Import - Export Policy of India

Contents Introduction Why do we need export,brief history Exim policy ,objectives Export Promotion Measures Import Control in India Pre 90’s Exim Policy of India Post 90’s Exim Policy of India

Why do we need export Export means trade across the political boundaries of different nation. No Nation is self sufficient and had all the goods that it needs. This happens because of climatic variation & unequal distribution of natural resources. As a result, countries all over the world have become interdependent, which necessitated foreign trade. A developing country like India with its fast growing agricultural production to keep pace with the population to keep pace with the population growth and growing Industrial infrastructure

needs high-import and this can be sustained only with fast export growth. To meet the oil import bill, export is unavoidable. Thus, it is evident that export promotion continues to be a major thrust area for the government. Several measures have been under taken in the past for improving export performance of the country. In India, Govt. has come out from time to time with various policies on foreign trade to promote export thereby increasing the “Foreign Exchange Reserve”. These policies are termed as “Exim Policy”

Brief history . Import export act was introduced by gov during second world war and it lasted for around 45 yrs and in June 1992 this act was superceded by the Foreign Trade (Development & Regulation Act), 1992. . The basic objective of this new act was to give effect to the new liberalized export and import policy of the Govt. till 1985 annual policies were made but from 1985-92, three yr policy was made and then 5 yr policy was made coinciding with 5 yr plans 1992-97, 1997-02, 2002-07.

What is Exim Policy? It contains policies in the sphere of Foreign trade i.e. with respect to import & export from the country and more especially export promotion measures, policies and procedure related there to. Export means selling abroad and import as bringing into India, any goods and services

Objective of Exim Policy Accelerating the country’s transition to a globally oriented vibrant economy with a view to derive maximum benefits from expanding global market opportunities; Stimulating sustained economic growth Enhancing the technological strength and efficiency Encouraging the attainment of internationally accepted standards of quality Providing consumers with good quality products and services at reasonable prices.

General provisions regarding export import Exports and Imports free unless regulated Compliance with Laws Interpretation of Policy Procedure: Exemption from Policy/ Procedure Principles of Restriction Restricted Goods Terms and Conditions of a Licence Importer-Exporter Code Number Exemption from Bank Guarantee Clearance of Goods from Customs

EXPORT PROMOTION MEASURES Policy measures Institutional set up. Import Facilitation for Export Production. Cash subsidies. Fiscal Incentives. Foreign Exchange Facilities. Export incentives Export production units

Import Facilitation for Export Production Export Promotion Capital Goods Scheme Special Import Licences Duty Free Licences under Duty Exemption Scheme Duty free licences are issued as : (1) Advance licence (2) Advance Intermediate licence. (3) Special Imprest licence. (4) Licence for jobbing, repairing etc. for re-export. (5) Licence under export production programme. (6) Advance Release Order. (7) Back to Back Inland Letter of Credit.

Export Incentives Duty Exemption Duty Drawback Scheme DFRC (Duty free replenishment certificate) DEPB( Duty entitlement pass book) Deemed Exports

Export Production Units Export Oriented Unit (EOU) Special Economic Zones (SEZ) Software Technology Parks (STP) Electronic Hardware Technology Parks (EHTP)

Cash subsidies Marketing development assistance Air freight subsidy Spices export promotion scheme Jute externel marketing assistance Financial assistance scheme agriculture &meat exports Financial assistance to marine products exports

Fiscal incentives Exemption from payment of central excise duty & simplified procedure for clearance. Exemption from sales tax Exemptions & deductions under income tax act,1961. Duty draw back Scheme (DDS) Cash Compensatory Support ( CCS ) International Price Reimbursement Scheme (IPRS)

Import control regime 1956-57, restrictions on imports started as lot of imports were there as such gov even had to import foodgrains for self fulfillment Imports were classified into Banned items ,Canalised items ,Restricted items, OGL In 1966 ruppee was devalued by 36.5% By devaluation gov expressed the hope that the devaluation would lead to expansion in export earnings as indian goods will become cheaper in internatinal market on the other hands import would decline as price of imported goods would increase.

Because of a rigid itemization of permissible imports, an element of inflexibility in the pattern of utilization of imports was introduced. The transferability of licenses among same and different industries was not permissible. This gave rise to an expanding black market in import licenses. Therefore, the import allocation system was so designed as to eliminate the possibility of all competition, either domestic or foreign. The Govt of India has liberalized the import regime from time to time. At present, practically all controls on import have been lifted. Under the new EXIM policy 2002-07.

Comparison of Pre 90’s & Post 90’s Exim Policy Year Import (Cr.) Export Trade Bal.(Cr.) 1948-51 650 647 -3 Excess of Import due to- Pent-up demand of war. Shortage of food & raw material due to partition. Import of capital goods due to starting of hydro-electric & other projects. 1951-56 730 622 -108 Trade deficit was largely due to programmes of industrialization which gathered momentum and pushed up the imports of capital goods. No improvement in exports.

Year Import Export Trade Bal.(Cr.) 1956-61 1080 613 -467 1961-66 1224 Excess of import due to setting of steel plants,heavy expansion & renovation on railways & modernization of many industries. Export lower than occur in second plan which shows that export promotion drive did not materialize. 1961-66 1224 747 -477 Excess of import due to- Rapid industrialization needs capital goods as raw material. Defence needs had increased due to aggression by China & Pakistan. Need of foodgrains due to failure of crops in 1965-66.

Year Import Export Trade Bal.(Cr.) 1966-69 (Annual- plans) 5775 3708 -2067 Devaluation was resorted to essentially- To reduce volume of import. To boost export. Create favourable balance of trade and balance of payment. 1969-74 1972 1810 -162 As a consequence of import restriction policies with vigorous export promotion measures ,during 1972-73 the country had favourable balance of trade for first time since independence. But several international factors pushed up the price of petroleum product,steel,fertilizers etc.results low magnitude of trade balance.

Year Import Export Trade Bal.(Cr.) 1974-79 5540 4730 -810 1980-85 Significant increase in export during every year of this period.Export of coffee,tea,cotton fabrics etc.recorded substantial increase in this period. But,Janta Government followed policy of haphazard import liberalization results decline trade balance from 1977-78. 1980-85 14,986 9051 -5935 Decline in POL imports was more than by a big hike in non-POL imports as a consequence of import liberalization. Consequently, huge trade balance.

Year Import Export Trade Bal.(Cr.) 1985-90 28,874 18,033 -10,841 Huge trade balance compelled the government to approach the World Bank/IMF for loan. The government was also forced to apply brakes on the licensing policy of imports. 1990-92 45,522 38,300 -7222 In 1990-91,push was given to export,but as a consequence of Gulf war government failed to curb imports. In1991-92, government introduced number of measures in trade policy allowing exim scripts,abolishing cash compensatory support(CCS) schemes as also a two-step devaluation of the rupee,but fail to boost up export.

Year Import Export Trade Bal.(Cr.) 1992-01 140740 118252 -22,488 (Cr.) In 1992-01,slow down in exports due to- Depressed nature of world markets. Saturation of developed countries market for electronic goods which are dynamic export sectors. Increased protectionism by industrialised countries in area of textile and clothing. Increasing competition from China & Taiwan. India underestimated the impact South-East Asian crisis Non-Tarrif barriers have been created by developed counties to slow down Indian exports. In 2000-01 export was largely due to rupee depreciation along with further trade liberalization,more openness to foreign investment in EOU sectors ike IT.

Trade Bal.(US $million) Year Import (US $million) Export Trade Bal.(US $million) 2002 –03 2003-04 65422 80177 52512 64723 -12910 -15454 Rise in imports in 2002-03 was broadly based on oil imports,food &allied products(edible oil),capital goods. Exim policy 2003-04gave massive thrust to exports by Duty free import facility for service sector upto earning 10lakh foreign exchange. Liberalization of Duty Exemption scheme. Besides,all these measures trade balance in 2003-04 are high due to mainly on imports of POL products more.Currently, almost two-third of country crude oil requirements are imported.Besides import of POL, import of non POL items shot up by 17% in2002-03 to 26.2%in 2003-04.

Trade - On an All time High India’s total external trade in goods and services grew by 41.5% in H12005-06 to US $ 153 billion. This is expected to go up to US $ 310 billion by the end of this year. This was just over US $ 74 billion in 1994. The trade to GDP ratio, calculated at current prices, has risen to 29.36% in 2004-05 from 18.28% in 1993-94. Economy is more Open than ever before Strong Export Growth Exports have grown to US $ 57.05 billion during April- November 2005-2006. They are expected to grow at 26% during the current year to US$ 100 billion. Strong Service Exports Service Exports grew by 71% in 2004-05. India's IT-ITES exports have shown robust growth and are expected to grow by 32% this year to US $ 23 billion. Strong Imports growth Non-oil imports grew at over 28% during April - September 2005 led by demand for capital goods. Source: Reserve Bank of India

Trade Trends .. Source: Reserve Bank of India