International Marketing Management - Recent trends in India's Foreign trade

UNIT 5
1Unit 5 – Recent trends in Foreign trade
RECENT TRENDS IN
INDIA’S FOREIGN TRADE
MR.T.SOMASUNDARAM
ASSISTANT PROFESSOR
DEPARTMENT OF MANAGEMENT STUIDES
KRISTU JAYANTI COLLEGE (AUTONOMOUS)
BENGALURU

UNIT 5
RECENT TRENDS IN FOREIGN
TRADE
Institutional Infrastructure for Exports
promotions in India, India’s Trade Policy,
Exports assistance, Exports
documentation and procedures including
different stages of documentation,
Globalization in India, Opportunities,
constraints and initiatives in India, Major
globalization initiatives from Indian
companies, Government initiatives needed
to foster globalization, Future of India
Global marketing.

EXPORTS PROMOTIONS IN INDIA
Introduction:
Export development is important to the firm and to the
economy as a whole.
Government measures aim, normally at the general
improvement of the export of the nation for the general
benefit of the economy.
The benefits of exports to the economy are many.
An expanding export trade is a dynamic factor in a
country’s development process.
Export promotion in India may be required to maintain its
position against the International competition and the level
of domestic economic activity.

Objectives of Export Promotions measures in India:
Compensate the exporters for the high domestic cost of
production.
Provide necessary assistance to the new and infant
exporters to develop the export business.
Increase the relative profitability of the export business and
domestic business.
Benefits of Export promotion:
 It provides opportunities to achieve economic growth.
 Supply of commodities increase the demand.
 It enables countries to achieve export – led growth.
 It help mitigate the effects of domestic recession.
 It need to boost it exports to earn enough foreign exchange.

Need for promoting Indian Export Trade:
a) Smaller Indian markets: - size of market and demand for
products depend on India’s populations.
b) Low labour productivity: - it is ratio of labour output to
labour input.
c) Lack of technology: - most of the developed countries use
Robots machines to supervise.
d) Lack of Marketing Skills: - Indian corporates don’t want to
face competition in globe as they afraid of ‘face off’
interaction in selling result, where most of corporates sell
product through intermediaries.
e) High Trade Promotional Expenditure – value of exports is
neglibigle when we compare export value of smaller countries.
f) High Price: - Indian producers don’t have economics of
scale and hence price of commodities are not attractive to
global players. 5Unit 5 – Recent trends in Foreign trade

INSTITUTIONAL SET UP FOR
EXPORT PROMOTIONS
Organizational Set (Infrastructure):
 Government has established or sponsored a number of
organizations to provide different
types of assistance to the exporters.
 Apart from the organizations
established exclusively for export
promotion, there are also a
number of other institutions
which assist the export
sector.
Commodity
Organizatio
n
Service
Institution
Export Corporations
SpecifiedTaskCommittees
State Govt. Agencies
Central Govt. (Ministry
of Commerce)

Ministry of Commerce:
 The Ministry of Commerce, Govt. of India, is the most
important organization 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 namely –
1. Administrative an General Division.
2. Finance Division.
3. Economic Division.
4. Trade Policy Division.
5. Foreign Trade Territorial Division.
6. Exports Products Division.
7. Services Division.
8. Industries Division. 7

Ministry of Commerce
S.No. Sub Agency Function
1 Cabinet Committee on
Exports
To formulate import, export
policies.
2 Directorate General of
Foreign Trade
(DGFT)
To execute import and
export policies laid down
by Cabinet Committee.
3 Board of Trade It has 28 members, who are
experts from various fields
to advise Govt. on import /
export policies.
4 Zonal Export and
Import Advising
Committee
It has 4 Zonal offices and it
advises region wise export
possibilities. 8

Commodity Organization
1 Export Promotion
Counciles
To promote image of India as
reliable producer of
dependable quality.
2 Commodity Boards like
Tea Board, Coffiee
Board, Coir Board, etc.
To identify product wise
global markets to modify
products as per needs.
3 Marine Product Exports
Development Authority
(MPEDA)
To advise exporters, value
added marine products and
new markets.
4 Agriculture and
Processed Food product
Export development
Authority
To organize latest technology
in agriculture farming and
processing for Indian
exporters. 9

Service Institutes
1 Indian Institute of
Foreign Trade (IIFT)
To train the personnel in
foreign trade.
2 Export Inspection
Council of Indian (EIC)
To organize the quality
control of compulsory items.
3 Directorate General of
Commercial
Intelligence and
Statistics (DGCI & S)
It provides trade statistics like
product wise export – import,
market wise & corporate
wise.
4 Export and Import bank
(EXIM)
To advise exporters credit
worthiness of various
countries.
5 Indian Council of
Arbitration (ICA)
To sort out commercial
disputes through discussions.1 0

Service Institutes
6 Indian Trade Promotion
Organization (ITPO)
To promote Indian exports
through trade fairs and
exhibitions.
7 Indian Institute of
Packaging (IIP)
It has its own sensitive
laboratory and huge R & D
dept. to advise exporters on
packing materials.
8 Federation of Indian
Export Organization
(FIEO)
It provides consultancy for
export provision.
9 Export Credit
Guarantee Corporation
(ECGC)
To provide insurance covers
and financial guarantees to
exporters.
1 1

Indian Trade Promotion Organization (ITPO):
ITPO was bought in 1992 by merging together
Trade Fair Authority of India (TFAI) and Trade
Development Authority of India (TDA)
Functions of ITPO are –
a) Develop and promote exports, imports and upgrade
technology through fair in India and abroad.
b) Compile and disseminate trade related information.
c) Undertake publicity through the print and electronic
media.
1 2Unit 5 – Recent trends in Foreign trade

Specified Task Committees
1 Drawback Committee To arrange excise duty
rebates.
2 Railway Freight
Committee
To arrange refund of railway
freight.
3 RBI To control foreign exchange
4 Freight Investigation
Bureau
To make available ships for
small consignments.
5 Customs and Central
Excise Dept.
To regulate excise refund and
customs refund claims.
6 Central warehousing
Corp.
To organize and provide
stoking, places near exporting
ports.

Export Corporations
1 State Trading
Corporation (STC)
To promote agriculture products
and small scale industries
exports. It has 5 subsidiaries like
Handicrafts and handloom,
Projects Equipment and Cottage
industries corporation and Tea
trading corporation.
2 Minerals and Metals
Trading Corporation
(MMTC)
To promote import and export of
iron ore coal and fertilizers.
State Governments
To appoint Liaison Officers, district wise to exploit exports from
grass root level.
1 4

Facilities provided to Indian Exporters:
A) Import facilities to Actual users or Manufacturer.
 Import of non – banded items.
 Banned items on Automatic License after submitting annual
consumption list, duly certified by CA.
 10% higher automatic licence next year considering
inflation and price rise.
 Actual users exporting 50% of their production are eligible
for Supplementary Licence to import on real basis.
 Import of non – banned spares up to 2% value and capital
goods can be imported.
B) Export Promotion Capital Goods Scheme for actual
users.

C) Duty Exemption Scheme (DES) for Manufacturer
Exporter:
Various Licences issued under DES –
 Advance Licence.
 Value base advance licence.
 Advance Intermediate Licence (AIL).
 Advance Customs Clearance Permit.
 Special Imprest Licence (SIL).
 Import facilities for registered exporters.
 Import Replenishment Licence is issued for exports already
made.
 Imprest Licences – it is issued before export take place.
 Issues of Advance Licence for import of goods without
payment of custom duty. 1 6
 Quantity base.

D) Other facilities to both type of Exporters:
 Import of second hand capital goods allowed.
 Import of office machines like computers, calculators,
xerox machine, etc. up to Rs.25 lakhs allowed.
 Collaboration even for trading activity is permitted.
 Allowed to expand manufacturing capacity.
 Relaxation under MRTP (Monopolies & Restrictive Trade
Practices) permitted.
 Royalty payments for import of technology are liberally
entertained.
 Concessions in land prices, water and electricity charges
are allowed if unit is located in Free Trade Zones (FTZ).

Exports Assistance (Marketing Assistance for Exports):
1. Govt. of India provides market and commodity research,
publicity of exportable products, participation in Trade Fairs,
setting up warehouses, etc. at very nominal charges.
2. Pre – shipment inspection and quality control is offered to
exporter, so as to maintain minimum quality.
3. Govt. publishes various booklets, brochures, etc. to bridge
the gap between Importer and Exporter on current trends.
4. Govt. agencies conduct market oriented tours.
5. Foreign exchange is kept reserve for exporter’s import.
6. Top Exporter gets National Award.
7. Govt. allows agency’s commission in any currency.
8. Research on packing material is provided free of cost.

Exports Incentives:
 Export incentives are a widely employed strategy of export
promotion.
 The main aim of these incentives is to increase the
profitability of export business.
 Important export incentives in India include rebate of duties,
cash compensatory support, income tax concession, interest
subsidies, freight subsidy, etc.
1. Cash Incentives:
i) Marketing development assistance.
iii) International price Reimbursement scheme for steel & Iron.
iv) Natural Rubber Subsidy scheme.
v) External Marketing Assistance Scheme for Jute goods.
vi) Deemed Exports facilities.
ii) Duty drawback.

2. Excise Duty Rebate:
i) Export under bond and excise refund.
ii) Export – order cancellation diversification of goods for
home consumption.
iii) Zero in case CIF (Cost, Insurance, Freight) value more
than Rs. 20 Crores.
iv) For agriculture Industries, zero in case CIF more than
Rs.5 Crore.
3. Export Financing:
i) Pre – Shipment Finance.
ii) Post – Shipment Finance.
4. Tax Incentives:
i) Income – tax relief.
ii) Sales Tax exemption. 2 0Unit 5 – Recent trends in Foreign trade

5. Miscellaneous Facilities:
i) Non –Resident Indians abroad.
ii) International trade disputes arbitration facilities for
settlement.
iii) Airfreight assistance for export of horticulture products.
iv) Refund facilities.
6. Over Marketing Facilities:
i) Agency commission remittances to overseas agents.
ii) Sample export.
iii) Foreign exchange for overseas marketing effects.
iv) Consultancy services and projects export assistance
facilities.
v) Training facilities.

7. Export Production Facilities:
i) Raw materials assistance indigenous and imported.
ii) Import – facility for samples for prototypes,
designs, drawings, etc.
iii) Labels, price tags, hangers import.
iv) Electronic export – linked import facilities.
v) Foreign collaborations / investments facilities and
technological up gradation.
vi) Export Oriented Units (EOUs) and Export
Processing Zone (EPZ).
vii) Quality Control facilities ISO 9000 / IS 14000.
viii) Export promotion capital goods scheme. 2 2Unit 5 – Recent trends in Foreign trade

STAGES OF EXPORT DOCUMENTATION
AND PROCEDURES
Introduction:
The exporting activity involves several commercial
and regulatory procedures.
These procedures also involve considerable
documentation requirements.
The export documentation involves the preparation
of the specified number of copies of the prescribed
documents pertaining to the different procedures.

Procedure & it stages for Export documentation:
Step 1: Import Export Code (IEC) number:
 IEC numbers are normally allotted by the regional
licensing authorities.
Step 2: Membership cum Registration:
 Membership of certain bodies will help the exporters in a
number of ways.
Step 3: Inquiry and Offer:
 An inquiry is a request from a prospective importer to be
informed of the terms and conditions of sales.
Step 4: Confirmation of Order:
 Once the negotiation are completed and conditions are
acceptable to the buyer and seller, the buyer may place and
order with the exporter. 2 4Unit 5 – Recent trends in Foreign trade

Step 5: Export License:
 Exports of some items are banned and of some items
controlled by means of licenses, through many items
are permitted to be exported freely.
Step 6: Finance:
 If the exporter require pre-shipment financial
assistance, he should take the necessary steps to obtain
it.
Step 7: Production / Procurement of goods:
 Once the order is confirmed, the exporter should take
necessary steps to ensure the timely availability of the
goods of the specification required and execute the
export order promptly.

Step 8: Shipping Space:
 As soon as the export order is confirmed, the exporter
should contract the shipping companies which have
sailings for the port to which goods have to be sent and
book the required shipping space.
Step 9: Packing and Marketing:
 Once the goods are ready, they are packed and marked
properly.
Step 10: Quality control and Pre – shipment inspection:
 Needless to say, goods should be exported only after
ensuring that they are of proper quality.
Step 11: Excise Clearance:
 As a matter of policy, the government has granted excise
duty exemption for export products.

Export documentation:
1) Principal Export Documents:
a) Commercial invoice.
c) Bill of Lading.
e) Certificate of inspection / quality control.
f) Insurance certificate / policy.
h) Bills of exchange and shipment advice.
2. Auxiliary Documents:
a) Performa invoice.
c) Shipping instructions.
e) Shipping Order.
g) Application for certificate of origin.
h) Letter to the bank for collection / negotiation of documents.
b) Packing list.
d) Combined transport document.
g) Certificate of Origin.
b) Intimation for inspection.
d) Insurance declaration.
f) Mate receipt.

3) Regulatory Documents:
a) Gate pass – 1 / Gate pass – 2 – prescribed by Central Excise
Authorities.
b) AR4 / AR4A Form – prescribed by Central Excise
Authorities.
c) Shipping Bill / Bill of Export – prescribed by Central Excise
Authorities.
d) Export Application / Dock Challan – prescribed by Port
Trust.
e) Receipt for payment of Port Charges.
g) Exchange Control Declaration – prescribed by RBI GR / PP
forms.
h) Freight Payment Certificate.
i)Insurance Premium Payment Certificate.
f) Vehicle Ticket.

Shipping the Goods:
Goods may be exported to foreign by sea, air, post, land or river.
1. Shipping by Sea:
 To obtain the permission of the post authorities for the
movement of goods into the port, it is necessary to present the
cart ticket to the gate warden / inspector / keeper at the port
gate.
2. Shipping By Air:
 Shipping by air has become popular for such products as
commodities which are perishable and seasonal or high in
cost but low in bulk.
3. Shipping by Post:
 Shipping of goods may be effected by post, subject to the
foreign trade and foreign exchange regulations of the
country. 2 9Unit 5 – Recent trends in Foreign trade

4. Shipping By Land:
 The procedure for the exports of excisable goods by land to
countries like Afghanistan is, by and large, similar to the one
laid down for export by sea.
Certificate related to Shipment:
1. Mate Receipt:
 A Mate receipt is a receipt issued by the Commanding Office
of the ship when the cargo is loaded on the ship and contains
information about the name of the vessel, berth, date of
shipment, description of packages, marks and numbers,
conditions of the cargo at the time of receipt on board the ship,
etc.
2. Shipping Bill:
 Shipping Bill is the main document on the basis of which the
custom’s permission for export is given. 3 0Unit 5 – Recent trends in Foreign trade

3. Cart Ticket:
 A cart ticket, also known as a cart chit, vehicle and gate pass, is
prepared by the exporter and includes details of the export cargo in
terms of the shipper’s name, the number of packages, the
shipping bill number, the port of destination and the number of the
vehicle carrying the cargo.
4. Certificate of Measurement.
5. Bill of Lading. (Lading - detailed list of a ship’s cargo in form of a
receipt given by master of ship to person consigning goods).
Documents related to Payment:
1. Letter of Credit.
3. Trust Receipt.
5. Bank Certificate of Payment.
Certificate of Inspection: It is a certificate issued by the Export
Inspection Agency, certifying that the consignment has been
inspected as required under Export Act, 1963. 3 1
6. Airway Bill.
2. Bill of Exchange.
4. Letter of Hypothecation.

GLOBALIZATION
Introduction:
Expansion of economic activities across the political
boundaries of nation states.
Increasing economic openness and growing
economic interdependence between countries.
Opening up of markets to foreign players and vice
versa.
Definition:
“Globalization is the process of growing
interdependence among elements of the global
economy.

What kinds of things cross international borders?
1. Trade – Goods and Services:
 (E.g.) You can buy a TV from China, Japan and also hire
someone from India to write software, etc.
2. Capital – Money and Investment:
 (E.g.) you can put your savings into bank in other countries
and also buy stock in foreign companies.
3. People – immigrants, refugees and tourists:
 Immigrants come from Asia, Africa and also easily travel to
Europe, America, etc.
4. Communication:
 You can easily call or email people around the world.
5. Culture (art, music):
 You can hear music from other countries.

What kinds of things cross international borders?
(Opportunities)
1. International Trade: (Lower Trade barriers and
more competition).
2. Financial Flows: (FDI, Technology transfer /
licensing, portfolio management, debt).
3. Communications: (Traditional media and Internet).
4. Technological advances in transportation,
electronics, bio engineering and related fields:
5. Population mobility, especially labour.

Drivers of Globalization:
1. Market Drivers:
 Per capita income converging among industrialized nations.
 Convergence of lifestyles and tastes.
 Organizations beginning to behave as global customers.
 Increasing travel creating global consumers.
 Growth of global and regional channels.
 Establishment of world brands.
 Push to develop global advertising.
2. Cost Drivers:
 Continuing push for economies of scale.
 Accelerating technological innovation.
 Advances in transportation.

 Emergence of newly industrialized countries with
productive capability and low labour costs.
 Increasing cost of product development relative to market
life.
3. Government Drivers:
 Reduction of tariff barriers.
 Reduction of non – tariff barriers.
 Creation of blocs.
 Decline in role of governments as producers and customers.
 Shift to open market economies from closed communist
systems in eastern Europe.
 Increasing participation of China and Indian in the Global
Economy.

4. Competitive Drivers:
Continuing increases in the level of world trade.
Increased ownership of corporations by foreign
acquirers.
Rise of new competitors intent upon becoming
global competitors.
Growth of global networks making countries
interdependent in particular industries.
More companies becoming globally centered rather
than nationally centered.
Increased formation of global strategic alliances.

Pros of Globalization:
Increases economic prosperity and opportunity.
Higher degrees of political and economic freedom
in the form of democracy.
Improved standard of living reduction in poverty.
Improved gender relations.
Increased life span.
Cons of Globalization:
Increased environmental damage.
Increased poverty, inequality, injustice erosion of
traditional culture.

Corporations are motivated by profit and have little
concern for people.
Economic globalization developments feed into
ethnic, religious and factional tensions that lead to
wars and terrorism.
Terrorists now globally interconnected and
empowered with knowledge, create a whole new
category of warfare based, in part, on the disruption
of the interconnections which are both created by
and necessary for globalization.
Corporations shape political policy of countries.

MAJOR GLOBALIZATION INITIATIVES
FROM INDIAN COMPANIES
1. Tata Infotech:
 It includes Banking Financial Services & Insurance (BFSI),
Consumer Packaged Goods (CPG), Retail, Manufacturing,
Engineering Services, Media & Entertainment, Travel,
Hospitality, Life Sciences and Transportation & Logistics.
 Ranked amongst Top 10 Specialty Application Development
Providers – Global Services, CMP Media.
2. Mahindra & Mahindra:
 One of the largest and most technologically advanced
manufacturing of forged and machined components in the
world.
 They create parts like shafts, pistons, axles, etc. throughout
the world. 4 0Unit 5 – Recent trends in Foreign trade

3. Infosys:
 Infosys is a global leader in consulting, technology and
outsourcing with revenues of US$7.231 billion.
 Infosys provides business consulting technology,
engineering and outsourcing services to help clients in over
30 countries build tomorrow’s enterprise.
 Infosys and its subsidiaries have 255,629 employees as on
Dec, 2012.
 Infosys takes pride in building strategic long – term client
relationships, 97.5% of our revenues come from existing
customers.
 Infosys have a global foot print with 67 offices and 69
development centers in US, India, China, Australia, Japan,
Middle East, UK, Canada, Poland, Germany, etc.

4.Dabur:
 Dabur has a special Herbal health care and personal care
range successfully selling in markets ranging from Middle
East, North Africa and Europe.
 Inroads into several European and American markets that
have good potential due to resurgence of back – to – nature
movement.
 Export of Active Pharmaceutical ingredients (APIs0,
manufactured under strict international quality
benchmarks, to Europe, Latin America, etc.
 Export of food and textile grade natural gums, extracted
from traditional plant sources.
 6 modern manufacturing facilities spread across South
Asia, middle east and Africa to optimize production by
utilizing modern technology. 4 2

5. Tata (Corus Group – U.K.):
 Tata Steel, one of the leading steel
producers in India acquired Corus Group for U.S. $12.11
billion.
 This acquisition is considered to be one biggest foreign
acquisitions by an Indian company.
6. Jaguar Cars and Land Rover (U.K.):
 Tata Motors has acquired both
Jaguar and Land Rover which are two
iconic British brands with worldwide growth.
 This is another endeavor of fast growing Indian industries,
also the latest in a string of foreign acquisitions by Tata.

6. Bharti Airtel (Zain Africa):
 It acquired Zain Africa for a value of
U.S. $10.7 billion.
 By expanding its business outside the country, long term
benefit from economies of scale, including getting better
deals from suppliers.
7. ONGC (Imperial Energy – U.K.):
 It has acquired Imperial Energy
which deals with 1.3 billion pounds.
 Company owned acquisition to government support, which
in the past seven years increase its no. of projects to 39 in
17 countries, from just a single project in Vietnam.

MAJOR CHANGES IN GLOBAL
MARKETING
1. World Growth:
Most of the world is in a stage of economic growth.
Asia growing at annual rates of 7 percent or higher.
China and India, which have begun to develop a middle class.
The population within the developed economies of the world
is continuing to grow will be a major market for goods and
services across a broad spectrum of consumer products.
2. World Economic Dominates:
The macro economics of the nation-state no longer control
economic outcomes in countries.
Need for economic and political reform at the national,
regional and global levels.

3. Trade Cycle Decision Rule:
Changes in global competition are bringing
companies into more direct competition with
economic rivals in other parts of the world.
A product matures, its production location would
shift to some countries.
4. Free Markets rule the world:
 The 75 year contest between capitalism and
communism is over.
Nowadays, Markets are in control of the allocation
of resources all over the world.

5. Accelerating growth of Global markets:
Accelerating growth is the high rate of growth in both the
high-and low-income countries.
The driving forces of this growth are technology,
deregulation, global integration, and the triumph of
marketing.
6. Rise of Internet and Information technology:
 The rapidly growing diffusion of Internet access combined
with the rapidly expanding bandwidth and capacity of the
global Internet itself will play a major role in supporting the
growth of global markets and global marketing.
Amazon.com can reach customers in Taiwan and Tokyo just
as easily as it can reach customers in Boston.

FUTURE OF INDIAN GLOBAL
MARKETING
Some of the measures to promote globalization in India are –
1. Import Liberalization:
 For liberalizing foreign trade, import controls through
licensing was abolished.
2. Imports of Gold and Silver:
 This reduced the incentive for smuggling and imports of
gold were made free from any commission charged for it.
3. Market – Determined Exchange Rate:
 This exchange rate of rupee today is determined by
demand and supply conditions in the foreign exchange
markets.

4. Convertibility of Rupee:
 Another important reform of globalizing the Indian
Economy was the convertibility of rupee on balance of
payments on current account.
 This implies the importers can get their required quantity of
foreign market by converting their rupee into dollars from
foreign currency market.
5. Liberalization of Foreign Investment:
 New economic policy adopted considerably liberalized the
scope of foreign investment, both direct and portfolio.
 Foreign portfolio investment was allowed mainly into a
limited number of public sectors bond issues.

50Unit 5 – InstitutionalAssistance

51Unit 5 – InstitutionalAssistance

International Marketing Management - Recent trends in India's Foreign trade

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