You are on page 1of 5


Submitted By Manash Protim Boruah Roll No:33/D/2011

Introduction: Exports are essential for any economy because all export activities generate employment within the country and result in earning of foreign exchange. It is more important for a country like India where foreign exchange outflow on account of imports is much higher compared to foreign exchange inflows on account of exports. Most of these initiatives or facilities are announced by Directorate General of Foreign Trade [DGFT] under Policy framework known as „Foreign Trade Policy [FTP]‟. The schemes announced under FTP form a significant part of strategy of export promotion. The schemes include „exemption‟ or „neutralisation‟ from Indirect taxes (Customs Duty, Excise Duty, Service Tax, etc.) on one hand and performance based rewards by way of duty credits on the other So The Government of India provides several schemes or incentives to promote exports and to obtain foreign exchange. These are given below: 1. Marketing development Assistance: The Ministry of Commerce and Industry has a scheme of MDA, which was launched in 1963 with a view to stimulate and diversify the export trade, along with the development of marketing of Indian products and commodities abroad. The MDA is utilized for: Market research, commodity research, area survey and research; Participation in trade fairs and exhibitions; Export publicity and dissemination of information; Trade delegation and study teams; Establishment of offices and branches in abroad; Grant-in-aid to Export Promotion Councils and other approved organizations for the development of exports and the promotion of foreign trade; and any other scheme which is generally aimed at promoting the development of markets for Indian products and commodities abroad. 2. Market Access Initiative (MAI) The Ministry of Commerce and Industry has introduced the MAI in April 2001 with the idea that the Government shall assist the industry in R&D, market research, specific market and product studies, warehousing and retail marketing infrastructure in select countries and direct market promotion activities through media advertising and buyer-seller meets. Financial assistance shall be available under the scheme to EPCs, industry and trade associations and other eligible activities, as may be notified from time to time. 3. Central Assistance to States The State Governments shall be encouraged to fully participate in encouraging exports from their respective States. For this purpose, a new scheme “Assistance to States for Infrastructural Development for Exports” (ASIDE) has been initiated which would provide funds to the States based on the twin criteria or gross exports and the rate of growth of

exports from different States. Eighty per cent of the total funds would be allotted to the States based on the above criteria and remaining 20 per cent will be utilized by the Centre for various infrastructure activities that cut across State boundaries, etc. The State shall utilize this amount for developing complementary and critical infrastructure 4. Special Economic Zone In 2005, the Ministry of Commerce, Government of India has enacted the Special Economic Zone (SEZ) Act, with an objective of providing an internationally competitive and hassle free environment for exports. A SEZ is defined as a "specifically demarked duty-free enclave and shall deemed to be foreign territory (out of Customs jurisdiction) for the purpose of trade operations and duties and tariffs". The main objectives of the SEZ Act are: (a) generation of additional economic activity (b) promotion of exports of goods and services; (c) promotion of investment from domestic and foreign sources; (d) creation of employment opportunities; (e) development of infrastructure facilities. Incentives and facilities offered to the SEZs The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include: 

     

Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. Exemption from minimum alternate tax under section 115JB of the Income Tax Act. External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels. Exemption from Central Sales Tax. Exemption from Service Tax. Single window clearance for Central and State level approvals. Exemption from State sales tax and other levies as extended by the respective State Governments.

6. Export Credit Guarantee Corporation of India Limited (ECGC): It was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. Being essentially an export promotion organisation, it functions under the administrative control of the Ministry of Commerce, Government of India. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, and insurance and exporting community. ECGC, is the fifth largest credit insurer of the

world. ECGC provides a range of credit risk insurance covers to exporters against loss in export of goods and services, and also offers guarantees to banks and financial institutions to enable exporters obtain better facilities from them. Exporters have a lot to benefit from ECGC as it provides --1. 2. 3. 4. 5. 6. insurance protection to exporters against payment risks provides information on credit-worthiness of overseas buyers provides information on about 180 countries with its own credit ratings guidance in export related activities makes it easy to obtain export finance from banks/financial institutions assists exporters in recovering bad debts

7. Duty Drawback on Goods Exported Under this Duty Drawback scheme export products get relief of incidence of customs and excise duties paid on raw materials and components used at various stages of production. It is defined as “rebate of duty chargeable on any imported or excisable material used in the manufacture of goods exported from India. Duty Drawback is admissible for exports irrespective of mode of export, i.e. whether despatched by Sea, Air, Land Customs or by Post. 8. Export Financing Financial assistance extended by the banks to exporters at pre-shipment and postshipment stages. While the pre-shipment finance is provided for working capital for the purchase of raw material, processing, packing, transportation, warehousing, etc, of the goods meant for export, post-shipment finance is generally provided in order to bridge the gap between the shipping of goods and the realization of proceeds. With a view to providing pre-shipment credit to Indian exporter at internationally competitive rates, interest, Reserve bank of India announced a new scheme in November 1993 to provide Pre-shipment Credit in Foreign Currency (PCFC) by the banks in India. The PCFC scheme is in addition to normal packing credit schemes in Indian rupees presently available to Indian exporters. Exporters are also permitted to draw foreign exchange from the authorized dealers for the purposes such as foreign travel or for giving advertisement aboard. Therefore, a person resident in India may open, hold and maintain with an authorized dealer, a foreign currency to be known as Exchange Earners‟ Foreign Currency (EEFC) Account, subject to the terms and conditions of the EEFC Account Schemes. 9. Exim Bank Finance The Export-Import Bank of India (Exim Bank) provides financial assistance to promote Indian exports through direct financial assistance. Overseas investment finance, term finance for export production and export development pre-shipment credit, buyers‟ buyers credit, lines of credit, relining credit facility, export bills rediscounting, refinance to commercial banks finance for computer software export, finance for export marketing and bulk import finance. The Exim Bank also extends non-funded facility to Indian exporters in form of guarantees. The diversified landing of the Exim Bank now covers various stages of export that is from the development of export market to expansion of production capacity for

exports, production for export and pre-shipment financing. The Exim Bank‟s focus is on export of manufactured goods, project exports and export of technology services.