2015

Export and Import Policy in India

Economic Environment of Business

Submitted bySubmitted to-

Saurabh Wadhwa

Prof. S.P. Das

UM14163
Section-C

Table of Contents

Introduction .................................................................................................................................................. 2
General Objectives of the Exim Policy .......................................................................................................... 2
Objectives of the Export- Import Policy 1997-2002...................................................................................... 4
Implications of the Exim Policy 1997 - 2002 ............................................................................................. 4
Objectives of Export- Import Policy 2002 - 2007 .......................................................................................... 7
Implications of Export- Import Policy 2002- 07 ........................................................................................ 7
Objectives of the Export- Import Policy 2009-2014.................................................................................... 11
Implications of Export-Import Policy 2009-14 ........................................................................................ 11
Conclusion ................................................................................................................................................... 15

Introduction
Trade policy governs exports from and imports into a country. It is one of the various policy instruments
used by a country to attain her goals of economic development. This policy is thus, formulated keeping
in view, the national priorities for economic development and the international commitments made by the
country. It is essential that the entrepreneurs and the export managers understand the trade policy as it
provides the vital inputs for the formulation of their business growth strategies. In India, the trade policy
i.e., export-import policy is formulated by the Ministry of Commerce, Government of India in terms of
section 5 of the Foreign Trade (Development and Regulation) Act,1992.
Meaning
The foreign trade of India is guided by the Export-Import (Exim) Policy of the government of India arid
is regulated by the Foreign Trade (Development and Regulation) Act, 1992.
Exim Policy contains various policy decisions taken by the government in the sphere of foreign trade,
i.e., with respect to imports and exports from the country and more especially export promotion
measures, policies and procedures related thereto. It is prepared and announced by the Central
Government (Ministry of Commerce). Indias EXIM policy, in general, aims at developing export
potential, improving export performance, encouraging foreign trade and creating favourable balance of
payments position.
This Act has replaced the earlier law namely, the imports and Exports (Control) Act1947. A comparison
of the nomenclature of the two Acts makes it very dear that there is a shift in the focus of the law from
control to development of foreign trade. This shift in the focus is the outcome of the emphasis on
liberalisation and globalisation as a part of the process of economic reforms initiated in India since June
1991.

General Objectives of the Exim Policy

Government control import of non-essential items through an import policy. At the same time, allout efforts are made to promote exports. Thus, there are two aspects of trade policy; the import policy
which is concerned with regulation and management of imports and the export policy which is
concerned with exports not only promotion but also regulation. The main objective of the Government
policy is to promote exports to the maximum extent. Exports should be promoted in such a manner that
the economy of the country is not affected by unregulated exports of items specially needed within the

country. Export control is, therefore, exercised in respect of a limited number of items whose supply
position demands that their exports should be regulated in the larger interests of the country. In other
words, the policy aims at
i.

Promoting exports and augmenting foreign exchange earnings; and

ii.

Regulating exports wherever it is necessary for the purposes of either avoiding competition among
the Indian exporters or ensuring domestic availability of essential items of mass consumption at
reasonable prices.
The government of India announced sweeping changes in the trade policy during the year 1991. As a
result, the new Export- Import policy came into force from April I, 1992. This was an important step
towards the economic reforms of India. In order to bring stability and continuity, the policy was made for
the duration of 5 years. In this policy import was liberalised and export promotion measures were
strengthened. The steps were also taken to boost the domestic industrial production.
The new Exim Policy 1997-2002 aims at consolidating the gains made so far, restructuring the
schemes to achieve further liberalisation and increased transparency in the changed trading
environment. It focusses on the strengthening the domestic industrial growth and exports and enabling
higher level of employment with due recognition of the key role played by the SSI sector. It recognises
the fact that there is no substitute for growth, which creates jobs and generates income. Such trade
activities also help in stimulating expansion and diversification of production in the country. The policy
has focused on the need to let exporters concentrate on the manufacturing and marketing of their
products globally and operate in a hassle free environment. The effort has been made to simplify and
streamline the procedure.
The objectives will be achieved through the coordinated efforts of all the departments of the government
in general and the ministry of Commerce and the Directorate General of Foreign Trade and its network
of Regional Offices in particular. Further it will be achieved with a shared vision and commitment and in
the, best spirit of facilitation in the interest of export.

Objectives of the Export- Import Policy 1997-2002

The principal objectives of the EXIM Policy 1997 -2002 are as under: a) To accelerate the economy from low level of economic activities to high level of economic activities
by making it a globally oriented vibrant economy and to derive maximum benefits from expanding
global market opportunities.
b) To stimulate sustained economic growth by providing access to essential raw materials,
intermediates, components, consumables and capital goods required for augmenting production.
c) To enhance the technoloca1 strength and efficiency of Indian agriculture, industry and services,
thereby, improving their competitiveness.
d) To generate new employment. Opportunities and encourage the attainment of internationally
accepted standards of quality.
e) To provide quality consumer products at reasonable prices.

Implications of the Exim Policy 1997 - 2002

The major implications of the EXIM Policy 1997-2002 are:a) Globalisation of Indian Economy :
The EXIM policy 1997-02 proposed to prepare a framework for globalisation of Indian economy. This is
evident from the very first objective of the policy, which states To accelerate the economy from low
level of economic activities to- high level of economic activities by making it a globally oriented vibrant
economy and to derive maximum benefits from expanding global market opportunities.
The Indian economy has been exposed to more foreign competition. The regime of high protection is
gradually vanishing.
It

means,

cost

in

reduction,

order

to

survive,

improvement

in

Indian
quality,

companies
delivery

will

have

schedules

to
and

pay

due

after

attention

sales

to

service.

At the same time, Indian industries have also been given an opportunity to globalise their business by
allowing them to import machineries and raw materials from abroad on liberal terms.

b) Impact on the Indian Industry :

In the EXIM policy 1997-02, a series of reform measures have been introduced in order to give
boost

to

Indias

industrial

growth

and

generate

employment

opportunities

in non-

agricultural sector.

The reduction of duty from 15% to 10% under EPCG scheme will enable Indian firms to import
capital goods. This will improve the quality and productivity of the Indian industry.

However, liberalisation of imports by transferring 542' items from restricted list to OGL and SIL
list would adversely affect the growth of, consumer goods industry in India, as most of .these
items are consumer goods items.

c) Impact on Agriculture

Double weightage will be given for agro exports in calculating the eligibility for export houses
and all forms of trading houses.

Additional SIL of 1 % has been declared for export of agro products.

EOUs and units in EPZs in agriculture and allied sectors can sell 50% of their output in the
domestic tariff area (DT1) on payment of duty.

Double weightage for agro exports while calculating the eligibility for export houses and all forms
of trading houses.

Additional SIL of 1 % for export of agro products.

EOUs and units in EPZs in agriculture and allied sectors can sell 50% of their output in the
domestic tariff area (DTA) on payment of duty.

Under the zero duty EPCG Scheme, the threshold level has been reduced from Rs. 20 crore to
Rs. 5 crore for agriculture and allied sectors.

d) Impact on. Foreign Investment

In order to encourage foreign investment in India, the EXIM policy 1997-02 has permitted
100% foreign equity participation in the case of 100% EOUs, and units set up in EPZs.

Due to liberalisation of procedural formalities, foreign companies may bee attracted to set up
manufacturing units in India.

Full Convertibility of Indian Rupee on revenue account would also give a fillip to foreign
investment in India.

e) Impact on Quality Upgradation

The SIL entitlement of exporters holding ISO 9000 certification has been increased from 2% to
5% of the FOB value of exports.

This would encourage Indian industries to undertake research and development programmers
and upgrade the quality of their products.

Liberalisation of EPCG scheme would encourage Indian industries to import capital goods and
improve quality and increase productivity of goods.

f)

Impact on Self-reliance

One of the long-term objectives of the Indian planning is to become self- reliant. This objective
is well reflected in the EXIM Policy 1997-02.

The policy aims at encouraging domestic sourcing of raw materials, so as to build up a strong
domestic production base.

In order to achieve this the policy has also extended the benefits given to exporters to deemed
exporters. This would lead to import substitution.

Oil, power and natural gas sectors have also been brought under the purview of deemed
exports.

However, the globalisation policy of the government may harm the interests of SSls and cottage
industries, as they may not be able to compete with MNCs.

Objectives of Export- Import Policy 2002 - 2007

The export-import policy 1997-2002 carried forward the process of liberalization and globalization set
in motion by the process of economic reforms initiated since June, 1991. These reforms had aimed at
restructuring the Indian economy to increase the productivity and competitiveness of foreign trade
enterprises in order to achieve a higher rate of growth in exports. It also enabled the foreign trade grow
in

an

environment

of

liberalization

from

licensing

procedures,

quantitative

restrictions,

discretionary bureaucratic controls and cumbersome documentation procedures.

Implications of Export- Import Policy 2002- 07

All-round Development of Indian Economy:
The Exim 2002-07 emphasises all-round development of Indian economy by giving due weightage to
different sectors of the economy. That is why the policy has been described as

Employment Oriented.

Technology Oriented.

Growth Oriented. .

a) Implications on Agricultural Sector :

Agriculture being the backbone of Indian economy, the EXIM policy has initiated a series of measures
for its growth and development, especially for promotion of exports from agricultural sector.

Removal of quantitative and packaging restrictions on certain agricultural products and on export of
all cultivated varieties of seed would give a major boost to the export of these items.

Identification of 20 Agricultural Export Zones would help in development of specific geographical

areas for export of specific products.

Extension of export obligation fulfilment period from 8 years to 12 years in respect of units in
Agricultural Export Zones.

Other measures such as transport subsidy, 3% special DEPB rate, would definitely give a fillip to
exports from agricultural sector.

b) Implications on Development of Cottage Industries :

The small scale sector, along with the cottage and handicraft sector, has been contributing to more
than half of the total exports of the country. In recognition of the export performance of these sectors
and to further increase their competitiveness, the following facilities have been extended to this
sector:-

Incentives such as Market Access Initiative (MAl), duty free imports upto 3% of FOB value of
exports, EPCG facility, etc.

Entitlement for Export House Status at Rs. 5 crore instead of Rs.15crore for others. These steps
would encourage units in cottage industries to develop their export potentiality.

c) Implications on Small Scale Industry :

With a view to encourage further development of centres of economic and export excellence as Tripura
for hosiery, woolen blankets in Panipat, woolen knitwear in Ludhiana, the following benefits have been
made available to the small scale sector :

Common service providers in these areas shall be entitled for facility of EPGC Scheme. .

Availability of Market Access Initiative Scheme for creating focused technological services and
marketing abroad.

Entitlement for Export House Status at Rs. 5 crore instead of Rs.15 crore for others.

These steps would lead to development of new centres of economic and export excellence.
d) Implications on Gem and Jewellery Industry :
Having already achieved leadership position in diamonds, the Exim. Policy 2002-07 aims at achieving a
quantum jump on jewellery exports as well. In order to achieve this, the following steps have been taken
in the new Exim Policy

Import of rough diamonds is allowed freely at 0% custom duty.

Abolition of licensing regime for rough diamonds would help the country emerge as a major
international centre for diamonds.

Value addition norms for export of plain jewellery reduced to 7% and for all merchandised
unstudded jewellery to 3%

Personal carriage of jewellery allowed through Hyderabad and Jaipur airports as well.

e) Implications on Industrial Sector

Liberalisation of EPCG scheme would help Indian industries to promote quality up gradation and
would also enable sick units to revive.

Extension of repatriation period for realisation of export proceeds from180 days to 360' days would help Indian industries to be more competitive in offering liberal payment terms to foreign
importers.

Licence, certificate, permissions and customs clearances for both imports and exports onselfdeclaration basis, priority finance for medium and long term capital requirement and 100% retention

of foreign exchange in Exchange Earners Foreign Currency (EEFC) account would definitely
benefit Indian industries and would encourage Indian producers to enter the export field.

Exemption from compulsory negotiation of documents through banks would help exporters to save
bank charges.

Transport subsidy for exports from units located in North East, Sikkim and Jammu and Kashmir
would offset the disadvantage of being far from ports.

f)

Diversification of Indian Industrial Sector :

In order to promote Indian industries to diversify their business and markets, the following measures
have been taken in the Exim Policy 2002-07

Setting up of Business Centre in Indian missions abroad would enable India exporters and
businessmen to visit abroad.

Launching of Focus LAC (Latin American Countries) in Novernber 1997 has greatly accelerated
Indian trade with Latin American countries. Extension of this programme upto March 2003
would enable Indian exporters to consolidate the gains of this programme.

There is a tremendous potential for trade with the Sub- Saharan African region. Launching of
Focus Africa programme would help exporters to diversify their exports to these markets.

Permission granted to External. Commercial Borrowings (ECBs) for tenure of less than three
years in SEZs would provide opportunities for accessing working capital loan for these units at
internationally competitive rates.

g) Implications on Technology Upgradation :

Liberalisation of import and export of samples would encourage product upgradation.

Liberalisation of EPCG scheme would encourage Indian industries to import capital goods and
improve quality and increase productivity of goods.

This would also encourage Indian industries to undertake research and development programmes
and upgrade the quality of their products.

Note on Special Economic Zones (SEZs)

Special Economic Zones (SEZs) Scheme in India was conceived by the Commerce and Industries
Minister Murosoli Maran during a visit to Special Economic Zones in China in 1999. The scheme was
announced at the time of annual review of EXIM Policy effective from 1.4.2000. The basic idea is to

establish the zones as areas where export production could take place free from all roles and
regulations governing imports and exports and to give them operational flexibility.
Special Economic Zone (SEZ) is a specifically delineated duty free enclave, which shall be deemed to
be a foreign territory for the purposes of trade operations and duties and tariffs. .
Note on Agriculture Export Zones (AEZs)
Agricultural Export Zones (AEZs) have been set up by the Ministry of Commerce, GOI, with a view to
promote agricultural exports from the country and provide remunerative returns to the farming
community in a substantial manner.
A Note on Counter Trade
Counter trade is a form of international trade in which certain export and import transactions are directly
linked with each other and in which import of goods are paid for by export of goods, instead of money
payments. Counter trade helps government offices or other local institutions by facilitating the
introduction of investments, technology transfer, research and development, specialized training/skills
and related activities without additional cost to the government.
Forms of Counter Trade

Barter: Barter refers to direct exchange of goods against goods of equal value, with no money
and no third party involved in it.

Compensation Deal: Under this arrangement, the seller receives a part of the payment in cash
and the rest in products.

Buy Back: Under the buyback agreement, the supplier of plant, equipment or technology agrees
to purchase goods manufactured with that equipment or technology.

Counter purchase: Under the counter purchase agreement, the seller

payment in cash but agrees to spend an equivalent amount

receives

the

full

of money in that country within

a specified period.

Trade-for-Debt or Debt-for-Goods. A loan or credit obtained by the government is paid for

(fully or partially) in goods or services of the debtor country.

Offset. Foreign suppliers commit to introduce investments, technology transfer, training and
skills upgrade, research and development that will promote the industrial and economic growth
of the country.

Objectives of the Export- Import Policy 2009-2014

Achieving an annual export growth of 15% with an annual export target of US$ 200 billion by
March 2011.

The country should be able to come back on the high export growth path of around 25% per
annum by 2014.

Double Indias exports of goods and services by 2014

The long term policy objective for the Government is to double Indias share in global trade by
2020

The policy aims at developing export potential, improving export performance, boosting foreign trade
and earning valuable foreign exchange. FTP assumes great significance this year as Indias exports
have been battered by the global recession. A fall in exports has led to the closure of several smalland medium-scale export-oriented units, resulting in large-scale unemployment.
Following are the three pillars which will support in achieving this target

Improvement in infrastructure related to exports

Bringing down transaction costs

Providing full refund of all indirect taxes and levies.

Implications of Export-Import Policy 2009-14

a) Market Diversification

Weaker demand in developed economies, triggered by falling asset prices and increased
economic uncertainty has pulled down the growth of Indias exports to developed countries.
There are no clear signals as to when the markets in developed countries would revive.

To insulate Indian exports from the decline in demand from developed countries, in this Policy
focus is on diversification of Indian exports to other markets, especially those located in Latin
America, Africa, parts of Asia and Oceania.

b) Technological Upgradation

To usher in the next phase of export growth, India needs to move up in the value chain of export
goods. This objective is sought to be achieved by encouraging technological upgradation of our

export sector. A number of initiatives have been taken in this Policy to focus on technological
upgradation; such initiatives include:

EPCG Scheme at zero duty has been introduced for certain engineering products, electronic
products, basic chemicals and pharmaceuticals, apparel and textiles, plastics, handicrafts,
chemicals and allied products and leather and leather products.

The existing 3 % EPCG Scheme has been considerably simplified, to ease its usage by the
exporters.

To encourage value added manufacture export, a minimum 15 % value addition on imported

inputs under Advance Authorisation Scheme has been stipulated.

A number of products including automobiles and other engineering products have been included
for incentives under Focus Product, and Market Linked Focus Product Schemes.

c) Support to status holders

The Government recognized Status Holders contribute approx. 60% of Indias goods exports.

To incentivise and encourage the status holders, as well as to encourage Technological

upgradation of export production, additional duty credit scrip @ 1 % of the FOB of past export
shall be granted for specified product groups including leather, specific sub sectors in
engineering, textiles, plastics, handicrafts and jute.

This duty credit scrip can be used for import of capital goods by these status holders.

The imported capital goods shall be subject to actual user condition.

d) Agriculture and Village Industry

Vishesh Krishi and Gram Udyog Yojana

Capital goods imported under EPCG will be permitted to be installed anywhere in AEZ.

Import of restricted items, such as panels, are allowed under various export promotion schemes.

Import of inputs such as pesticides are permitted under Advance Authorisation for agro exports.

New towns of export excellence with a threshold limit of Rs 150 crore shall be notified.

Certain specified flowers, fruits and vegetables are entitled to a special duty credit scrip, in
addition to the normal benefit under VKGUY.

e) Electronics and IT Hardware Manufacturing Industries

Expeditious clearance of approvals required from DGFT shall be ensured.

Exporters /Associations would be entitled to utilize MAI & MDA Schemes for promoting
Electronics and IT Hardware Manufacturing industry exports.

f)

Green products and technologies

India aims to become a hub for production and export of green products and technologies. To
achieve this objective, special initiative will be taken to promote development and manufacture of
such products and technologies for exports.

To begin with, focus would be on items relating to transportation, solar and wind power
generation and other products as may be notified which will be incentivized.

Exports, Imports and Trade Balance (US $ Million)

Year

Exports

Imports

Trade

Rate

Balance

Change

of

Export Import
1989-90

16612

21219

-4607

18.9

8.8

1990-91

18143

24075

-5932

9.22

13.46
-

1991-92

17865

19411

-1546

-1.53

19.37

1992-93

18537

21882

-3345

3.76

12.73

1993-94

22238

23306

-1068

19.97

6.51

1994-95

26330

28654

-2324

18.40

22.95

1995-96

31797

36678

-4881

20.76

28.00

1996-97

33470

39133

-5663

5.26

6.69

1997-98

35006

41484

-6478

4.59

6.01

1998-99

33218

42389

-9171

-5.11

2.18

1999-00

36715

49738

-13023

10.53

17.34

2000-01

44076

49975

-5899

20.05

0.48

2001-02

43827

51413

-7586

-0.56

2.88

2002-03

52719

61412

-8693

20.29

19.45

2003-04

63843

78149

-14306

21.10

27.25

2004-05

83536

111517

-27981

30.85

42.70

2005-06

103091 149166

-46075

23.41

33.76

2006-07

126414 185735

-59321

22.62

24.52

2007-08

163132 251654

-88522

29.05

35.49

2008-09

185295 303696

-118401

13.59

20.68

2009-10

178751 288373

-109622

-3.53

-5.05

2010-11

251136 369769

-118633

40.49

28.23

2011-12

305964 489319

-183355

21.83

32.33

2012-13

300401 490737

-190336

-1.82

0.29

Every export-import policy aims at achieving the following1. Globalization of Indian Economy: The EXIM Policies proposed with an aim to prepare a framework
for globalizations of Indian economy. This is evident from the very first objective of the policy, which
states. "To accelerate the economy from low level of economic activities to- high level of economic
activities by making it a globally oriented vibrant economy and to derive maximum benefits from
expanding global market opportunities."
2. All-round Development of Indian Economy: The EXIM policy emphasizes all-round development
of Indian economy by giving due weight age to different sectors of the economy. That is why. The
policy has been described as:

Employment Oriented.

Technology Oriented.

Growth Oriented.

3. Impact on the Indian Industry: In the EXIM policies a series of reforms measures have been
introduced in order to give boost to India's industrial growth and generate employment opportunities in
nonagricultural sector. These include enabling Indian firms to import capital goods and is an important
step in improving the quality and productivity of the Indian industry.

Conclusion
The long-term vision of the Department of Commerce is to make India a major player in world trade by
2020, and assume a role of leadership in the international trade organizations commensurate with
Indias growing economic and demographic profile. In consonance with its vision of ensuring sustained
accelerated growth of exports and making India a major player of world trade, the Government
announces a Foreign Trade Policy (FTP) every five years. FTP is annually reviewed to incorporate
changes necessary to take care of emerging economic scenarios both domestically and globally. The
underlined philosophy of supplement to Foreign Trade Policy is based on seven broad principles:
a. Give a focused thrust to employment intensive industry.
b. Encourage domestic manufacturing for inputs to export industry and reduce the dependence on
imports
c. Promote technological up gradation of exports to retain a competitive edge in global markets
d. Persist with a strong market diversification strategy to hedge the risks against global uncertainty
e. Encourage exports from the North Eastern Region given its special place in Indias economy
f.

Provide incentives for manufacturing of green goods recognising the imperative of building capacities
for environmental sustainability

g. Endeavour to reduce transaction cost through procedural simplification and reduction of human
interface