School Of Future Studies & PlanningDAVV, IndoreDiscussion over“Foreign Trade Policy of India(2009-13)”Submitted to: Presented By:Dr. Ajay Chhabariya Jayant NannoreFaculty, DAVV MBA(BF)
What is “Foreign Trade”?• Exchange of goods and services between thecountries is known as foreign trade. The difference isthe producer and consumers reside in separatecountries.• The foreign trade policy and regulation is a veryimportant determinant of the business environment.The export-import policy, for example, can havesignificant impact on the competitive environmentand the export sector.
• Import control was introduced in 1940• Import and Export(control) Act came intoforce with effect from 25th march 1947• Finally the Import and Export(control) act wasreplaced by the Foreign Trade(Developmentand Regulation) Act in 1992.HISTORY OF FOREIGN TRADE IN INDIA
Key strategies for achieving its Objectives :-•Simplifying procedures and bringing down transactioncosts;•Facilitating development of India as a global hub formanufacturing , trading and services.•Identifying and nurturing special focus areas to generateadditional employment opportunities , particularly insemi-urban and rural areas.•Facilitating technological and infrastructuralupgradation of the Indian economy ,especially throughimport of capital goods and equipments.•Activating Indian embassies as key players in the exportstrategy.
Indian Foreign Trade Policy•The Union Commerce Ministry, Government of India announcesthe integrated Foreign Trade Policy (FTP) in every five year.•This is also called EXIM policy.•The Foreign Trade Policy which was announced on August 28,2009 is an integrated policy for the period 2009-14•This policy is updated every year with some modifications andnew schemes.•New schemes come into effect on the first day of financial yeari.e. April 1, every year.
Promotional Measures• Assistance to States for Infrastructure Development ofExports (ASIDE): The State Governments shall be encouragedto participate in promoting exports from their respectiveStates.• Market Access Initiative (MAI): The Market Access Initiative(MAI) scheme is intended to provide financial assistance formedium term export promotion efforts with a sharp focus ona country and product.• Marketing Development Assistance (MDA): The MarketingDevelopment Assistance (MDA) Scheme is intended toprovide financial assistance for a range of export promotionactivities implemented by export promotion councils,industry and trade associations on a regular basis every year.
• Towns of Exports Excellence: The Central Government aimsto encourage manufacturers and exporters to attaininternationally accepted standards of quality for theirproducts.• Brand Promotion and Quality.• Target Plus Scheme: The objective of the scheme is toaccelerate growth in exports by rewarding Star ExportHouses who have achieved a quantum growth in exports
Organizational SetupGovernment has established or sponsored anumber of organizations to provide different types ofassistance to the exporters.• Ministry of Commerce• Autonomous Bodies• Public Sector Undertakings• Advisory Body
Ministry of Commerce• The Ministry of Commerce, Government of India, is themost important organ concerned with the promotionand regulation of the foreign trade of the country.• Matters related to foreign trade are dealt with by eightdivisions in the Department of Commerce, namely,(i) Administrative and General Division, (ii) FinanceDivision, (iii) Economic Division, (iv) Trade PolicyDivision, (v) Foreign Trade Territorial Division, (vi) ExportsProducts Division, (vii) Services Division, and (viii)Industries Division.
Autonomous Bodies1. Export Inspection Council2. Indian Institute of Foreign Trade3. Indian Institute of Packaging4. Export Promotion Councils, Commodity Boards andAuthorities5. Federation of Indian Export Organisations6. Indian Council of Arbitration7. India Trade Promotion Organisation
Public Sector Undertakings• The following trading/service corporations arefunctioning under the administrative control of theMinistry of Commerce.i. The State Trading Corporation of India and itssubsidiariesii. The Minerals and Metals Trading Corporation ofIndia and its subsidiary, viz., Mica TradingCorporationiii. The spices Trading Corporationiv. The Export Credit Guarantee Corporation
Advisory Body• Central Advisory Council on Trade: The Central AdvisoryCouncil on Trade, consisting of representatives fromdifferent organisations and individuals with businessstanding and expertise in the field of trade andcommerce, advise Government on matters relating to :i. Export and import policy programmeii. Operation of import and export trade controlsiii. Organisation and development of commercial servicesiv. Export Credit Guarantee Corporation
Marketing Assistance• A number of steps have been taken to assist the exporters intheir marketing effort.• Market Development Assistance• Market Access Initiative• Trade Fairs and Exhibitions• Export Risk Insurance• Finance• Quality control and Preshipment Inspection• Institutional Assistance• India Brand Equity Fund
Short Term Objectives:• To arrest and reverse the declining trend of exports; and• To provide additional support to those sectors which have been hit badlyby recession in the Developed World.Medium term Policy Objectives :• To achieve an Annual Export growth of 15% with an Annual Export Targetof 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 2020.14INDIA’S FOREIGN TRADE POLICY 2009-14
INDIA’S FOREIGN TRADE POLICY 2009-14• Aim in General• The policy aims at developingexport potential, improvingexport performance, boostingforeign trade and earningvaluable foreign exchange.• FTP assumes great significancethis year for those sectors whichjob losses liketextiles, leather, handicrafts etc.during recession.• A fall in exports has led to theclosure of several small- andmedium-scale export-orientedunits, resulting in large-scaleunemployment.
INDIA’S FOREIGN TRADE POLICY 2009-14• Targets:• Export Target : $ 450 Billion for2013-14• Export Growth Target: 25 % everyyear• Three pillars:i. Improvement in infrastructurerelated to exports.ii. Reduction in transaction costs.iii. Provision of full refund of allindirect taxes.
INDIA’S FOREIGN TRADE POLICY 2009-14TECHNOLOGY UPGRADATIONEPCG Scheme1. Obligation under EPCG schemerelaxed.2. To aid technological up gradationof export sector, EPCG Scheme atZero Duty has been introduced.3. Export obligation on import ofspares, moulds etc. under EPCGScheme has been reduced by 50%.Re-fixation of Annual Average ExportObligation:Taking into account the decline inexports, the facility of Re-fixation ofAnnual Average Export Obligation for aparticular financial year in which there isdecline in exports from the country, hasbeen extended.GREEN PRODUCTS & TECHNOLOGIESSupport for Green products andproducts from North East extended.SPECIAL FOCUS INITIATIVES
INDIA’S FOREIGN TRADE POLICY 2009-14Announcements for FPS, FMS.• 26 new markets added in thisscheme. (16 in Latin America, 10in Asia-Oceania)• Incentives under FMS raised from2.5 % to 3 %• Incentive available under FocusProduct Scheme (FPS) raised from1.25% to 2%.• Extra products included in thescope of benefits under FPS
INDIA’S FOREIGN TRADE POLICY 2009-14Announcements• Market Linked Focus Product Scheme (MLFPS) expanded byinclusion of products like pharmaceuticals, textile fabrics, rubberproducts, glass products ,auto components, motor cars, bicycle andits parts.etc. However , 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).• A common simplified application form has been introduced to applyfor the benefits under FPS, FMS, MLFPS
INDIA’S FOREIGN TRADE POLICY 2009-14Announcements for MDA & MAI:• Higher allocation for Market Development Assistance (MDA) and MarketAccess Initiative (MAI) has been announced.Towns of Export Excellence (TEE)• The following cities have been recognized as towns of export excellence(TEE)• Handicrafts : Jaipur, Srinagar and Anantnag• Leather Products : Kanpur,Dewas and Ambur• Horticultural Products: Malihabad
INDIA’S FOREIGN TRADE POLICY 2009-14Extension of Income Tax Exemption to EOU• Income Tax exemption to 100% EOUs units under Section 10B and10A of Income Tax Act, has been already extended for the financialyear 2010-11 in the Budget 2009-10.
INDIA’S FOREIGN TRADE POLICY 2009-14• Announcements For Marinesector :• Fisheries exempted frommaintenance of average EO underEPCG Scheme (along with 7sectors) however FishingTrawlers, boats, ships and othersimilar items shall not be allowedfor this exemption.• Additional flexibility underTarget Plus Scheme (TPS) /Duty Free Certificate ofEntitlement (DFCE) Scheme forthe marine sector.
INDIA’S FOREIGN TRADE POLICY 2009-14Announcements for Gems &Jewellery Sector:• Duty Drawback is allowed onGold Jewellery exports toneutralize duty incidence.• Plan to establish "DiamondBourse (s) with an aim to makeIndia and International TradingHub announced.• Introduction of a new facility toallow import on consignmentbasis of cut & polished diamondsfor the purpose of grading/certification.
INDIA’S FOREIGN TRADE POLICY 2009-14Announcements for Agro Exports:• Introduction of a single windowsystem to facilitate export ofperishable agricultural producewith an aim to reduce transactionand handling cost.• This system will involve creationof multi-functional nodalagencies.
INDIA’S FOREIGN TRADE POLICY 2009-14• Announcements for LeatherExports :• On the payment of 50 %applicable export duty, Leathersector shall be allowed re-exportof unsold imported raw hidesand skins and semi finishedleather from public bonded warehouses.
INDIA’S FOREIGN TRADE POLICY 2009-14• Announcements for Tea Exports:• The existing Minimum valueaddition under advanceauthorization scheme for exportof tea is 100 %. It has beenreduced from the existing 100%to 50%.• DTA (Domestic Tariff Area) salelimit of instant tea by EOU unitsincreased from 30% to 50%.
INDIA’S FOREIGN TRADE POLICY 2009-14• Announcements for PharmaExports :• Export Obligation Period foradvance authorizations issuedincreased from existing 6 monthsto 36 months.• Pharma sector included underMLFPS for countries in Africa andLatin America & some countriesin Oceania and Far East.
INDIA’S FOREIGN TRADE POLICY 2009-14Scheme for Export Oriented Units:• EOUs have been allowed to sell products manufactured by them inDTA (Domestic Tariff Area) upto a limit of 90% instead of existing75%, without changing the criteria of ‘similar goods’, within theoverall entitlement of 50% for DTA sale. (This means that instead of75% these units can sell up to 90 % of their products in thedomestic markets)• EOU allowed to procure finished goods for consolidation along withtheir manufactured goods, subject to certain safeguards.• Extension of block period by one year for calculation of Net ForeignExchange earning of EOUs kept under consideration.
INDIA’S FOREIGN TRADE POLICY 2009-14Announcements for Value Added Manufacturing (VAM)• To encourage Value Added Manufactured export, a minimum 15% valueaddition on imported inputs under Advance Authorization Scheme.Announcements for Project Exports:• Project Exports and a large number of manufactured goods covered underFPS and• MLFPS.
INDIA’S FOREIGN TRADE POLICY 2009-14Reduction in Transaction Costs:• Maximum applicable fee for 18 Authorizations/ license applications hasbeen reduced to Rs. 100,000 from the existing Rs 1,50,000 (for manualapplications) and Rs. 50,000 from the existing Rs.75,000 (for EDIapplications).Dollar Credits• There is a provision for state-run banks to provide dollar credits
INDIA’S FOREIGN TRADE POLICY 2009-14Announcements for Medical Devices• To solve the problem of medical device industry, the procedure for issue ofFree Sale Certificate has been simplified and the validity of the Certificatehas been increased from 1 year to 2 years.Announcements for Automobile Industry• Those Automobile industries which have their establishment will beallowed free import of reference fuels (petrol and diesel), upto amaximum of 5 KL per annum, which are not manufactured in India.Simplification in EPCG for automobile industry.
INDIA’S FOREIGN TRADE POLICY 2009-14Announcements for EDI Initiatives• Export Promotion Councils & Commodity Boards have been advised toissue RCMC through a web based online system.• It is expected that issuance of RCMC would become EDI enabled beforethe end of 2009.Set up of Directorate of Trade Remedy Measures Announced• A Directorate of Trade Remedy Measures shall be set up, which will enablesupport to Indian industry and exporters, especially the Micro Small &medium Enterprises MSMEs in availing their rights through trade remedyinstruments
Conclusion(FTP)• After the implementation foreign trade policy, the import and export among foreigncountries have increased and have becomemore secured.• Setting up of EPZ and SEZ have also increasedforeign investors .