EXIM POLICY 2004-2009

Presented By:Group 6,Section B-2

Exim Policy

• The foreign trade of India is guided by the Export-Import policy of the Government of India

• Exim policy contain various policy decisions with respect to import and exports from the country

• Exim Policy is prepared and announced by the central government

• Exim Policy of India aims to developing export potential, improving export performance, encouraging foreign trade and creating favorable balance of payment position

EXIM Policy of India 2004-2009

Hon. Shri Kamal Nath minister for commerce and industry has announced on 31st Aug 2004, India’s first Exim policy.

The duration of the policy from 1st Sept. 2004 to 31st March 2009.

It takes an integrated view of the overall development of India’s foreign trade.

Aim of the policy is to double the global merchandise trade within the policy time period of 5 years

Two Major Objectives

Objectives

To double our percentage of

share of global merchandise

trade within the five year

To act as an

effective instrument

of economic

growth by giving

a thrust to employment

generation

General Objectives of Exim Policy

• To establish the framework for globalization.• To promote the productivity competitiveness of

Indian Industry.• To Encourage the attainment of high and

internationally accepted standards of quality.• To augment export by facilitating access to raw

material, intermediate, components, consumables and capital goods from the international market.

• To promote internationally competitive import substitution and self-reliance.

Key Strategies to achieve these objectives

• Unshackling of controls• Simplifying Procedures• Neutralizing Incidence• Facilitating development of India• Identifying special focus areas• Facilitating technological upgradation

Key Strategies cont….

• Facilitating technological upgradation• Avoiding inverted duty structure• Upgrading the Infrastructure• Revitalizing the Board of Trade• Activating Indian Embassies

Special Focus Initiative:

a) Sectors with significant export prospectsb) Further sectoral initiativesc) The threshold limit of Towns of Export Excellence is reduced

Provisions of New Exim Policy

Agricultural Sector:

Agriculture has the potential to bring prosperity in rural areas, and also has the largest potential for promoting employment. Some special provisions for the agricultural sector under the EXIM policy are as follows:

a) Vishesh Krishi Upaj Yojana b) Import of Capital Goods c) Agri Export Zones d) Import of seeds

Gems and Jewellery Industry:

To provide employment among artisans and to develop their skills, special package has been announced for this sector. Some of them are:

a) Duty Free Importb) Commercial Samplesc) Import of gold

Handloom and Handicraft Sector:

Increased exports from this sector will benefit the workers at grass root level.

a) Handicraft Export Promotion Councilb) Leather and footwear industryc) Towns of Export Excellenced) Status holder exportere) Vishesh Krishi Upaj and Gram Udyog

Yojana

Leather & Footwear:

• Duty free entitlements of import trimmings, embellishments and footwear components for leather industry increased to 3% of FOB value of exports.

• Duty free import of specified items for leather sector increased to 5% of FOB value of exports.

• Machinery and equipment for Effluent Treatment Plants for leather industry shall be exempt from Customs Duty.

New Export Promotion Schemes:

A new scheme to accelerate growth of exports called “Target plus” has been introduced. Under the scheme exporters who exceed the annual export target were to be rewarded under the Target Plus scheme. This reward was in terms entitlement to duty-free credit based on incremental export earnings.

Special Schemes for Export Promotion:• Vishesh Krishi Upaj and Gram Udyog Yojna• Target Plus• ‘Focus Product’ and ‘Focus Market’ Scheme• Served from India• Duty-Entitlement Pass Book Scheme• Duty-Free Import Authorisation Scheme

SEZ (Special economic zone):

A scheme for setting up special economic zones(Sezs)in the country to promote exports was announced by the government in the export and Import Policy on March 31st , 2000. During 2006-07, exports from functioning Sezs were Rs. 34,615 crores.

Main Objectives of SEZs Act:• Generation of additional economic activity• Promotion of exports of goods and services• Promotion of investments from Domestic and Foreign sources• Creation of employment opportunities and• Development of infrastructure facilities

Star Export Houses:

A Star Export House was entitled to get license, certificate, permission and customs clearances for both import and exports on self declaration basis. The FTP announced a new categorization of status holders. Under new scheme, Export House were divided into five categories depending upon their export performance in three years:

The categories were:• One Star (export of Rs 15 crores)• Two Star (export of Rs 100 crores)• Three Star (exportof Rs 500 crores)• Four Star (export of Rs.1500 crores)• Five Star (export of Rs 5000 crores)

Free Trade & Warehousing Zones (FTWZ):

Objective:• The objective is to create trade-related infrastructure to facilitate the import and

export of goods and services with freedom to carry out trade transactions in free currency. The scheme envisages creation of world-class infrastructure for warehousing of various products, state-of-the-art equipment, transportation, handling facilities etc.

• The Free Trade & Warehousing Zones (FTWZ) shall be a special category of Special Economic Zones with a focus on trading and warehousing

Functioning:• The scheme envisages duty free import of all goods• Such goods shall be permitted to be re-sold.• Payment of duty will become due only when goods are sold.• Packing or re-packing without processing and labelling as per customer or

marketing requirements could be undertaken within the FTWZ.• The maximum period that goods shall be permitted to be warehoused within the

FTWZ will be two years.

Export oriented units (EOUs):

(a) EOUs shall be exempted from Service Tax in proportion to their exported goods and services.

(b) EOUs shall be permitted to retain 100% of export earnings in EEFC accounts.

(c) Income Tax benefits on plant and machinery shall be extended to DTA units which convert to

EOUs.(d) Import of capital goods shall be on self-certification

basis for EOUs.

Procedural Simplification

• Bank Gurantee• Second-hand-capital goods• Validity of all lincences• No. of Returns and forms has been simplified• Redressal of grievances• Physical examination of export cargo

Board of Trade:

• The role is to advising government on relevant issues connected with Foreign Trade Policy. The Board of Trade shall be revamped and given a clear and dynamic role.

• An eminent person or expert on trade policy shall be nominated as President of the Board of Trade, which shall have a Secretariat and separate Budget Head, and will be serviced by the Department of Commerce.

Other Provisions:

Pragati MaidanConvention centerFree Trade agreementService Export Promotion Council

Implications of The Foreign Trade 2004-09

Implicationson Indian Economy

Implications Implications on on

AgricultureAgriculture

Implications Implications on Handlooms on Handlooms and Handicraftand Handicraft

Implications Implications on Gem and on Gem and

Jewellery Jewellery SectorSector

Implications Implications on Leather on Leather

and Footwear and Footwear IndustryIndustry

Implications Implications on Service on Service IndustryIndustry

Annual Supplement to Foreign Trade Policy 2004-

09 Shri Kamal Nath, Minister for Commerce & Industry, Government of India announced Annual Supplement 2008, to the Foreign Trade Policy 2004-09 on the 11th April 2008.

Highlights of Supplement

DUTY ENTITLEMENT PASSBOOK SCHEME (DEPB)

REFUND OF SERVICE TAX

INCOME TAX ON EOUs

SECTORAL INITIATIVES

PROMOTION OF HIGH VALUE ADDED MANUFACTURED PRODUCTS

EXPORT PROMOTION CAPITAL GOODS SCHEME (EPCG)

FOCUS MARKET & PRODUCT SCHEMES

Highlights of Supplement cont…

Thus from the supplement, I am pleased to say that our achievements have exceeded our expectations. Not only have we fulfilled our promises in substantial measure, but we have achieved these remarkable results in just four years, instead of five.

Supplement in gist

Supplement Cont….

In 2004 our exports stood at a little over US $ 63 billion. In 2007-08, they have exceeded US $ 155 billion;

our exports are not just double what they were 4 years ago, but 2½ times that. We have managed an average cumulative annual growth rate (CAGR) of 23%,

year on year, way ahead of the average growth rate of international trade.

The task is difficult, but the prize is great. If we achieve it, India will once more become

the trading superpower it was two centuries ago

Evaluation of EXIM Policy

• Means to boost economic growth• Employment-Generation• Towns of Export-Excellence• Export of services• Setting up of Free Trade and Warehousing Zones• Import of Second-hand Capital Goods

MERITS

Evaluation Cont…..

• Setting up of Special Economic Zones-SEZs• Procedural Simplification• Boost for Small, Cottage and Handicraft

Industries• Boost for Agriculture Sector• More Incentives for Higher Growth Rate in

Exports• Diversification of Exports

Evaluation Cont….

• Liberal Imports• Encouragement to Gems and Jewellery• Setting up of Bio-Tech-Parks• Income tax concessions and exemptions.

Evaluation Cont….

• Burden of export promotion schemes• Danger of circular trading• Risk of importing outdated machinery• Policy fails to take a holistic view of trade

DEMERITS

Negative List of Exports 2002-07

The negative list consists of goods, the import or export of which is ether prohibited, restricted through licensing or otherwise to be canalized through a designate government agency.The negative list of exports, as per the EXIM Policy 2002-07

Negative List Cont…• Prohibited Items : Which items completely banned from

the exports. – All forms of wild animals including their parts and

products.– Special Chemicals as notified by the DGFT.– Exotic birds as notified by the DGFT.– Beef.– Sea Shells, as specified– Human Skeleton.– Peacock Tail– Red sanders wood in any form.

Negative list cont…• Restricted Items : which items allowed for exports under

special license issued by the DGFT.– Dress materials, ready-made garments, fabrics or textile

items with imprints of excerpts or verses of the Holy Quran.

– Horses – Kathiawadi, Marwari, and Manipuri breeds.– Fresh and frozen silver prom frets of weight less than

300gm.– Paddy (Rice in husk).– Seaweeds of all types.– Chemical Fertilizer all types.

What is new in new FTP of Govt. Of India ?

This policy comes at a time when India’s

foreign trade is growing robustly.

The FTP hopes to double the country’s percentage

share of global trade within next five years

and also generate substantial employment.

The government will rely on some established strategies like:

i) loosen controls and create an atmosphere of trust,ii) simplify procedure and reduce transaction costsiii) neutralize the incidents of levies and duties on inputs used in export products,iv) facilitate technological and infrastructural upgradation in all the sectors of the company.

What’s new? Cont….

The new initiatives announced for agricultural and other thrust areas such as handicrafts, handlooms, gem and jewellery and leather and footwear and commendable. But the promotional steps proposed are not exactly original; they involve a liberal import of

capital goods and raw materials to aid export effort.

Conclusion: The EXIM Policy 2004-2009 is one of the most ambitious policies of the

government to liberalise the Indian economy and the government has also come a long way in achieving the same. However the current policy also has its flaws which are not only because lack of radical thinking by the government but also because of the global scenario. Some of the flaws are as follows:

i) No concrete solution o reduce delays and transaction costs.ii) Software Technology Parks of India not given income tax exemption.iii) Poor export in growth, in rupee terms, and in volume terms, ignored.iv) The rising crude oil prices and inflationary pressures in the economy.v) Due to global economic slowdown and recession in the USA economy,

India’s largest trading partner, uncertainty of the rupee-dollar exchange rate continues which in turn affects the economy.

References:

• http://www.eximkey.com• http://www.eximinfo.com• http://www.eximbankindia.in/• http://exim.indiamart.com/index.html• http://dgft.gov.in• http://finmin.nic.in/

Thank You