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Introduction

Trade is not an end in itself, but a means to economic growth and national development. The primary purpose is not the more earning of foreign exchange, but the stimulation of greater economic activity. The Union Commerce Ministry, Government of India announces the integrated Foreign Trade Policy FTP in every five year also called EXIM policy. This policy updated every year with some modifications and new schemes. New schemes come into effect on the first day of financial year i.e. April 1, every year. The Foreign trade Policy, which was announced on August 28, 2009, is an integrated policy for the period 2009-14. The policy aims at developing export potential, improving export performance, boosting foreign trade, and earning valuable foreign exchange. FTP assumes great significance this year as Indias exports have been battered by the global recession. A fall in exports has led to the closure of several small- and mediumscale export-oriented units, resulting in large-scale unemployment. While India has gradually opened up its economy, its tariffs continue to be high when compared with other countries, and its speculation norms are still restrictive. This leads some to see India as a rapid globalizer while others still see it as a highly protectionist economy. The main focus of this page is the foreign trade policy of India. Foreign trade concerning main legislation in India is the Foreign Trade (Development and Regulation) Act, 1992. The Act endow with the expansion and regulation of foreign trade by assisting imports into, and supplementing exports from, India and for matters associated therewith or incidental thereto. As per the requirements of the Act, the government:(i) may make necessities for assisting and controlling foreign trade; (ii) may proscribe, confine and regulate exports and imports, in all or particular cases as well as subject them to exclusion; (iii) is endorsed to formulate and proclaim an export and import policy and also modify the same from time to time, by notification in the Official Gazette; (iv) Is also authoritative to appoint a 'Director General of Foreign Trade' for the purpose of the Act, including formulation and accomplishment of the exportimport policy.

Nevertheless, in modern years, the governments stand on trade and investment policy has demonstrated a marked shift from protecting producers to benefiting consumers. This is revealed in its foreign trade policy of India for 2009/14 according to which, "For India to become a major player in world trade we have also to make possible those imports which are required to stimulate our economy." Along with economic transformations, globalization of the Indian economy has been the leading factor in devising the trade policies. The reform procedures pioneered in the subsequent policies have focused on liberalization, ingenuousness and lucidity. They have given export friendly surroundings by simplifying the procedures for trade facilitation. The declaration of a new Foreign Trade Policy of India for a five year period of 2009-14, substituting the till now nomenclature of EXIM Policy by Foreign Trade Policy (FTP) is another step in this course. It takes an incorporated view of the overall development of Indias foreign trade and provides a roadmap for the development of this sector. A dynamic export-led growth strategy of doubling Indias share in global commodities trade (in the next five years), with a spotlight on the sectors having prospects for export expansion and prospective for employment generation, constitute the main lath of the policy. All such events are expected to enhance India's international competitiveness and aid in auxiliary increasing the acceptability of Indian exports. The policy sets out the core intentions, identifies key strategies, spells out focus initiatives, delineates export incentives, and also addresses issues relating to institutional support including simplification of procedures relating to export activities. India is now belligerently pushing for a more liberal global trade regime, especially in services. It has implicit a leadership role among developing nations in global trade debates, and played a critical part in the Doha negotiations. With economic reforms, globalization of the Indian economy has been the guiding factor in formulating the Foreign trade policy of India. In accordance with the provisions of the Act, a "Directorate General of Foreign Trade (DGFT)" has been set up as an attached office of the Ministry of Commerce and Industry. It is leaded by the 'Director General of Foreign Trade' and is answerable for formulating and implementing the Indian Foreign Trade Policy with the main intent of promoting Indian exports. The DGFT also issues licences to exporters and supervises their consequent commitments through a network of 32 regional offices located at the following places:- Ahmedabad; Amritsar; Bangalore; Baroda (Vadodara); Bhopal; Kolkata; Chandigarh; Chennai; Coimbatore; Cuttack; Ernakulam; Guwahati; Hyderabad; Jaipur; Kanpur; Ludhiana; Madurai; Moradabad; Mumbai; New Delhi; Panaji; Panipat;

Patna; Pondicherry; Pune; Rajkot; Shillong; Srinagar(Functioning at Jammu); Surat; Thiruvananthapuram; Varanasi; and Vishakhapatnam. The coming years are sure to witness a vigorous export-led growth strategy of doubling Indias share in global merchandise trade with a focus on the sectors having prospects for export expansion. The rising potential for employment generation will constitute the main backbone for the Indian foreign trade policy.

Objectives of Foreign Trade Policy


1) To reverse declining trend of exports is the main aim of the policy. This aim will be reviewed after two years.

2) To Double Indias exports of goods and services by 2014.

3) To double Indias share in global merchandise trade by 2020 as a long-term aim of this policy. Indias share in Global merchandise exports was 1.45% in 2008.

4) Simplification of the application procedure for availing various benefits

5) To set in motion the strategies and policy measures which catalyse the growth of exports 6) To encourage exports through a mix of measures including fiscal incentives, institutional changes, procedural rationalization, and efforts for enhance market access across the world and diversification of export markets.

7) Export Target: $ 200 Billion for 2010-11

8) Export Growth Target: 15% for Next Two Years And 25% Thereafter.

Review and Literature


Micro studies have generally shown that the relationship between imports and
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productivity growth is often negative. Studies covering the industrial sectors of Morocco[ Haddad (1993)], Mexico [Tybout et al (1995), Weiss (1992)], Taiwan [Okuda (1994)] and Turkey [Forouton (1991,96)] have used either growth or level of import penetration rate to assess the impact of increased exposure to foreign competition on productivity growth. Our survey of the empirical literature shows that only a few studies have attempted to explore the scale effects of trade liberalization on productivity growth. The export to output ratio has been used to capture the impact of trade policy reforms in the studies for Mexico, Morocco, Korea, Taiwan and India [Tybout et.al (1995), Haddad (1993), Kwak (1994), Okuda (1994) and Das (2001)]. Other measures of openness such as average nominal tariffs has also been utilized in several studies [Weiss (Mexico); Tybout and Westbrook (Mexico); Harrison (Cote dIvore); Wha-lee (Korea), Kim (Korea) and Sharma (Nepal)].
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However the measure is subject to bias. Measures such as tariff equivalent of QRs, real exchange rate contribution to export and import demand have also been used to capture aspects of trade policy reforms[ Ocampo (Colombia)]. Further, import substitution and export expansion measures of the Chenerys growth-exercise have also been incorporated to account for trade liberalization impact [Nishimizu and Robinson (1984), Nishimizu and Page (1991), Norouz (2001)]. Our review of the trade liberalization indicators confirms that it is not easy to combine different aspects of trade policy into a single measure. Moreover, different measures capture alternative channels of the trade-productivity linkage. Growth and levels of effective rate of protection, import penetration rates and export intensity have been widely used in most of the studies. Some studies have also used measures such as average nominal tariffs, tariff equivalent of QRs, real exchange rates etc. Recent studies [Das (2001) , Goldar and Kumari (2002) and Chand and Sen (2002) ] have addressed the issue of the trade liberalization-manufacturing productivity growth linkage with appropriately defined measures of trade policy
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reforms . These studies use panel data with appropriately defined lag structures

for testing the observed relationship. The first one covers the period of 1980s and early 1990s using 72 three-digit industries, the second study extends the period of 1980s up to the late 1990s for 17 two-digit industry groups and the third one covers the period of 1970s till 1988 for around 30 three-digit industry groups. Evidence on the impact of trade liberalization on the productivity performance
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in South Asian manufacturing is limited. Studies examining the productivity implications of trade liberalization in Sri Lanka report mixed evidence as far as improvements in productivity growth rates are concerned. Weiss and Jayanthakumaran(1995) use cross-section regression with 2 and 4 digit industrial data for two periods 1979-89 and 1985-89. Over the longer period no support is found for the trade liberalization and productivity growth link.

ANALYSIS Special focus initiatives


With a view to continuously increasing our percentage share of global trade and expanding employment opportunities special focus initiatives have been identified. Government of India shall make concerted efforts to promote exports in these sectors.

Export promotion of capital goods


 To Aid Technological Up gradation Of Export Sector, EPCG Scheme At Zero Duty Has Been Introduced.  Export Obligation on Import of Spares, Moulds etc. Under EPCG Scheme Has Been Reduced By 50%  Jaipur, Srinagar and Anantnagar have been recognized as' Towns of Export Excellence for handicrafts; Kanpur,Dewas and Ambur for leather products; and Malihabad for horticultural products.

Market Diversification
During 2008-09 and 2009-10, weaker demand in developed economies, triggered by falling asset prices and increased economic uncertainty had pulled down the growth of Indias exports to developed countries. To insulate Indian exports from the decline in demand from developed countries, in this Policy, focus is on diversification of Indian exports to Other markets, especially those located in Latin America, Africa, parts of Asia and Oceania. To achieve diversification of Indian exports, following initiatives have been taken under This Policy. (a) 27 new countries have been included within the ambit of Focus Market Scheme. (b) The incentives provided under Focus Market Scheme have been increased from 2.5% to 3%. (c) There has been a significant increase in the outlay under Market Linked Focus Product Scheme by inclusion of more markets and products. This ensures support for exports to all countries in Africa and Latin America, and major Asian markets like China and Japan.

Technological Up gradation
To usher in the next phase of export growth, India needs to move up in the value chain of export goods. This objective is sought to be achieved by encouraging technological Up gradation of our export sector. A number of initiatives have been taken in this Policy to focus on technological up gradation; such initiatives include: (a) EPCG Scheme at zero duty has been introduced for certain engineering products, electronic products, basic chemicals and pharmaceuticals, apparel and textile, plastics, handicrafts, chemicals and allied products and leather and leather products. This Scheme is being expanded to cover more export product groups including marine products, sports goods, toys, rubber & rubber products, additional chemicals / allied products and additional engineering products. The scheme is also being extended up to 31.3.2012.

(b) The existing 3% EPCG Scheme has been considerably simplified, to ease its usage by the Exporters.

(c) The facility of EPCG Scheme for Annual Requirement is being introduced to reduce Documentation and transaction time.

(d) To encourage value added manufacture export, a minimum 15% value addition on imported inputs under Advance Authorisation Scheme has been stipulated.

(e) A number of products including automobiles and other engineering products have been included for incentives under Focus Product, and Market Linked Focus Product Schemes.

(f) Steps to encourage Project Exports shall be taken.

Support to status holders


The Government recognized Status Holders contribute approx. 60% of Indias goods exports. To incentivise and encourage the status holders, as well as to encourage Technological up gradation of export production, additional duty credit scrip @ 1% of the FOB value of past export shall be granted for specified product groups including leather, Specific sub-sectors in engineering, textiles, plastics, Handicrafts and jute. This duty credit scrip can be used for import of capital goods by these status holders. The imported Capital goods shall be subject to actual user condition. The status holder incentive scrip scheme is being expanded to cover more export product groups including marine products, Sports goods, toys, specified chemicals and allied products and additional engineering products. The scheme is also being extended up to 31.3.2012.

Agriculture and Village Industry


(a) Vishesh Krishi and Gram Udyog Yojana.

(b) Capital goods imported under EPCG will be permitted to be installed anywhere in AEZ.

(c) Import of restricted items, such as panels, is allowed under various export promotion schemes.

(d) Import of inputs such as pesticides is permitted under Advance Authorisation for agro exports.

(e) New towns of export excellence with a threshold limit of Rs 150 crore shall be notified.

(f) Additional flexibility for agric-infra scrip by way of limited transferability to other status holders and the units in Food Parks allowed.

Handlooms
(a) 2% bonus benefits under focus product scheme.

(b) Specific funds are earmarked under MAI / MDA Schemes for promoting handloom exports.

(c) Duty free import entitlement of specified trimmings and embellishments is 5% of FOB value of exports during previous financial year. Handloom madeups have also been included for the entitlement.

(d) Duty free import entitlement of hand knotted carpet samples is 1% of FOB value of exports during previous financial year.

(e) Duty free import of old pieces of hand knotted carpets on consignment basis for re-export after repair is permitted.

(f) New towns of export excellence with a threshold limit of Rs 150 crore shall be notified.

(g) Machinery and equipment for effluent treatment plants is exempt from customs duty.

Leather and Footwear


(a) Additional 2% bonus benefits under Focus Product Scheme.

(b) Finished Leather exports to be incentivized under Focus Product Scheme.

(c) Duty free import entitlement of specified items is 3% of FOB value of exports of leather garments during preceding financial year.

(d) Duty free entitlement for import of trimmings, embellishments and footwear components for footwear (leather as well as synthetic), gloves, travel bags and handbags is 3% of FOB value of exports of previous financial year. Such entitlement shall also cover packing material, such as printed and non printed shoeboxes, small cartons made of wood, tin or plastic materials for packing footwear.

(e) Machinery and equipment for Effluent Treatment Plants shall be exempted from basic customs duty.

(f) Re-export of unsuitable imported materials such as raw hides & skins and wet blue leathers is permitted.

(g) CVD is exempted on lining and interlining material notified at S. No 168 of Customs Notification No 21/2002 dated 01.03.2002. (h) CVD is exempted on raw, tanned and dressed fur skins falling under Chapter 43 of ITC (HS).
(Figures in US$ billion)

DEPARTMENT OF COMMERCE ECONOMIC DIVISION EXPORTS & IMPORTS November EXPORTS (including re-exports) 2010-2011 2011-2012 % Growth 2011-2012/ 2010-2011 IMPORTS 2010-2011 2011-2012 % Growth 2011-2012/ 2010-2011 TRADE BALANCE 2010-2011 2011-2012 - 7.35 - 13.60 - 93.00 - 116.84 28.84 35.92 24.55 237.66 309.53 30.24 21.49 22.32 3.87 144.66 192.69 33.21 April-November

Recommendations
 More and more establishment of SEZ.  Labor laws can be relaxed resulting in more and more establishment of industries.  Promotion of investment from domestic and foreign resources.  Convenient trade practices.

 Establishment of infrastructure

References
 Wisegeek.com  Locateindia.com  Commerce.nic.in

A PROJECT REPORT ON INDIA FOREIGN TRADE MBA (INTERNATIONAL BUSINESS)

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SUBMITTED TO Ms .JATINDER KAUR SUBMITTED BY PANKAJ MISHRA A-03 REG.NO:- 11108327