UNIVERSITY OF MUMBAI
PROJECT REPORT ON
FOREIGN TRADE POLICIESIN PARTIAL FULLFILLMENT FOR MASTERS OF
COMMERCE
2013-14
PROJECT GUIDE
PROF. Aarti Sharma
SUBMITTED BY:
PANKAJ.B.RATHOD
ROLL NO
3790
MAHATAMA EDUCATION SOCIETYS
PILLAIS COLLEGE OF ARTS, COMMERCE & SCIENCE
NEW PANVEL
DECLARTION
I, PANKAJ RATHOD student of M.COM-I, MAHATMA EDUCATION SOCIETYS
PILLAIS COLLEGE OF ARTS, COMMERCE & SCIENCE, hereby declare
that I have completed the project report on FOREIGN TRADE POLICIES
in the academic year 2013-2014. The information submitted by me is
true & original to best of my knowledge.
Signature
MAHATMA EDUCATION SOCIETYS
PILLAIS COLLEGE OF ARTS, COMMERCE, SCIENCE
NEW PANVEL
CERTIFICATE
To whomsoever it may concern
This is to certify that the work entered in this journal is the
work of PANKAJ RATHOD from MCOM PART-I have successfully completed
a project report on FOREIGN TRADE POLICIES.Topic terms of the year
2013-2014 in the college as laid down by the college authority
Professor /Guide name
MCOM Co-Ordinator
Mrs, Aarti Sharma
Mr. Gajanan Wader_______________________
____________________ DATE: _________
________________
External Examiner
INDEXSR NO.TOPICPAGE NO.
1PRE 1991 SCENARIO OF FOREIGN TRADE5
Brief Review of Indias Trade Policy5
Indias Share In World Trade8
General Provisions Regarding Imports And Exports 9
2JOURNEY OF EXIM POLICY15
Exim Policy, 1992-9715
Exim Policy, 1997-200216
Exim Policy 1999-200017
Exim Policy 2001-200217
Exim Policy 2002-200718
Exim Policy, 2003-200419
Mini EXIM Policy, Jan 200420
3HIGHLIGHTS OF EXIM POLICY & ITS IMPACT21
Special Economic Zone (SEZ)21
Duty Free Replenishment Certificate (DFRC) Scheme23
Quantitative Restrictions (QR)24
Agricultural Export Zones (AEZ)25
Status Holders26
Export Promotion Capital Goods Scheme (EPCG)27
Deemed Exports28
4EXPORTS, IMPORTS & TRADE BALANCE29
5INDIA V/S WORLD: ANNUAL EXPORT GROWTH RATE30
6FUTURE OF FOREIGN TRADE POLICY31
8CONCLUSION 32
PRE 1991 SCENARIO OF FOREIGN TRADE
Exim is the principal financial institution in the country for
co-coordinating 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. Brief Review of Indias Trade
PolicyIndias 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.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.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.
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.
Import substitution was the prime objective of Indias trade
policy till the mid 1970s. 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.
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.
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--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 industrys access to imported inputs at low tariffs.
Indias 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 Indias
share in world trade has not only been arrested but reversed. Below
table shows trends in Indias share in the world trade during the
post-Independence period.Selected Years (percent)
YearExportsImportsTrade
19501.851.711.78
19601.031.691.36
19700.640.650.65
19800.420.720.57
19900.520.660.59
19910.500.560.53
19920.530.610.57
19930.580.600.59
19940.600.630.61
19980.60--
20000.70--
20010.70--
20030.86--
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
2.1Exports 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 item wise 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
2.2Every exporter or importer shall comply with the provisions
of the Foreign Trade (Development and Regulation) Act, 1992, the
Rules and Orders made there under, the provisions of this Policy
and the terms and conditions of any license/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 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 there under 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).
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 they are derived; and
Prevention of traffic in arms, ammunition and implements of
war.
Terms and Conditions of a License / Certificate / Permission
Every license/certificate/permission shall be valid for the
period of validity specified in the license/ 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 license/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
license/certificate/permission in accordance with the provisions of
the Act and the Rules made there under.
Penalty
If a license/certificate/permission holder violates any
condition of the license/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.
Importer-Exporter Code Number
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 Neighboring 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 neighboring
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
license/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).
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 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 standardization 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.
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.
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
2.42.1No seizure of stock shall be made by any agency so as to
disrupt the 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
2.43The 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
2.44Any 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.
JOURNEY OF EXIM POLICYIndia`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 Indias foreign trade policy must respond to the changes
(liberalization 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 liberalized
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
liberalization 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.
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.
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.
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 trading in all 27 out of 715
items taken of the quantitative restrictions list were put under
the state trading category.
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.
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 R.B.I 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.
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. 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.
Objective and strategy
The new FTP takes an integrated view of the overall development
of Indias foreign trade and essentially provides a roadmap for the
development of this sector. It is built around two major objectives
of doubling Indias 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.
HIGHLIGHTS OF EXIM POLICY & ITS IMPACTSPECIAL ECONOMIC ZONE
(SEZ)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 soUnits 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 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.
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.
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.
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.
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
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) SCHEMEDFRC 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.
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. 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 QRs 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.
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
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.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. Agriculture ExportUnless 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.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 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.
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.
DEEMED EXPORTSDeemed 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;
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.
EXPORTS, IMPORTS & TRADE BALANCEYearExportsImports Trade
Exports Imports ExportsImports
($ mln.) ($ mln.)Balances(% change)(% change) (% to GDP) (% to
GDP)
($ mln.)
1990-911814823464-53169.2510.595.727.39
1991-921799819551-1553-0.83-16.686.737.31
1992-931743720583-3146-3.125.287.138.42
1993-942221323305-109227.3913.228.068.45
1994-952633728662-232518.5722.998.148.86
1995-963184236730-488820.928.158.9210.29
1996-973349839165-56675.26.638.6210.08
1997-983504941535-64864.636.058.5210.1
1998-993321142379-9168-5.242.037.9810.18
1999-003676049799-1303910.6817.518.1511.04
2000-014414750056-590920.10.529.5810.86
2001-024395851567-7609-0.433.029.1610.75
2002-035282361533-871020.1719.3310.3812.09
2003-046388678203-1431620.9427.0910.6112.99
2004-0583502111472-2797030.742.541216.03
2005-06103075149144-4606823.4433.812.7918.51
2006-07126246190438-6419222.4827.6913.8620.9
INDIA V/S WORLD: ANNUAL EXPORT GROWTH RATE7. FUTURE OF FOREIGN
TRADE POLICYThe 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.
8. CONCLUSION
This project was conducted study the foreign trade policy of
India. This study has provided me an insight into the Exim
policies.
This study is conducted by searching from various books,
newspaper, internet etc. This study was undertaken for a period of
three weeks.. The collected datas are consolidated through using
t-test. The graph and table were used for representation.The
researcher has tried his best to make the study realistic and
suggestive, but does not claim the findings and suggestions in the
report are perfect. If time available were more the study would
have been extended to a large portion of the universe, which would
help the findings to be more accurate.
The key learning from this project study is that in an extremely
competitive world Exim policy of India is very strong to deal in
this world trade to keep a balance of payment and help the nation
to flourish.3