This slide help understand Trade Policy in indian context

1. Foreign Trade Policy
INDIAN CONTEXT
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2. CONTENT
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 Main features of India’s Trade Policy
 Foreign trade policy
 Phases of India’s Trade Policy
 Major Trade Reforms
 New trade Policy 2015-20
 References

3. Foreign Trade Policy
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Advanced countries like Germany, the United States, Japan and
others have used their trade policy to
a) Restrict their imports and provide a sheltered market for their own
industries so that they could develop rapidly and
b) Promote their export so that their expanding industries could secure
foreign markets.
 Trade policy has played significant in the development of advanced
countries.
 It was only after independence that a trade policy, as a part of the general
economic policy development, was formulated by India.

4. Phases of India’s trade Policy
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Five phases in India’s trade policy can be noted as follows:
 The first phase pertain to period from 1947-48 to 1951- 52
 The second phase covering the period from 1952-53 to 1956-57
 The third phase from 1957-58 to June 1966
 The fourth phase started after devaluation of the rupee in June
1966
 And the last phase after 1975-76

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 During the first phase up to 1951-52, India's could have liberalized imports, but on
account of placed by the united kingdom on the utilization of the sterling balances, it
had to continue wartime controls.
a) since our balance of payment(BOP) with the Dollar area was heavily adverse.
b) This is also necessitated India to devalue her currency in 1949.
c) By the large, the import policy continued to be restrictive during this period.
 During the second phase (from 1952-53 to 1956-57), the liberalization of foreign as a
goal of trade policy.
a) Import license were granted in a liberal manner.
b) An effort also made to encourage export by relaxing export control, reducing export
duties, abolishing export quotas, and providing incentives to exports.
c) Liberalization led to a tremendous increase in our import, but export did not rise
appreciably.
d) Fast deterioration in our foreign exchange reserves (FERs).

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 During the third phase, which began in 1956-57, the trade policy was reoriented to meet planned
economic development.
a) A very restricted, import policy was adopted and import controls further screened the list of imported
goods.
b) On other hand a vigorous export promotion drive was launched.
c) It was in this period that India’s trade policy was thoroughly reviewed by the Mudaliar Committee 1962
 The fourth phase started after the devaluation of rupee in June 1966.
a) During the period, the trade policy attempted to expand export and strangely liberalized imports. Export
promotion was given a big boost through the acceptance and implementation of the recommendation of
the Mudaliar Committee (1962).
b) The major recommendation included an increased allocation of raw materials to export-oriented
industries, income tax relief on export earnings, export promotion through import entitlement, removal
of disincentives, and setting up of Export Promotion Advisory Council, a ministry of international trade
 During the last phase (1975-76 onwards), the government adopted a policy of import liberalization, with a
view to encourage export promotion.

7. India's foreign trade policy, 1991
The commerce minister, Mr. P. Chidambaram, announced a major overhaul of trade policy on July 4,1991,
entailing
i. Suspension of cash compensatory support
ii. An enlarged and uniform REP (replenishment) rate of 30 per cent of FOB(free on board) value.
iii. Abolition of all supplementary licenses.
iv. Abolition of unlisted OGL (open general license).
v. Removal of all import licensing for capital goods and raw materials.
The government decided that while all essential import like POL (petroleum, oil, lubricants)
fertilizer, and edible oil should be protected all other imports should be linked export by enlarging and
liberalizing the REP license system.
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8. India's foreign trade policy 1991: The Reform period
New trade policy substantially eliminates the licensing, quantitative restrictions and
other regulatory and discretionary control. The main features of new trade policy are:
1) Free import and export:
Major changes in import licensing system by replacing large of administered of import
entitlements linked to export earnings.
The system of advanced licensing, designed to provide exporters with duty free access to
inputs, was strengthened further by simplifying and speeding up the process of these
licenses.
New units and units is going undergoing substantial expansion would be automatically
granted licenses for import of capital goods without any clearance, provided the import
requirement was up to 25% of the value of plant and machinery subject to maximum of 2
crores.
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2) Rationalization of Tariff structure:
 On the recommendation of Chellia committee, import duty was drastically reduced to established parity in
prices of goods produced domestically and internationally.
3) Decanalisation:
 The government decontrolled 116 item allowing their exports without any licensing formalities.
 Another 29 items were shifted to OGL.
 It also decanalised 16 export items 20 import items including new print, non ferrous metal, natural rubber
intermediate and raw material for fertilizers.
4) Exchange rate reform:
 The government devalue the Rupee in July 1991, which lead to depreciation in the value of Rupee against the
five major International currencies by roughly 22%.
i. Partial convertibility of rupee: the finance minister announced the Liberalised Exchange Rate System
(LERMS) under which 40% of foreign exchange system were to be exchange through the RBI at the official
exchange rate and rest was allowed to converted at a market exchange rate.
ii. Fully convertible of current account: the rupee fully convertible. The current account convertibility means
to freedom to buy or sell foreign exchange.
5) Phased Manufacturing Program:
6) Trading house: In 1991 the policy allowed the export houses and trading houses to import a wide range of
items.

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7) Export Oriented Units (EOU), Electronic Hardware Technology Park (EHTP), Software Technology Parks
(STPs) and Bio Technology Parks (BTPs).
8) Free trade and warehousing zones:
 special category of Special Economic Zones with a focus on trading and warehousing.
 The objective of FTWZ is to create trade related infrastructure to facilitate the import and export of goods and
services with freedom to carry out trade related infrastructure to facilitate the import and export of goods and
services to carry out the transaction in free market.
9) Special Economic Zones:
 A scheme for setting up Special Economic Zones in country to promote Export was announced by the Export
and Import Policy march 31, 2000.
 To instill confidence in investors and the government commitment to a stable SEZ policy regime, the Special
Economic Zones Act, was passed by the parliament in may 2005.
10) EOU Scheme:
 The export oriented scheme introduced in the early 1981, is complementary to SEZ scheme.
 It offer to wide option in location with reference to factors like source of raw materials, port of export,
hinterland and facilities and availability of technology skills.
11)Agriculture Export Zones:
 Exim policy 2001 introduced the concept of Agri Export Zones(AEZs) to primacy to promotion of agriculture
export and effect a reorganisation of our export effort on the basis of specific products and specific
geographical areas.

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11)Market Access Initiative Scheme:
 The market access initiative scheme was launched in 2001-2002 for undertaking marketing promotion efforts
abroad.
 The key features of the scheme are in depth Market Studies for the select products in the chosen countries to
generate data for promotion of Export from India.
12)Reducing the transaction cost and simplifying the procedures:
The FTP(2004-09) announce a number of rationalization measures-
i. All exporters with minimum turnover ₹ 5 crore exempted from furnishing the bank guarantee.
ii. Import of second hand capital goods permitted without any age of restriction
iii. All goods and services exported including those from DTA (Domestic Tariff Area) UNITS exempted from
service tax.
iv. The Number of returns and forms to be filled reduced.
13) Concession and Exemptions.
 The large number of Tax benefits have been granted to liberalise import and promote exports.
 These include reduction in the peak rate of the custom duty to 10 percent.
 Significant reduction in duty rates for critical inputs for information technology sector, which is important
Export sector.
 Grant of concession for building infrastructure by way of 10 years tax holiday to the developers of SEZs

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Foreign trade policy (2015-20)
Introduction:
 What does Darjeeling Tea, Basmathi Rice, Indian Carpet, Kancheepuram Silk, Mysore
Sandalwood Oil, Indian Garments, Indian Software, Surat Diamonds to name a few have in
common. They represent the modern symbols of Indian foreign trade.
 On 1st April 2015, the new Foreign Trade Policy (FTP) for the period 2015-20 was
announced which replaces the 2009-14 FTP which expired on 31st March 2014. With the
announcement of new policy, exporters’ one year wait for new FTP has come to end.
 India's Foreign Trade Policy also known as Export Import Policy (EXIM) in general, aims at
developing export potential, improving export performance, encouraging foreign trade and
creating favorable balance of payments position.
 Foreign Trade Policy or EXIM Policy is a set of guidelines and instructions established by the
DGFT (Directorate General of Foreign Trade) in matters related to the import and export of
goods in India.
 The Foreign Trade Policy of India is guided by the Export Import in known as in short EXIM
Policy of the Indian Government and is regulated by the Foreign Trade Development and
Regulation Act, 1992.

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Some highlights of the present Foreign Trade Policy 2015-2020
 India to be made a significant participant in world trade by 2020
 Commerce Minister announced two new schemes in Foreign Trade Policy 2015-2020 Two
New Schemes announced in FTP Are MEIS & SEIS. FTP 2015-20 introduces two new
schemes, namely "Merchandise Exports from India Scheme (MEIS)" and "Services Exports
from India Scheme (SEIS)".
 Merchandize exports from India (MEIS) to promote specific services for specific Markets
Foreign Trade Policy.
 For services, all schemes have been replaced by a 'Services Export from India
Scheme'(SEIS), which will benefit all services exporters in India.
 FTP would reduce export obligations by 25% and give boost to domestic manufacturing.
 Incentives (MEIS & SEIS) to be available for SEZs also. FTP benefits from both MEIS &
SEIS will be extended to units located in SEZs. – Both MEIS and SEIS firms and service
providers can now get subsidized office spaces in SEZ (Special Economic Zones), along with
other benefits. With a view to boost the Special Economic Zones, Government has decided to
extend both the incentive schemes for export of goods and services to units in SEZs.

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E-Commerce of handicrafts, handlooms, books etc., eligible for benefits of MEIS. E-
Commerce exports up to Rs.25000 per consignment will get SFIS benefits.
E-Commerce Exports Eligible For Services Exports From India Scheme. – As part of Digital
India vision, mobile apps would be created to ease filing of taxes and stamp duty, automatic
money transfer using Internet Banking have been proposed. Online procedure to upload
digitally signed document by Chartered Accountant/Company Secretary/Cost Accountant to
be developed.
Agricultural and village industry products to be supported across the globe at rates of 3% and
5% under MEIS. Higher level of support to be provided to processed and packaged
agricultural and food items under MEIS.
Branding campaigns planned to promote exports in sectors where India has traditional
Strength.
Calicut Airport, Kerala and Arakonam ICDs(Inland Container Depots), Tamil Nadu notified
as registered ports for import and export.
Vishakhapatnam and Bhimavarm added as Towns of Export Excellence.

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References:
Websites:
http://www.financialexpress.com
http://economictimes.indiatimes.com
http://www.indiainfoline.com
Research papers
• India’s New Foreign Trade Policy Pluses and Minuses by Biswajit Dhar the Centre for
Economic Studies and Planning, Jawaharlal Nehru University, New Delhi.
• Economics for Everyone - India’s Foreign Trade Policy (FTP/EXIM) by Prof. M.
Guruprasad, AICAR Business School | Mumbai
Books:
• Shaikh, Business Environment, Pearson Education, New Delhi, 2006
• Misra , S.K and V.K. Puri, Indian Economy, 23rd edition, Himalaya Publishing House, 2005
• Mittal, Vivek, Business Environment, Excel Books, New Delhi, 2007