Foreign

Trade Policy
PROF. DHAVAL BHATT
SESSION NO: 03
 Introduction
 A foreign trade policy is to maintain a mutual agreement of wants and needs
while trading.
 For a successful economic development of a country, a robust foreign trade
policy is crucial.
 All export and import-related activities are governed by the Foreign Trade
Policy (FTP), which is aimed at enhancing the country's exports and use
trade expansion as an effective instrument of economic growth and
employment generation.
 There are two types of Trade Policies:
 Free Trade Policy and Protective Trade Policy. As the name suggests in
the free trade policy there are no restrictions on areas such as Exchange of
Goods or Services, between countries that are trading, there are no bars or
limitations on production or consumptions, neither are there any taxes,
subsidies or tariffs to adhere to. The arrangement of free trade works quite
well for developed countries.
 The Protective Trade Policy overall protects the domestic economy from
external competition in goods, that might threaten the domestic market for
their products and goods. Such a policy is ideal for developing economies
like India.
 DGFT - Directorate General of
Foreign Trade
 Directorate General of Foreign Trade (DGFT) organisation is an attached
office of the Ministry of Commerce and Industry and is headed by Director
General of Foreign Trade.
 Right from its inception till 1991, when liberalization in the economic policies
of the Government took place, this organization has been essentially
involved in the regulation and promotion of foreign trade through regulation.
 Keeping in line with liberalization and globalization and the overall objective
of increasing of exports, DGFT has since been assigned the role of
“facilitator”.
 The shift was from prohibition and control of imports/exports to promotion
and facilitation of exports/imports, keeping in view the interests of the
country.
 Headquarter: New Delhi
Chapter
Title
No
1 LEGAL FRAMEWORK AND TRADE FACILITATION

2 GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS

3 EXPORTS FROM INDIA SCHEMES

4 DUTY EXEMPTION-REMISSION SCHEMES

5 EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME

EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE TECHNOLOGY

6 PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS (STPs) AND BIO-
TECHNOLOGY PARKS (BTPs)

7 DEEMED EXPORTS

8 QUALITY COMPLAINTS AND TRADE DISPUTES

 Special Focus Initiatives
 Sectors
having significant export potentials are promoted
and supported under special focus initiatives.
 Agriculture

 Gems & Jewellery

 Handlooms & Handicraft
 Leather & Footwear
 Target plus scheme
 Board of Trade
Chapter 1C of DGFT
 The Board of Trade is a British government department concerned with
commerce and industry, currently within the Department for International
Trade.
 The objective of the BOT is to have a continuous dialogue and consultation with
trade and industry.
 Currently, The board is headed by Commerce and Industry Minister Nirmala
Sitharaman while the members include Apollo Tyres CMD Onkar Kanwar, Hero
MotoCorp MD Pawan Munjal, ICICI Bank Ltd MD and CEO Chanda Kochhar,
Biocon MD Kiran Majumdar Shaw, Dr Reddy's MD Satish Reddy, HCL
Technologies Chairman Shiv Nadar, Mahindra Group MD Anand Mahindra, ITC
Chairman Y C Deveshwar and Ashok Leyland MD R Seshasayee. 
 General Provision w.r.t Exports &
Imports
Chapter 2 of DGFT
 Regulated by DGFT (Directorate General of Foreign Trade)
 Indian Trade Classification (Harmonised System) [ITC (HS)] of Exports and
Imports.
 Importer-Exporter Code (IEC)
 Mandatory documents for export/import of goods from/into India.
 Bill of Lading/ Airway Bill/ Lorry Receipt/ Railway Receipt/Postal Receipt
 Commercial Invoice cum Packing List
 Shipping Bill/Bill of Export/ Postal Bill of Export
 Export of Special Chemicals, Organisms, Materials, Equipment and Technologies
(SCOMET)
 DGFT may, through a Notification, impose restrictions on export and import,
necessary for: -
a) Protection of public morals;
b) Protection of human, animal or plant life or health;
c) Protection of patents, trademarks and copyrights, and the prevention of
deceptive practices;
d) Prevention of use of prison labour;
e) Protection of national treasures of artistic, historic or archaeological value;
f) Conservation of exhaustible natural resources;
g) Protection of trade of fissionable material or material from which they are
derived;
h) Prevention of traffic in arms, ammunition and implements of war
i) Relating to the importation or exportation of gold or silver.
 Promotional Measures
 The government of India initiates different incentives and plans to help business
firms enhance the competitiveness of their exports. 
1. Duty Drawback Scheme
 Merchandise that is to be export is not conditional for payment of different
excise, levy charges and customs duties. On showing verification of export of
these products to the concerning authority such charge returns. Such refunds
are ‘Duty Drawbacks.’
2. Export Manufacturing under the Bond Scheme
 Under this freeway, organizations can manufacture merchandise without giving
excise duty and different charges. The organizations can benefit this facility
after giving an endeavour (i.e. bond) that they are producing commodities for
the export goal.
 Promotional Measures
3. Exemption from Payment of Sales Taxes
 Merchandise manufactured for the sole reason of exporting is not conditional
upon payment of sales tax. Money received from exporting operations has been
absolved from giving of Income-tax for a long time now. This exemption is only
available to 100% Export oriented units and units set up in Export Processing
Zones / special economic zones.
4. Advance Licence Scheme
 In this government policy which permits the supplier duty-free supply of local
and also in addition imported resources required for the manufacturing of
export merchandise. The firms exporting irregularly can likewise acquire these
licenses against particular export orders.
 Promotional Measures
5. Export Processing Zones
 They are industrial domains, which shape enclaves from the Domestic Tariff
Areas. These are generally located close to seaports or air terminals. They
intend to provide an internationally competitive duty-free environment for
export production at low cost. There are different measures, for example,
availability of export fund, export promotion, capital merchandise scheme is in
use for foreign trade promotion.
 Promotional Measures
 The Government has also established a number of institutions to give
infrastructural help and also marketing help to organizations doing International
business.
Department of Commerce
 The Department of Commerce formulates policies in the sphere of foreign trade.
It also frames the import and export policy of the country in general.
Export Promotion Councils
 Export Promotion Councils are non-profit institutions register under the
Companies Act or the Societies Registration Act. The fundamental objective of
the export promotion councils is to market and produce the nation’s exports of
particular products falling under their jurisdiction. Currently, there are 21 EPC’s
dealing with different commodities.
 Promotional Measures
Export Inspection Council
 Export Inspection Council of India is an establishment by the Government of
India under Section 3 of the Export Quality Control and Inspection Act 1963. The
council aims at the sound development of export trade through quality control
and pre-shipment inspection.
Indian Trade Promotion Organisation
 Indian Trade Promotion Organisation is an establishment under the Companies
Act 1956 by the Ministry of Commerce, Government of India. Its head office is at
New Delhi. ITPO was formed by the merger of the two government agencies,
which are, Trade Development Authority and Trade Fair Authority of India. It’s
objective is to support export organizations engaged in international trade fairs
and exhibitions, etc.
 Promotional Measures
Indian Institute of Foreign Trade (IIFT)
 Indian Institute of Foreign Trade is an establishment by the Government of India
as an autonomous body in 1963. IIFT is registered under the Societies
Registration Act with the prime objective of professionalising the country’s
foreign trade management.
State Trading Organisation
 State Trading Organisation (STC) was established in May 1956. The main
purpose of STC is to promote trade, primarily export trade among different
trading partners of the globe.
Indian Institute of Packaging (IIP)
 The Indian Institute of Packaging is an establishment as a national institute
mutually run by the Ministry of Commerce, Government of India, and the Indian
Packaging industry and allied interests in 1966. 
 Current Status of Foreign
Trade in India
 In November 2018, India and Iran had signed a bilateral agreement to settle oil
trades in Indian currency through public sector bank United Commercial Bank
(UCO) Bank.
 In June 2018, a Memorandum of Understanding (MoU) was signed between the
Governments of India and China to export non-basmati rice to China. As of October
2018, total 24 mills got clearance to export the same.
 Bilateral trade between India and China reached US$ 84.44 billion in 2017 with 40
per cent increase in Indian exports to China.
 In August 2018, US upgraded India’s status as a trading partner on par with its
North Atlantic Treaty Organization (NATO) allies.
 India’s external sector has a bright future as global trade is expected to grow at 4
per cent in 2018 from 2.4 per cent in 2016.
 Current Status of Foreign
Trade in India
 The Union Cabinet, Government of India, has approved the proposed
Memorandum of Understanding (MoU) between Export-Import Bank of India
(EXIM Bank) and Export-Import Bank of Korea (KEXIM).
 The Goods and Services Network (GSTN) has signed a memorandum of
understanding (MoU) with Mr Ajay K Bhalla, Director General of Foreign Trade
(DGFT), to share realised foreign exchange and import-export code data,
process export transactions of taxpayers under goods and services tax (GST)
more efficiently, increase transparency and reduce human interface.
 Mr Richard Verma, the United States Ambassador to India, has verified that
India-US relations across trade, defence and social ties will be among the top
priorities of the newly elected US President Mr Donald Trump's administration.
 Bilateral trade between India and Ghana is rising exponentially and is expected
to grow from US$ 3 billion to US$ 5 billion over the coming three years, stated
Mr Aaron Mike Oquaye Junior, Ghana's Ambassador to India.