Import - Export Policy of India

Contents
Introduction Why do we need export,brief history Exim policy ,objectives Export Promotion Measures Import Control in India Pre 90s Exim Policy of India Post 90s Exim Policy of India

Why do we need export

Export means trade across the political boundaries of different nation. No Nation is self sufficient and had all the goods that it needs. This happens because of climatic variation & unequal distribution of natural resources. As a result, countries all over the world have become interdependent, which necessitated foreign trade. A developing country like India with its fast growing agricultural production to keep pace with the population to keep pace with the population growth and growing Industrial infrastructure

 needs high-import and this can be sustained only with fast export growth. To meet the oil import bill, export is unavoidable. Thus, it is evident that export promotion continues to be a major thrust area for the government. Several measures have been under taken in the past for improving export performance of the country. In India, Govt. has come out from time to time with various policies on foreign trade to promote export thereby increasing the Foreign Exchange Reserve. These policies are termed as Exim Policy

Brief history

. Import export act was introduced by gov during second world war and it lasted for around 45 yrs and in June 1992 this act was superceded by the Foreign Trade (Development & Regulation Act), 1992. . The basic objective of this new act was to give effect to the new liberalized export and import policy of the Govt. till 1985 annual policies were made but from 1985-92, three yr policy was made and then 5 yr policy was made coinciding with 5 yr plans 1992-97, 1997-02, 2002-07.

What is Exim Policy?

It contains policies in the sphere of Foreign trade i.e. with respect to import & export from the country and more especially export promotion measures, policies and procedure related there to. Export means selling abroad and import as bringing into India, any goods and services

Objective of Exim Policy

Accelerating the countrys transition to a globally oriented vibrant economy with a view to derive maximum benefits from expanding global market opportunities; Stimulating sustained economic growth Enhancing the technological strength and efficiency Encouraging the attainment of internationally accepted standards of quality Providing consumers with good quality products and services at reasonable prices.

General provisions regarding export import

Exports and Imports free unless regulated Compliance with Laws Interpretation of Policy Procedure: Exemption from Policy/ Procedure Principles of Restriction Restricted Goods Terms and Conditions of a Licence Importer-Exporter Code Number Exemption from Bank Guarantee Clearance of Goods from Customs

EXPORT PROMOTION MEASURES

Policy measures Institutional set up. Import Facilitation for Export Production. Cash subsidies. Fiscal Incentives. Foreign Exchange Facilities. Export incentives Export production units

Import Facilitation for Export Production

Export Promotion Capital Goods Scheme Special Import Licences Duty Free Licences under Duty Exemption Scheme Duty free licences are issued as : (1) Advance licence (2) Advance Intermediate licence. (3) Special Imprest licence. (4) Licence for jobbing, repairing etc. for reexport. (5) Licence under export production programme. (6) Advance Release Order. (7) Back to Back Inland Letter of Credit.

Export Incentives
Duty Exemption Duty Drawback Scheme DFRC (Duty free replenishment certificate) DEPB( Duty entitlement pass book) Deemed Exports

Export Production Units

Export Oriented Unit (EOU) Special Economic Zones (SEZ) Software Technology Parks (STP) Electronic Hardware Technology Parks (EHTP)

Cash subsidies
Marketing development assistance Air freight subsidy Spices export promotion scheme Jute externel marketing assistance Financial assistance scheme agriculture &meat exports Financial assistance to marine products exports

Fiscal incentives
Exemption from payment of central excise duty & simplified procedure for clearance. Exemption from sales tax Exemptions & deductions under income tax act,1961. Duty draw back Scheme (DDS) Cash Compensatory Support ( CCS ) International Price Reimbursement Scheme (IPRS)

Import control regime

1956-57, restrictions on imports started as lot of imports were there as such gov even had to import foodgrains for self fulfillment Imports were classified into Banned items ,Canalised items ,Restricted items, OGL In 1966 ruppee was devalued by 36.5% By devaluation

gov expressed the hope that the devaluation would lead to expansion in export earnings as indian goods will become cheaper in internatinal market on the other hands import would decline as price of imported goods would increase.

 Because of a rigid itemization of permissible imports, an element of inflexibility in the pattern of utilization of imports was introduced. The transferability of licenses among same and different industries was not permissible. This gave rise to an expanding black market in import licenses. Therefore, the import allocation system was so designed as to eliminate the possibility of all competition, either domestic or foreign. The Govt of India has liberalized the import regime from time to time. At present, practically all controls on import have been lifted. Under the new EXIM policy 2002-07.

Comparison of Pre 90s & Post 90s Exim Policy

Year 1948-51 Import Export
(Cr.) (Cr.)

Trade Bal.(Cr.) -3
Excess of Import due toPent-up demand of war. Shortage of food & raw material due to partition. Import of capital goods due to starting of hydro-electric & other projects. Trade deficit was largely due to programmes of industrialization which gathered momentum and pushed up the imports of capital goods. No improvement in exports.

650

647

1951-56

730

622

-108

Year 1956-61

Import Export
(Cr.) (Cr.)

Trade Bal.(Cr.) -467

Excess of import due to setting of steel plants,heavy expansion & renovation on railways & modernization of many industries. Export lower than occur in second plan which shows that export promotion drive did not materialize. Excess of import due toRapid industrialization needs capital goods as raw material. Defence needs had increased due to aggression by China & Pakistan. Need of foodgrains due to failure of crops in 1965-66.

1080

613

1961-66

1224

747

-477

Year 1966-69 (Annualplans) 1969-74

Import Export
(Cr.) (Cr.)

Trade Bal.(Cr.) -2067

Devaluation was resorted to essentiallyTo reduce volume of import. To boost export. Create favourable balance of trade and balance of payment.

5775

3708

1972

1810

-162

As a consequence of import restriction policies with vigorous export promotion measures ,during 1972-73 the country had favourable balance of trade for first time since independence. But several international factors pushed up the price of petroleum product,steel,fertilizers etc.results low magnitude of trade balance.

Year 1974-79

Import Export
(Cr.) (Cr.)

Trade Bal.(Cr.) -810

Significant increase in export during every year of this period.Export of coffee,tea,cotton fabrics etc.recorded substantial increase in this period. But,Janta Government followed policy of haphazard import liberalization results decline trade balance from 1977-78. Decline in POL imports was more than by a big hike in non-POL imports as a consequence of import liberalization. Consequently, huge trade balance.

5540

4730

1980-85 14,986

9051

-5935

Year

Import Export
(Cr.) (Cr.)

Trade Bal.(Cr.)
Huge trade balance compelled the government to approach the World Bank/IMF for loan. The government was also forced to apply brakes on the licensing policy of imports.
In 1990-91,push was given to export,but as a consequence of Gulf war government failed to curb imports. In1991-92, government introduced number of measures in trade policy allowing exim scripts,abolishing cash compensatory support(CCS) schemes as also a two-step devaluation of the rupee,but fail to boost up export.

1985-90

28,874 18,033 -10,841

1990-92

45,522 38,300

-7222

Year

Import Export
(Cr.) (Cr.)

Trade Bal.(Cr.)
In 1992-01,slow down in exports due toDepressed nature of world markets. Saturation of developed countries market for electronic goods which are dynamic export sectors. Increased protectionism by industrialised countries in area of textile and clothing. Increasing competition from China & Taiwan. India underestimated the impact SouthEast Asian crisis Non-Tarrif barriers have been created by developed counties to slow down Indian exports. In 2000-01 export was largely due to rupee depreciation along with further trade liberalization,more openness to foreign investment in EOU sectors ike IT.

1992-01

140740 118252 -22,488

Year

Import Export
(US $million) (US $million)

Trade Bal.(US
$million)
Rise in imports in 2002-03 was broadly based on oil imports,food &allied products(edible oil),capital goods.
Exim policy 2003-04gave massive thrust to exports by Duty free import facility for service sector upto earning 10lakh foreign exchange. Liberalization of Duty Exemption scheme. Besides,all these measures trade balance in 2003-04 are high due to mainly on imports of POL products more.Currently, almost two-third of country crude oil requirements are imported.Besides import of POL, import of non POL items shot up by 17% in2002-03 to 26.2%in 2003-04.

2002 03 65422

52512 -12910

2003-04

80177

64723 -15454

Economy is more Open than ever before

Indias total external trade in goods and services grew by 41.5% in H12005-06 to US $ 153 billion. This is expected to go up to US $ 310 billion by the end of this year. This was just over US $ 74 billion in 1994. The trade to GDP ratio, calculated at current prices, has risen to 29.36% in 2004-05 from 18.28% in 1993-94.

Trade - On an All time High

Strong Export Growth

Exports have grown to US $ 57.05 billion during AprilNovember 2005-2006. They are expected to grow at 26% during the current year to US$ 100 billion. Service Exports grew by 71% in 2004-05. India's IT-ITES exports have shown robust growth and are expected to grow by 32% this year to US $ 23 billion. Non-oil imports grew at over 28% during April September 2005 led by demand for capital goods.

Strong Service Exports

Strong Imports growth

Source: Reserve Bank of India

Trade Trends ..
India Exports - Goods and Services
US $ billion
200 150 100 50 0 9697 9798 9899 9900 0001 0102 0203 0304 0405 0506 (A)
US$ million

India's Foreign Trade

350 300 250 200 150 100 50 0 1984 1994 Exports Imports 2004-05 Total Trade 2005-06 (A)

Goods

Services

Share of Asia
180 160 140 120 100 80 60 40 20 0 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
Asia Non Asia 140.00 120.00

India Capital Good Im ports

US $ billion

US $ b illio n

100.00 80.00 60.00 40.00 20.00 0.00 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05

Capital Goods Imports

Total Imports

Source: Reserve Bank of India