Foreign Trade Policy

FOREIGN TRADE POLICY AND BALANCE OF PAYMENTS

Advanced Countries: restrict their imports and provide a sheltered market for their own industries promote their exports so that their expanding industries could secure foreign markets.

Discriminating Protection Import restriction since 1923 to protect domestic industries against foreign competition

Features
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Restricted imports using import licensing, import duties etc. Banning or keeping to the minimum the import of non-essential consumer goods Comprehensive control of various items of imports Liberal import of machinery, equipment, and other developmental goods to support heavy industrybased economic growth A favourable climate for the policy of import substitution. Setting up of trading institutions and through other fiscal measures, subsidies etc. the promotion of exports

PHASES OF INDIAS TRADE POLICY

Five distinct phases in Indias trade policy can be noted as follows: The first phase: 194748 to 195152
boost exports in above dollar area

The second phase: 195253 to 195657

Import licenses liberalized Reducing export duties Abolishing export quotas

The third phase: 195758 to June 1966

Export promotion drive launched Import substitution industries encouraged

The fourth phase started after devaluation of the rupee in June 1966
Liberalized imports and expand exports

Last phase after 197576

Import liberalization to encourage export promotion

MAJOR TRADE REFORMS

1. REP (Exim Scrip) the principal instrument for export-related imports 2. All exports to have a uniform REP rate of 30 per cent of the FOB value. 3. Maximum incentive to exporters whose import intensity is low. 4. All supplementary licences shall stand abolished except in the case of the small-scale sector and for producers of life-saving drugs/equipment. 5. All additional licences granted to export houses shall stand abolished. 6. OGL items to be imported through REP route 7. Unlisted OGL scheme category abolished and all items to be imported through REP

8. Cash Compensatory Scheme (CCS) abolished 9. Financial institutions allowed to trade in exim scrips

The Export Promotion Capital Goods (EPCG) scheme - It was one of the several export-promotion initiatives launched by the government in the early '90s. The basic purpose of the scheme was to allow exporters to import machinery and equipment at affordable prices so that they can produce quality products for the export market. Cash Compensatory Scheme Cash subsidy scheme designed to compensate the exporters for unrebated indirect taxes and to provide resources for product development. Import Replenishment Licenses (REP) It enabled exporters to import inputs where the domestic substitutes were not adequate in terms of price, quality etc. International Price Reimbursement Scheme (IPRS) Designed to make available specific inputs at international prices

Duty Entitlement Passbook Scheme DEPB Its aim is to neutralize the incidence of basic and special customs duty on import content of export product. Under the post-export DEPB, which is issued after exports, the exporter is given a duty entitlement Pass Book at a pre-determined credit on the FOB value. The DEPB allows import of any items except the items which are otherwise restricted for imports. Freight On Board (FOB) - specifies which party (buyer or seller) pays for which shipment and loading costs, and/or where responsibility for the goods is transferred.

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Government confident of $200 billion exports this fiscal. Zero duty Export Promotion Capital Goods (EPCG) scheme extended by one year to March 31, 2012; more products added. Duty Entitlement Passbook (DEPB) scheme extended by six months till June 30, 2011. Number of additional products from sectors like leather, engineering, textiles, jute added to 2 per cent interest subvention scheme. Additional benefit of 2 per cent bonus for 135 products under Focus Product Scheme. One per cent Status Holder Incentive Scheme (SHIS) for technology up-gradation extended till 2011-12; more products added in the scheme. Benefits under Market Linked Focus Product Scheme to garment exports to EU extended till March, 2011.

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Barmer (handicrafts), Bhiwandi (textiles) and Agra (leather goods) declared Towns of Export Excellence. Steps announced to reduce transaction cost of exports. Leather sector allowed to re-export of unsold imported raw hides and skins and semi-finished leather from public bonded warehouses, without export duty. List of items allowed for duty-free import of gems and jewellery sector expanded. Scrips issued under Served From India Scheme (for services sector) can be used for payment of duty on import of vehicles. Instant tea included for five per cent duty benefit.