Introduction Foreign Trade Policy
To become a major player in world trade, a comprehensive approach needs to be taken through the Foreign Trade Policy of India. Increment of exports is of utmost importance, India will have to facilitate imports which are required for the growth Indian economy. Rationality and consistency among trade and other economic policies is important for maximizing the contribution of such policies to development. Thus, while incorporating the new Foreign Trade Policy of India, the past policies should also be integrated to allow developmental scope of India’s foreign trade. This is the main mantra of the Foreign Trade Policy of India.
Objectives of foreign trade policy of India
Trade propels economic growth and national development. The primary purpose is not the mere earning of foreign exchange, but the stimulation of greater economic activity. The Foreign Trade Policy of India is based on two major objectives, they are 1. To double the percentage share of global merchandise trade within the
next five years.
2. To act as an effective instrument of economic growth by giving a
thrust to employment generation.
Strategy of Foreign Trade Policy of India
1. Removing government controls and creating an atmosphere of trust
and transparency to promote entrepreneurship, industrialization and trades. 2. Simplification of commercial and legal procedures and bringing down transaction costs. 3. Simplification of levies and duties on inputs used in export products. 4. Facilitating development of India as a global hub for manufacturing, trading and services.
5. Generating additional employment opportunities, particularly in semi-
urban and rural areas, and developing a series of ‘Initiatives’ for each of these sectors. 6. 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. 7. Neutralizing domestic Agreements inverted / duty structures not Trade and ensuring in / the that India's Free Trade Trade sectors are disadvantaged Agreements
Agreements that India enters into in order to enhance exports. 8. Up gradation of infrastructural network, both physical and virtual, related to the entire Foreign Trade chain, to global standards.
9. Revitalizing the Board of Trade by redefining its role, giving it due
recognition and inducting foreign trade experts while drafting Trade Policy.
This Foreign Trade Policy of India is a stepping stone for the development of India’s foreign trade. It contains the basic principles and points the direction in which it propose to go. A trade policy cannot be fully comprehensive in all its details it would naturally require modification from time to time with changing dynamics of international trade.
Certain Facts & achievements from previous policies:
1. In 2004 our exports stood at a little over US $ 63 billion. In 2007-08,
they have exceeded US $ 155 billion; our exports are not just double what they were 4 years ago, but 2½ times that.
We have managed an average cumulative annual growth rate (CAGR) of 23%, year on year, way ahead of the average growth rate of international trade.
3. Our total merchandise trade – exports and imports together – will be
almost US $ 400 billion this past year, accounting for 1.2% of world trade.
4. If the trade in services is added to this, our commercial engagement
with the world would be in the region of US $ 525 billion.
5. We have delivered on our second objective as well: that of fashioning
trade into an instrument of economic growth and employment generation.
6. Our total trade in goods and services is now equivalent to almost 50%
of our GDP. This is unprecedented in India’s modern economic history.
7. On the issue of employment, it is our estimate that during the last 4
years increased trade activity has created 136 lac new jobs.
8. We have always mentioned that exports are not just about earning
foreign exchange but about boosting our manufacturing sector, creating large scale economic activity and generating fresh employment opportunities.
9. What is more remarkable about all these achievements is that they
have been accomplished in the face of appreciation of the rupee (by more than 12% in the last year alone), high interest rates, spiraling oil prices, withdrawal of some GSP benefits to India by other countries and general international economic slowdown in some of our major trade markets.
India’s Foreign Trade Period 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 $ Growth Rate 10.85 21.01 -01.65 20.34 17.26
Steps considered in latest 2004-2009 foreign trade policy of India:
1. To promote modernization of our manufacturing and services exports,
the import. 2. Duty under the EPCG scheme is being reduced from 5% to 3%.
3. Refund of tax on a large number of services relating to exports has
already been announced by the Government. A few remaining issues regarding refund of service tax on exports are still in progress to be resolved. 4. Income tax benefit to 100% EOUs available under Section 10B of Income Tax Act is being extended for one more year, beyond 2009. 5. Sports and toys are mainly produced by our unorganized labour intensive sector.
disadvantages suffered by them, an additional duty credit of 5% over and above the credit under Focus 7. Product Scheme is being provided.
8. 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 VKGUY is proposed.
9. Interest relief already granted for sectors affected adversely by the
appreciation of the rupee is being extended for one more year. The DEPB scheme is being continued till May 2009.
Thrust Sectors & schemes
1. Agricultural. 2. Handicrafts. 3. Handlooms. 4. Gems and Jewellery. 5. Leather. 6. Textile
1. SEZ Scheme 2. EOU/EHTP/STP/BTP Schemes 3. EPIP Scheme 4. Warehousing Scheme 5. CCP 6. DTA Schemes
Incorporating a legal entity In India [ROC] Trade Licence
Proprietorship& Partnership Concern
[State Departments] Permanent Acccount Number [PAN by Income Tax Dept.] Bank Certificate [from the concerned Bank]
Importer-Exporter Code Number[DGFT]
Nature of Restriction ITC [HS] Classification
Free List items
Certain schemes ( over view)
ADVANCE LICENCE SCHEME
1. PHYSICAL EXPORT • •
Duty free import of Inputs, Fuel, Oil, Energy, Catalyst etc. V.A.;AU condition; Norm fixed & No Norm cases; Imports & Exports valid upto 24 months; Further extn allowed Supply to SEZ units also covered. E.O. discharge based on S/Bs & BRC (Irrevocable L/C , Provision of Avalisation, co-acceptance also available)
Advance Licence (Intermediate Supply)
For supplies to Advance licence for physical exports; Alternatively direct Physical Exports also allowed. Duty free import of Inputs, Fuel, Oil,Energy, Catalyst etc. AU condition; Norm fixed & No Norm cases; Imports & Exports valid upto 24 months; further extn allowed. E.O. discharge based on S/Bs & Bank certificate (Irrevocable inland L/C , Provision of Avalisation, co-acceptance also available)
Advance License (Deemed Export)
For supplies within India under various projects, supplies to EOU/EHTP/STP/BTP. Duty free import of Inputs, Fuel, Oil, energy, Catalyst etc.
Import of capital goods with AU condition at concessional rate of 5% duty for pre-production, Production & Post production purposes related to export (Both Physical & deemed);Import of Car. E.O. 8 times the duty saved in 8 years; 12 Years. E.O. monitoring in two blocks only. Special Dispensation for licence with duty saved of Rs 100 crores or above, Agro units, SSI units, BIFR. E.O. period 12 years and varied /reduced E.O. EPCG license for project import—Reduced E.O. Export of alternate product/services allowed. Special package for agro units in the AEZ
• • •
Post export scheme based on S/B (Bill of Export) and BRC; Both against Phy. & Deemed exports. Min. 25% V.A., SION based, Certain sensitive items with technical specification allowed.
For 161 Tradable services. New Export Promotion Council for Service.
DFEC for Serve from India Scheme 1. Eligibility:
-- Min.FFE of Rs 10 Lakhs in the preceding or current financial year (Exception Rs 5 Lakhs for individuals) -- Categories of exports excluded for entitlement 2. Entitlement: Hotels of one star & above Stand alone Restaurants All other service providers 3. Imports allowed: With AU condition Any CAPITAL GOODS, Office Equipments, Furnitures and consumables etc No Agricultural Product except food items and beverages for the Hotels and Restaurants. 5% 20% 10%
VISHESH KRISHI UPAJ YOJANA
A new scheme christened as the “Vishesh Krishi Upaj Yojana” to boost exports of specified agricultural products. 1. Duty credit entitlement of 5% of FOB value of Exports. 2. Exports of fruits, vegetables, flowers, minor forest produce and their value added variants 3. Freely transferable 4. Imports of inputs and capital goods permitted. 5.CENVAT credit or DBK allowed for the CVD Import of capital goods shall be permitted duty free under the EPCG Scheme Units in Agri Export Zones (AEZ) shall be exempt from BG under the EPCG Scheme
Import of inputs such as pesticides shall be permitted under the Advance Licence for agro exports. Capital goods imported under EPCG permitted to be installed anywhere in the AEZ.
This Policy is essentially a roadmap for the development of India’s foreign trade. It contains the basic principles and points the direction in which we propose to go. By virtue of its very dynamics, a trade policy cannot be fully comprehensive in all its details. It would naturally require modification from time to time. We propose to do this through continuous updating, based on the inevitable changing dynamics of international trade. It is in partnership with business and industry that severs the propose to erect milestones on this roadmap.