Foreign Trade Regulation in India

Anupam Singh Gautam(10810012)U.Kistaiah (10810064)

Agenda

History of Foreign Trade in IndiaForeign Trade ActForeign Trade Policy 2009-14Incentives SchemesNew InitiativesOrganizational Setup

HISTORY OF FOREIGN TRADE IN INDIA

• Import control was introduced in 1940

• In 1946 the Emergency provisions ordinance was promulgated to continue the import trade control

• Import and Export(control) Act came into force with effect from 25th march 1947

• Finally the Import and Export(control) act was replaced by the Foreign Trade(Development and Regulation) Act in 1992.

FTDR Act

MAIN PROVISIONS:

1. Development and Regulation

2. Prohibition and Restriction

3. EXIM Policy

4. Director General of Foreign Trade

5. Importer - Exporter Code Number

6. Issue and Suspension/Cancellation of license

7. Search, Inspection and Seizure

8. Penalty for Contravention

5

India’s Foreign Trade

In the last few years, robust growth in merchandise exports

From US$ 63 billion in 2003-04 to US $ 168 billion in 2008-09.

Share of global trade (WTO estimates):

2003 2008

Merchandise trade 0.83% 1.45%

Commercial Services 1.4% 2.8%

Goods & Services Trade

0.92% 1.64%

Source : Annual report of foreign trade policy

6

India’s Foreign Trade Exports & Imports (Figures in US$ billion)

Year Export %Growth

Imports % Growth

2004-05 83.53 30.8 111.52 42.7

2005-06 103.09 23.4 149.17 33.8

2006-07 126.26 22.5 185.60 24.4

2007-08 162.90 29.0 251.65 27.0

2008-09 185.29 13.6 303.69 20.7

2009-10 178.75 -3.52 288.37 -5.01

Source: Ministry of commerce

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REASONS FOR EXPORT DECLINE

Major Hurdles faced by Indian Exporters:

Rupee Appreciation by about 12% in the year

2007-08 Global Economic Slowdown and Recession in

Developed Economies during 2008-09 and its impact.

High Interest Rates Ban on exports of certain food products

since 2007. High Incentives provided by some of the

countries like China, Bangladesh etc.

8

India’s Foreign Trade Major Export Destinations

Country 2008-09($ bn) % share in Total

1 USA 19.7 12%

2 United Arab Emirates 17.8 11%

3 China 8.5 5%

4 Singapore 7.6 5%

5 Hong Kong 6.4 4%

6 United Kingdom 6.2 4%

7 Germany 5.9 4%

8 Netherlands 5.9 4%

9 Saudi Arabia 4.8 3%

10 Belgium 4.3 3%

9

India’s Foreign Trade Major Import Commodities

Commodity 2008-09($ bn)

% share in Total

1 Petroleum, Crude and products 93.1 32.36%

2 Machinery, Electrical and non-electrical 24.3 8.44%

3 Electronic goods 21.5 7.48%

4 Gold and silver 19.5 6.76%

5 Fertilizer, crude and manufactured 13.6 4.72%

6 Pearls, precious and semi-precious 12.8 4.44%

7 Organic and inorganic chemicals 12.8 4.43%

8 Coal, coke and briquettes 10.5 3.64%

9 Iron & Steel 9.5 3.30%

10 Metaliferrous ores and metal scrap 8.3 2.89%

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Foreign Trade Policy 2009-14

Short Term Objectives: To arrest and reverse the declining trend of exports; and To provide additional support to those sectors which have

been hit badly by recession in the Developed World.

Medium term Policy Objectives : To achieve an Annual Export growth of 15% with an Annual

Export Target of US$ 200 billion by March 2011. To achieve an Annual Export growth of around 25% by

2014. To double India’s exports of goods and services by 2014.

Long Term Objective : To double India’s share in Global Trade by 2020.

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Promotional Measures/ Incentive Schemes

Vishesh Krishi and Gram Udyog Yojana (VKGUY)

Focus Market Scheme (FMS)Focus Product Scheme (FPS)Market Linked Focus Product Scheme

(MLFPS)

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Vishesh Krishi & Gram Udyog Yojana (VKGUY)

To promote exports of :(i) Agricultural Produce and their value added products(ii) Minor Forest Produce and their value added variants(iii) Gram Udyog Products(iv) Forest Based Products and(v) Other Products, as notified from time to time.

VKGUY benefits are granted with an aim to compensate high transport costs, and to offset other disadvantages.

13

Focus Market Scheme

Objective is to offset high freight cost and other externalities to select international markets with a view to diversify the markets and to enhance India’s export competitiveness in these countries.

Currently 109 markets have been notified

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Focus Product Scheme

Objective is to incentivize export of such products which have high export intensity / employment potential, so as to offset infrastructure inefficiencies and other associated costs involved in marketing of these products.

Currently over 1000 Products covered under FPS.

Example: Green Technology products

15

Market Linked Focus Product Scheme (MLFPS)

To promote exports of products of high export intensity but which have a low penetration in countries

Currently over 1550 products covered under MLFPS.

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Foreign Trade Policy – 2009-14New Initiatives

Higher Support for Market and Product Diversification

26 new markets added under FMS(16 in Latin America, 10 in Asia-Oceania)

Incentive under FMS raised from 2.5% to 3%.

Incentive under FPS raised from 1.25% to 2%.

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Foreign Trade Policy – 2009-14New Initiatives

Higher Support for Market and Product

Diversification (contd.)

New products under FPS :Engineering products, Plastic (value added products),Technical Textiles, Green Technology products , vegetables, textiles and certain Electronic items.

New products/markets under MLFPS : Pharmaceuticals, Synthetic textile fabrics, value added rubber products, value added plastic goods, textile made ups,, glass products, certain iron and steel products

. Benefits to these products will be provided, if exports are made to 13 identified markets (Algeria, Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico, Ukraine, Vietnam, Cambodia, Australia and New Zealand).

The above markets also included for existing products i.e. Auto Components, Motor cars, Bicycles & Parts, Apparels.

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Foreign Trade Policy – 2009-14New Initiatives

To Support Various Sectors Like

Gems & Jewelers Sector Pharmaceutical Sector Agriculture Sector Leather Sector Handloom sector

ORGANISATIONAL SET UP

Ministry of commerce

Autonomous bodies

Public sector

undertakings

Advisory body

Attached and subordinate

Office

MINISTRY OF COMMERCE• The Ministry of Commerce, Government

of India, is the most important organ concerned with the promotion and regulation of the foreign trade of the country.

• Matters related to foreign trade are dealt with by eight divisions in the Department of Commerce.

• i) Administrative and General Division, (ii) Finance Division, (iii) Economic Division, (iv) Trade Policy Division, (v) Foreign Trade Territorial Division, (vi) Exports Products Division, (vii) Services Division, and (viii) Industries Division.

DESCRIPTION OF AUTONOMOUS BODIES

• Export Inspection Council

• Indian Institute of Foreign Trade

• Indian Institute of Packaging

• Export Promotion Councils, Commodity Boards and Authorities

• Federation of Indian Export Organisation

• Indian Council of Arbitration

• India Trade Promotion Organisation

PUBLIC SECTOR UNDERTAKINGS

• The State Trading Corporation of

India and its subsidiaries

• The spices Trading Corporation

• The Minerals and Metals Trading

Corporation of India and its

subsidiary

ADVISORY BODY

Central Advisory Council on Trade: The

Central Advisory Council on Trade, consisting of representatives from different organisations and individuals with business standing and expertise in the field of trade and commerce, and headed by Commerce minister.

ATTACHED AND SUBORDINATE OFFICES

• Office of the Director General of Foreign

Trade(DGFT)

• Office of Development Commissioners

• Director General of Commercial

Intelligence and Statistics

Thank You