thank you