FOREIGN TRADE POLICY IN INDIA

INTRODUCTION

Trade between two or more nations is called foreign trade or international trade

Foreign trade is also known as external trade.

Foreign trade transactions are classified under three categories:

Import Trade Export Trade Net Exports

FOREIGN TRADE POLICY

Long term objective of the FTP is to promote exports and increase India’s competitiveness globally, leading to employment generation particularly in the labor-intensive sectors

Objective common to both the old and new policies is to double India’s exports within 5 years

HISTORY

The Government of India, Ministry of Commerce and Industry announced New Foreign Trade Policy on 27th August 2009 for the period 2009-2014

Earlier this policy known as  Export Import (EXIM) Policy.

Union Commerce Ministry, GOI announces integrated FTP every five year.

The Export Import Policy (EXIM Policy) or Foreign Trade Policy is updated every year on the 31st of March and the modifications, improvements and new schemes becomes effective from April  month of each year

WHERE DOES INDIA STAND GLOBALLY? On a per capita income basis, India ranked 140th

by nominal GDP and 129th by GDP (PPP) in 2011.

India is the nineteenth largest exporter and tenth largest importer in the world.

Economic growth rate stood at around 6.5% for the 2011–12 fiscal year.

Country Exports Imports GDP Trade as % of GDP(US$ bn.) (US$ bn.) (US$ bn.)

Korea 197.6 175.5 605.0 61.7

China 438.3 393.6 1446.9 57.5

Mexico 165.4 171.0 626.1 53.7

Russia 135.9 75.4 433.5 48.7

South Africa 38.7 35.0 160.1 46.0

Argentina 29.4 13.1 129.7 32.8

Brazil 73.1 48.3 492.1 24.7India 57.0 74.3 588.8 22.3

Source: Economist Intelligence Unit

Foreign Trade Policy 2009-14

Short Term Objectives: arrest and reverse the declining trend of exports. provide support to those sectors which have been hit

badly by recession.

Medium term Policy Objectives : achieve an Annual Export growth of 15% by March

2013. achieve Annual Export growth of around 25% by

2014.

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

ANNOUNCEMENTS FOR FPS, FMS, MLFPS 26 New markets added under this scheme Incentives under FMS raised from 2.5% to 3% Incentives available under FPS raised from

1.25% to 2% MLFPS expanded by inclusion of products like

pharmaceuticals , textile fabrics, rubber products, glass products, auto components , etc

FOREIGN TRADE POLICY 2009-14 HIGHLIGHTS

TECHNOLOGICAL UPGRADATION EPCG Scheme at zero duty has been introduced Jaipur , Srinagar – “Town of Export Excellence

for Handicraft” Kanpur, Dewas and Ambur- “Town Of Excellence for

Leather products” Malihabad- “Town Of Excellence for Horticulture”

E.P.C.G. SCHEME RELAXATIONS More flexible  No restriction on second hand imported goods

AGRICULTURAL SECTOR a single window system to facilitate export of

perishable agricultural produce has been introduced.

GEMS ANS JEWELLERY planned to establish “Diamond Bourses” import of  cut & polished diamonds on

consignment basis of personal carriage upto US $ 5 million value

units in case of participation in overseas exhibition

LEATHER SECTOR  re-port of unsold imported rawhides and skins and

semi finished leather Enhancement of FPS rate to 2 %  

STATUS HOLDERS additional Duty Credit Script to Status holder @1%

FOB value of past exports Transferability for the Duty Credit scripts being issued

to Status holder.

STATUS HOLDER EXPORT PERFORMANCE(F.O.B. BASIS)

1 star house 15 crores

2 star house 100 crores

3 star house 500 crores

4 star house 1,500 crores

5 star house 5,000 crores

AGRICULTURE SECTOR  To reduce transaction and handling cost, a

single window system to facilitate export of perishable agricultural produce has been introduced.

E.O.U. allowed to sell in DTA up to a limit of 90%  finished goods for consolidation along with

manufactured goods CENVAT credit facility

D.E.P.B. factoring of custom duty component on Flexibility provided to exporters. Simplification of procedures. TEA Minimum value addition for export

reduced from 100% to50% DTA sale limit by EOU units increased to

50%

PHARMACEUTICALS SECTOR  Export obligation period increased to 36

months. extensively covered under MLFPS

for countries in Africa & Latin America -some countries in Oceania

HANDLOOM SECTOR  requirement of  “Handloom Mark” for

availing benefits has been removed.

SPECIAL ECONOMIC ZONES  Easing of land norms to set up special economic

zones (SEZs)  Transfer of ownership and sale of SEZ units

allowed

The need for SEZ and Government’s policy

SEZ policy introduced on 1/4/2000 in India

To increase exports SEZ can be set up by private, public,

joint sector or by the state government Transform EPZ(Export Processing Zone)

to SEZ

Provisions under SEZ

100% FDI for manufacturing sector

Income tax benefit

Duty free import of domestic goods

Applicability of labour laws

Exemption from Income tax on investments

Enhanced limit of 2.4 crore for managerial remuneration

Performance of Units under SEZ

Zone 2003-2004 (Rs. in crores)

2004-2005(Rs. in crores)

Kandla SEZ 1018.82 1060.14

SEEPZ-SEZ 7832.81 8298.59

Noida SEZ 1534.17 4266.00

Madras SEZ 1037.96 1376.91

Cochin SEZ 298.91 462.99

Falta SEZ 825.34 569.15

Visakhapatnam SEZ 435.67 579.27

Surat SEZ 869.90 1539.72

Manikanchan SEZ --- 95.54

Jaipur SEZ --- 5.27

Indore SEZ --- 55.02

Advantages of SEZ

Growth and development Attracts FDI(Foreign Direct Investment) Exposure to technology and global

markets Increase in GDP and economic model Employment opportunities are created

EXIM BANK OF INDIA

Set up by an act of parliament in September 1981 Wholly owned by government of India Commenced operations in March 1982 One of the topmost financial institutions Objectives:

“.......for providing financial assistance to importers and exporters, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financial export and import of goods and services with a view to promoting country’s international trade....”

“ ....shall act on business principles with due regard to public interest”

(Export-Import Bank of India Act, 1981)

OPERATING GROUPS OF EXIM BANK Corporate Banking Group Project Finance/Trade Finance Group Small and Medium Enterprise Export Services Group Export Marketing Services Bank Support Services Group

Financing Programmes

Export Export CreditCredit Import Import

CreditCredit

Loans for Exporting Loans for Exporting UnitsUnits

  credit opened by an importer with a bank in an exporter's country to finance an export operation

 credit opened

by an importer

at a bank in his

own country

upon which an

exporter may

draw.

Provides loans for the exporting units setup in the country

RECENT TRENDS Q1(Quarter 1) of 2012-13, exports stood at US$ 75.2 bn and

showed a decline of 1.7 per cent as against an increase of 36.4

per cent during Q1 of 2011-12.

Q1 of 2012-13, imports declined by 6.1 percent over the

corresponding quarter of 2011-12 and stood at US$ 115.3

billion.

Lower growth in POL imports at 5.5 percent during Q1 of

2012-13 as compared with 52.5 percent during Q1 of 2011-12.

RECENT TRENDS Imports of gold and silver, US$ 9.4 bn during Q1 of 2012-13

were 48.4 per cent lower than that in Q1 of 2011-12.

Non-oil non-gold imports during Q1 of 2012-13 at US$ 65.3

bn recorded a decline of 2.9 per cent as compared to an

increase of 18.9 per cent in Q1 of preceding year.

Trade deficit during Q1 of 2012-13 stood lower at US$ 40.1

bn as compared with US$ 46.2 bn during Q1 of 2011-12.

India’s Foreign Trade

•Growth is uncertain in coming months, given the worsening global

macroeconomic outlook and high interest rate in the domestic market.

•During April-Sept 2011, India's imports expanded by 32.4% to $ 233.5

billion. The trade deficit during the April-Sept’ 2011 period stood at $

73.5 billion. Increasing Trade Deficit further depreciates Rupee.

•Depreciation of rupee will also push up cost of imports leading to

wider trade deficit in coming times.

Export/Import Share of India as (%) of GDP

Exports of Principal Commodities

Imports of Principal Commodities

India's Exports to Principal Regions

India's Imports from Principal Regions

India’s Foreign Trade

Last 10 Years India’s Export/Import Performance

CONCLUSION

Composition of India’s Foreign Trade has undergone a positive change. It is a remarkable achievement that India has transformed itself from a predominantly primary goods exporting country into non primary goods exporting country. Under Imports also India’s dependence on food grains and capital goods has declined.