INDIA’S FOREIGN

TRADE

2013-14
2001-12

1950-51
 FOREIGN TRADE PERFORMANCE
VALUE OF EXPORTS
1950 TO EARLY 1970s - import substitution became the keystone of development
strategy in the late 1950s. The value of exports as a percentage of GDP declined from 6% to
4%.

Early 1970s to 1980s - Value of exports as a % of GDP picked up after 1971-72 and
increased till the end of 1970s. The decade 1980s can be viewed as a period of growing
uneasiness with the policies of excessive protectionism.

 1990s - THE 1990s have witnessed an increase in the value of

exports as a % of GDP from 8% to 6%. After the payment crises of 1990-1991, when the
foreign exchange reserves had fallen drastically , the process of economic reforms was
started in 1991. The chief elements of reforms are –
 Devaluation of rupee
 Liberalisation of import licensing
 Reduction in tariffs, etc
DIRECTION OF INDIA’S FOREIGN TRADE

• DIRECTION OF TRADE REFERS TO

SOURCES OF EXPORTS AND
IMPORTS,I.E., THE COUNTRIES TO
WHICH EXPORT IS MADE AND
THE COUNTRIES FROM WHICH
IMPORT IS DONE.
H
 Some important points
 The share of east Asian countries in india’s exports was around 1/6th
before the crisis.
 Amongst the domestic factors that continue to hamper exports are –
 Infrastructural constraints
 Transaction costs
 Small scale industries reservation
 Labour inflexibility
 The compound annual growth rate (CAGR) for india’s merchandise
exports for the period 2004-05 to 2008-09 increased to 22%
 The share of emerging and developing economies (EDEs) in world
merchandise exports has increased from 25.4% to 42.3% in 2012. nearly
60% of this increase is on account of the BRICS .
ar
 HIGHLIGHTS
• With the break-up of the soviet unions, the share of the east european
countries fell dramatically from 17.9% in 1990-91 to just 2.9% in 2001-02
primarily on account of the termination of rupee trade and its adverse impact
on exports of agricultural products such as tea, tobacco and spices
• India’s exports to EU and china have been more negative during the recent
global slowdowns than in 2009-10
• The major development in the direction of the india’s trade is that USA which
was in the first position in 2007-08 has been relegated to the 3 rd position in
2008-09, with UAE becoming india’s largest trading partner followed by china
• China is the major source of india’s imports, accounting for 11.3% of india’s
total imports.
• The performance of india’s exports to EU of textiles and RMG , gems and
jewellery and ores and to china of manufactures, engineering
goods,chemicals,gem and jewellery and ores was worse off in 2012-13
 VALUE OF IMPORTS
 India’s value of imports has increased from
606crs.in 1950-51 to about 27,15,434crs. In
2013-14.
The high growth in imports in value terms
was primarily due to high POL( petroleum,
oil and lubricants) price.
Import growth decelerated sharply from
32.3% in 2011-12 to 0.3% in 2012-13 and fell
to a negative -8.3% in 2013-14 due to fall in
non-oil imports by 12.8%
 TERMS OF TRADE
• MEANING
• Terms of trade means those terms at which exports
are exchanged for imports. It is a measure of
relative price of a country’s exports and imports .
The value of exports in comparison with the value of
import is more, the terms of trade are favourable to
that country and vice versa. In case of unfavourable
terms of trade , a country has to export high cost
goods in exchange of low prize imports.
 Composition of trade
• Meaning:
• Composition of trade refers to the type of goods in which country trades i.e, types
of goods imported and exported by a country. The composition of trade reveals the
level of economic development of a country. The more developed the economy,
more will be the export of manufactured goods and import of technical know-how,
capital equipments and industrial raw materials.
• In 1951, india’s main exports were traditional items like cotton textiles ,jute, tea .
They combined to form more than 50% of the total export earnings. The share of
manufactured goods was almost nil which highlights the underdeveloped nature of
our country.
• With the development of the industrial sector, oppourtunities to export new
industrial products came in view and tis changed te composition of exports.
 It includes tea It includes leather and
It includes It includes
coffee cereals manufactures gems
iron ore crude and
unmanufactured and jewellery drugs
processed various
tobacco spices pharmaceuticals fina
minerals and petroleum
cashew nuts oil chemicals dyes
other ore products…
meals fruits and electronic goods
and minerals.
vegetables etc.. garments etc…

13.7% 1.8% 63.5% 20.6%

 COMPOSITION OF
EXPORT
Percentage share CAGR Growth rate
2000-01 2013-14 2000-01 to 2013-14
2013-14

(a) Agri & allied products 14.0 13.8 17.0 5.1

(b) Ores and minerals 2.0 1.8 16.5 1.4
(c) Manufactured goods 78.8 63.7 15.1 4.6
(d) Petroleum, crude & 4.2 20.1 33.5 3.0
products
TOTAL 100 100 17.2 4.1
 Commodity group Percentage share CAGR Growth rate
2000-1 2013- 2000-1 to 2013-14
14 2013-14
I Food and allied products 3.3 3.2 21.5 -15.9
1 Cereals 0.0 0.0 16.0 3.8
2 Pulses 0.2 0.4 29.1 -25.5
3 Edible Oils 2.6 2.1 19.6 -16.9
II Fuel 33.5 40.4 21.9 0.4
1 POL 31.3 36.7 21.6 0.7
III Fertilizers 1.3 1.4 24.0 -28.0
IV Capital goods 10.5 11.9 23.0 -14.7
1 Machinery 5.9 5.2 20.6 -14.5
2 Electrical machinery 1.0 1.0 20.4 -2.0
3 Transport equipment 1.4 3.3 30.6 -12.8
V Others 52.5 38.4 18.5 -14.4
TOTAL EXPORT 100 100 21.0 -8.3
COMPOSITION OF
EXPORTS
Year 2013-14

0%
21% 14% 2 agricultural and allied
% products
ores and minerals
manufactured goods
crude and petroleum
products
other and unclassified
items
63%
 COMPOSITION OF
IMPORTS
• The size or volume of imports is determined
by the government policy has been to import
those goods which can accelerate the pace of
economic development and not to waste
foreign reserves on the imports of
unnecessary goods . Imports have undergone
various changes since independence.
 VALUE OF EXPORTS AND IMPORTS (1950-51 TO
2014-15)
YEAR EXPORTS IMPORTS TRADE RATE OF CHANGE
BALANCE EXPORTS IMPORTS
1950-51 1269 1273 -4 24.9 -1.5
1960-61 1346 2353 -1007 0.3 16.7
1970-71 2031 2162 -131 8.8 3.5
1980-81 8486 15869 -7383 6.8 40.2
1990-91 18143 24075 -5932 9.2 13.5
2000-01 44560 50536 -5976 21.0 1.7
2005-06 103092 149167 -46076 23.4 33.8
2006-07 126360 185747 -59387 22.6 24.5
2007-08 163132 251654 -88522 29.0 35.5
2008-09 185295 303696 -118401 13.6 20.7
2009-10 178751 268373 -109622 -3.5 -5.0
2010-11 251136 369769 -118633 40.5 28.2
2011-12 305964 489319 183356 21.8 32.3
2012-13 300401 490739 190336 -1.8 0.3
2013-14 314405 450200 135795 4.7 -8.3
2014-15 241154 351206 110052 4.0 3.6
 TRADE PERFOMANCE
Exports Import Term of
trade
US $ terms Rupee Quantum Unit US $ term Rupee Quantum Unit value Net income
term index value term index index
index
2001- -0.6 2.7 0.8 1.0 2.9 6.2 4.0 2.8 -1.4 -0.9
02
2004- 30.8 27.9 11.2 14.9 42.7 39.5 17.2 18.9 -3.4 8.4
05
2007- 29.0 14.7 4.9 5.1 35.5 20.4 14.1 1.9 3.1 11.2
08
2010- 40.5 35.2 15.2 13.8 28.2 23.4 8.0 13.0 0.7 15.9
11
2011- 21.8 28.3 8.9 20.2 32.3 39.3 -20.9 74.9 -31.3 -25.2
12
2012- -1.8 11.5 7.9 6.0 0.3 13.8 4.1 8.0 -1.9 5.8
13
2013- 4.7 16.6 5.9 9.9 -8.3 1.7 -10.7 12.9 -2.7 3.1
14
2014- 3.4 5.0 4.8 3.6 1.5 3.9 0.8 3.3 0.2 5.0
15
 Trade performance of
year 2014-15 shows
• Its is useful to decompose the growth rates in terms of changes
in quantity and price which are best indicated by the quantum
and unit value indicates that reflects terms of trade . The
changes in quantum index for exports broadly corresponds
directionally with nominal growth in US dollar terms there
was negative growth as against a high positive growth rate in
the quantum index.
• In the case of the quantum index term of imports ,there was a
greater directional divergence with the nominal growth rates
expressed in US dollar and rupee terms .
• Net terms of trade has shown +0.2 % changes and income
terms of trade has shown + 0.5 % change in 2014-15.
 Balance of payment

• Bop is an accounting statement that provides a

systematic record of all economic transactions
between the residents of a country and the rest of
the world in a given period of time, usually one year.
• These transactions include payments for the
country's exports and imports of goods, services, 
financial capital, andfinancial transfers.It is prepared
in a single currency, typically the domestic currency
for the country concerned.
Bop is divided into two main accounts
 Current account
• Bop on current account is a statement of actual
receipts and payments in a short period.
• It includes value of exports and imports of both
visibles and invisible goods . There can either be
surplus or deficits in current account.
• The current account includes :- export and
imports of services, interest, profits, dividends
and unilateral receipts and payments from/to
abroad
 Components of current account

Components of current account:

The balance of the current account tells us if a country has a deficit or a surplus.
1.Merchandise
• Goods – It is also known as visible trade. Exports are valued at f.o.b prices i.e. free on board prices.
Whereas imports are valued at c.i.f prices i.e, cost, insurance, and freightprices. It takes the form of
either private merchandice or government merchandice.
2. Invisibles
• Services – Travel, Transportation, Insurance, Government not included elsewhere and miscellaneous
Services, communication services, construction services, financial services, software services, news
agency services, royalities, management services and business services.
• Income - Income is money going in (credit) or out (debit) of a country from salaries, portfolio
investments (in the form of dividends, for example), direct investments or any other type of
investment. This means that items under these categories are actual resources that are transferred
to and from a country for economic production.
• Current Transfers - These include workers' remittances, donations, aids and grants, official
assistance and pensions. Due to their nature, current transfers are not considered real resources
that affect economic production
Position of India’s current account
 Capital account
• It is the difference between receipts and
payments on account of capital account. It
refers to all financial transactions.
• The capital account involves inflows and
outflows relating to investment , short term,
medium term and long term lending and
borrowings.
• There can be surplus or deficit in capital
account.
 Components of capital account
1. Foreign Investment
 Foreign direct investment
Foreign direct investment: FDI is considered to be the most attractive type of capital flow
for emerging economies as it is expected to bring latest technology and enhance
production capability of the economy.
 Portfolio investment
Portfolio investment is the acquisition of an asset, without control over it. Portfolio
investment comes in the form of Foreign Institutional Investors (FIIs), offshore funds and
Global Depository Receipts (GDRs) and American Depository Receipts (ADRs).
2. Loans
 External assistance
 It take form of foreign aid. Foreign aid refers to international loans and grants. While grants
are non-returnable outright payments, loans are repayabe over time.
 Commercial borrowings ― cover all medium/long term loans.
External Commercial Borrowing are loans which are raised by the Indian companies from
external financial organisations in commercial terms. In case of ECB, the lenders charges
market rate of interest on loans because their motive is commercial, i.e. to make profits.
3. Banking Capital
 Non-residential Indian Deposit: Foreign currency deposits by the NRIs under FCNRA(Foreign
Currency and Non-Resident Account) is a major source of financing foreign trade and current
account deficits.
 Debt Liabilities
 Stage 1: 1951- 52 to 1975- 76
This period covers the first four five year plans .
 During the first plan the balance of payment position was quite comfortable as country
experienced a small deficit in balance of payment on current account of Rs 42 crore.
• Reasons:
Korean war boom American recession and favourable monsoon at home boost agricultural &
industrial production

 During the second plan balance of payments rose to Rs 1725 crore

Balance of payments deficit as % of GDP also increased from a deficit of.17%
during first plan to 1.038% during 2nd plan.
• Reasons:
Heavy imports of machines raw materials & food grains to meet the demand from rapidly
growing population.

 During third plan balance of payment deficit increased to Rs 1951 crore.

Average BOP as % of GDP was .09% during this period.
• Reasons:
Shortage of food grains & large imports of military equipments in the wake of Indo- China and
Indo- Pak war.
 Annual plans (1966-67 to 1968-69):
Deficit rose to Rs 2015 crore
• Reasons:
Import of foodgrains due to famine conditions in the country by droughts.
Heavy amt paid in the form of interest payments on the loans contracted earlier.

 Fourth five year plan (1969-70 to 1973-74):

During this period balance of payment was favourable to the extent of Rs 100 crore. It
was happened for the first time since independence that BOP as % of GDP showed a
surplus of 0.134%.
• Reasons:
Adoption of objective of self reliance by the government.
On the import side restriction of import was made possible through good crops in 1968-
69 and 1970-71& consequent significant reduction in import of food grains .
On the export side vigorous export promotion measures succeeded in boosting exports .

 Balance of payment accounts witnessed a huge deficit of $599 million in year 1974-75
due to substantial increase in price of crude oil (by about 4 time).
However this deficit again turned into surplus in the year 1975-76.
 Stage 2: 1976-77 to 1979-80
 This was the golden period for India's foreign trade.
• Gains from balance of payments rose to Rs 3082 crore.
• India had current account surplus of 0.6% of GDP.
• Foreign exchange reserves were 6.72 percent .
• Capital account witnessed a surplus of $968.6 million.

Reasons:
 Increase in the output of wheat & rice due to Green Revolution.
 Rapid increse in remittances from Indian workers working in Gulf countries.
 Rise in donestic production of oil & machine tools etc.
 More tourists visiting India.
 Stage 3: 1980-81 to 1989-90
This stage covers the sixth and seventh five year plans. This decade is also known as
decade of difficulties in balance of payments.
 The average deficit during sixth five year plan in BOP account was $4813 million which
was .56% of GDP.
 The current account deficit became 1.3% of GDP during sixth plan period.
 The current account deficit became 2.4% of GDP in seventh plan period.
 India became the third largest debted country in the world after Brazil and Mexico.
 India sold gold to bank of England as part of settlement account.

Reasons:
 Second oil shock of 1979-80 that increased the price of oil drastically.
 Remittances declined
 Foreign aid reduced
 Inflation grew
 Political instability increased
 Stage 4: 1991-92 to 2001-02
It covers the eighth five year plan & ninth five year plan.
In 1991 current account deficit was of Rs 17366 crore. Foreign exchange reserves were only
Rs 4388 crore. It was a situation of Foreign exchange crisis.
 In 1991 to deal with the adverse current account position of India many policy reforms
were introduced ; devaluation decontrol & liberalisation .
 A new system of exchange rate management liberalisation of import licensing & tariff
reduction were also introduced.
Eighth plan (1992-97) period:
 The impact was that balance of payments as a % of GDP showed a surplus of 1.37%
during this period.
 Foreign exchange reserves were able to finance around 7 months' imports.
 The current account deficit declined to $3716.4 million in 8th plan period from $5823.4
million in seventh plan.
 The current account deficit was 1.12 % of GDP.
 Capital account as % of GDP showed a surplus of 2.69%
 Ninth five year plan (1997-02):
 Balance of payments account witnessed a handsome surplus of $6552 million during
this plan period which was 1.68% of GDP.
 The improvement in BOP account was made possible largely becausecof dynamism in
export performance and sustained buoyancy in invisible receipts.
 However this surplus declined to $5868 million in 2000-01 due to some pressures;
• Sharp downturn in the international equity prices
• Successive rise in interest rates in USA and Europe.
But the situation eased because of funds available under Indian Millennium Deposits.
The last year of the ninth plan(2001-02) recorded surplus in current account of BOP at Rs
6719 crore.
Reasons for good performance in 2001-02 were:
• Increase in software services
• Reduced non oil import demands.
 Stage 5: 2002-03 - till date
It covers the tenth eleventh and twelfth five year plan .
Tenth plan period (2002-07):
 the first year of 10th plan (2002-03) balance of payment on current account was in
surplus at Rs 19987 crore.
 In 2003-04 balance of payment on current account was in surplus at Rs 47952 crore.
 The current account reverted to deficit in
2004-05 at Rs (12174)
2005-06 at Rs (43737)
2006-07 at Rs(44383)
Reasons:
• Trade deficit on account of rising oil prices in 2003-04 & 2004-05
• Rise in international prices of petroleum products & gold.
Capital account surplus as a % of GDP increased to 3.48 % during this period.
On the whole tenth plan perion was quite comfortable as far as balance of payments is
concerned as capital account increased at significant rate leading to significant
increase in balance of payments.
• Eleventh plan period:

year Balance of Balance of Total balance of

payments on payments on payments
current account capital account
2007-08

2008-09 (127600) 30500 (97100)

2009-10

2010-11 (210100) 269600 59500

2011-12
Source : Econonic survey 2012-13
Trade policy of govt.
of india
 Pre-1991 Trade Policy

In 80’s, export
promotion schemes
were implemented
In 1960’s and 70’s, such as cash
import were partly compensatory
liberalized with scheme, schemes of
Second year several conditions
plan(highly restrictive epz etc
policy)
Inward looking
development
strategy(import
substitution )
 The 1991 Trade Policy

Liberalisation of exports and imports

Liberal exchange rate management

Rationalisation of tariff structure

Changes in the system of export incentives

 EXIM POLICY
• It contains policies in the sphere of foreign
trade i.e. with respect to export and import
of the country and more specially export
promotion measures, policies and procedures
related there to.
• Export means selling abroad and imports as
bringing into india any goods and services.
 Objectives
• 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.
 Exim Policy(1992-1997)

In order to
liberalize imports and boost exports, the Government of India for the first time
introduced the Indian Exim Policy on April I, 1992.

In order to bring stability and continuity, the Export Import Policy was
made for the duration of 5 years.

the Central Government reserves the right in public interest to make any
amendments to the trade Policy in exercise of the powers conferred by Section-5
of the Act.
 Exim Policy (1997-2002)
FEATURES

New duty entitlement Scope of export promotion

passbook scheme was capital goods scheme was
started widened

Special incentives to
Reduction in custom duties
agricultural products

EOUs and EPZs were given

No. of restrictive items were
more incentives and
made freely importable
facilities.
 Exim policy (2002-07)

The govt. presented a medium term export strategy(METS) for 2002-07.

Sector wise targets, with a mission to achieve 1% of global trade by 2007.

Aimed to provide an environment free of restrictions and controls.

Salient features
Source : Directorate General
of Commercial Intelligence &
Statistics (DGCI&S), Kolkata
SOURCE- RESERVE BANK OF INDIA
 FOREIGN TRADE POLICY
• Policies enacted by the government sector of a domestic economy to
discourage imports from, and encourage exports to, the foreign
sector.
• The three most common trade policies are tariffs, import quotas &
export subsidies. Tariff and import quotas are designed to discourage
import and export subsidies are designed to encourage exports.
• The general goal of these foreign trade policies is to create or
increase a country’s balance of trade surplus, that is, to increase the
net exports.
 
FOREIGN TRADE POLICY (FTP) IS THE NEW NAME FOR THE EARLIEST
EXIM POLICY
 FOREIGN TRADE POLICY (FTP)
(2004-09)
According to Economic Survey 2006-07, addition made in FTP 2004-
09 are:
The government announced new foreign Trade Policy on August 31, 2004.FTP is
the new name for the earlier EXIM policy.

The preamble of new FTP reads as follows:

“For India to become a major player in world trade, an all-encompassing,
comprehensive view needs to be taken for overall development of the country’s
foreign trade. While increase in exports is of vital importance, we have also to
facilitate those imports which are required to stimulate our economy. Coherence
and consistency among trade and other economic policies is important for
maximising contribution of such policies to development. Thus, while incorporating
the existing practice of enunciating an annual EXIM policy, it is necessary to go
much beyond and take an integrated approach to the development requirements
of India’s foreign trade. This is the context of the new Foreign Trade Policy.”
OBJECTIVES OF FTP (2004-09)
The objectives of FTP (2004-09) are:
1. To double our percentage share of global
merchandise trade within the next five years;
and
2. To act as an effective instrument of economic
growth by giving a thrust to employment
generations.
 STRATEGY OF FTP (2004-09)
The strategy of FTP (2004-09) includes:
1) Unshackling of controls and creating an atmosphere of trust and transparency
to unleash the innate entrepreneurship of our businessmen, industrialists and traders.
2)Simplifying procedure and bringing down transaction costs.
3) Facilitating development of India as a global hub for manufacturing, trading and
services.
4) Identifying and developing special focus areas which would generate additional
employment opportunities, particularly in semi-urban and rural areas.
5) Helping technological and infrastructural up gradation of all the sectors of
Indian economy, especially through import of capital goods and equipment.
6)Avoiding inverted duty structure and ensuring that our domestic sectors are not
disadvantaged in the Free Trade Agreements / Preferential Trade Agreements/
Regional Trade Agreements that we enter into in order to enhance our exports.
7)Upgrading our infrastructural network , both physical virtual, related to entire
foreign trade chain, to international standard.
8)Revitalising the board of trade by redefining its role, giving it due recognition
and inducting experts on trade policy
9)Activating our Embassies as key players in our export strategy and linking our
commercial wings abroad through an electronic platform for real time trade
intelligence and enquiry dissemination.
 FOREIGN TRADE POLICY
(2009-14)
• 2009-Most severe global recession
WTO estimates project a grim forecast that global trade is likely to decline by 9% in
volume terms and IMF estimates project a decline of over 11%

World bank estimate suggests that 53 million more people would be fall into the
poverty net this year and over a billion people would go chronically hungry

It was difficult to announce a FTP in this economic climate

There was declining demand in the develo9ped world and the need was felt to set
in motion strategies and policy measurses which would catalyse the growth of
exports
 OBJECTIVES OF FTP(2009-14)
SHORT TERM OBJECTIVES

1)To arrest and reverse the declining trend of

exports
2) To provide additional support to those sectors
which have been hit badly by recession.
3) To achieve annual growth of15%with an annual
export target of us$200 billion by March 2011.In
the remaining three years of FTP i.e., up to 2014
the country should be able to come back on the
path of around 25% per annum
By 2014 the objective is to double India’s exports
of goods and services
 LONG TERM OBJECTIVE

• TO DOUBLE INDIA’S SHARE IN

GLOBAL TRADE BY 2020
 POLICY MEASURES FOR FTP(2009-14)
1. Fiscal incentives, institutional changes, procedural
rationalization, enhanced market access across the world
and diversification of export markets.
2. Improvement in infrastructure related to exports, bringing
down transaction costs, and providing full return of all
indirect taxes and levies would be the three pillars which
will support us to achieve this target.
3. Endeavour will be made to see that the goods and services
tax rebates all indirect taxes and levies on exports.
 SALIENT FEATURES OF FTP
(2009-14)
1) A special thrust needs to be provided to employment intensive
sectors which have witnessed job loss in the wake of recession,
especially in the field of textile, leather, handcraft, etc.
2) To encourage value addition in manufactured exports, minimum
15%value addition on imported input under advance authorisation
scheme has been stipulated.
3) The government seeks to promote BRAND INDIA through six or more
‘MADE IN INDIA’ shows to be organised across the world every year .
4) EPCG scheme
• Obligation under EPCG scheme relaxed.
• To aid technological up-gradation of export sector, EPCG scheme at
zero duty has been introduced
• Export obligation on import of spares, moulds etc. under EPCG
scheme has been reduced by 50%
 5) Re –Fixation of Annual Average Export Obligation
• Taking into account the decline in exports, the facility of Re-Fixation of Annual
Average Export Obligation for a particular financial year in which there is decline
in exports from the country, has been extended for the 5 year policy period2009-
14. support for GREEN PRODUCTS and products from north east extended
6) For up gradation of export sector infrastructure, towns of export excellence and
units located therein are generated additional focused support and incentives .
7) Different agreements in order to diversify export markets
• As a part of our policy of market expansion, Comprehensive Economic
Partnership Agreement has been signed with South Korea which will give
enhanced market access to Indian exports.
• Asia trade in goods agreement with ASEAN has been signed which will give
enhanced market access to several items of Indian exports.
• More agreements are in line with India’s Look East Policy.
• The MERCOSUR PREFRENTIAL Trade Agreement has also been signed. It will
deepen our trade engagement with other major economic groupings in the
world.
8) e-trade projects
In order to reduce the transaction costs and institutional bottlenecks, the e-trade
project are implemented in a time bound manner to bring all stake holders on a
common platform.
 OTHER TRADE POLICY MEASURES
Many trade policy measures were announced by the Government
in the Annual supplement to the Foreign Trade Policy on 5 th June
2012. many measures were also taken by government in Uni9on
Budget 2012-13 and the RBI in its monetary policy and credit
policies during the course of the year which include the following:
A) BUDGET RELATED
The following steps has taken in respect of custom duties :
1. Imports of equipment for initial setting up or substantial
expansion of fertilizer projects exempted from basic custom
duty of 5% for a period of 3 years up to 31 march 2015; and
custom duty on some water-soluble and liquid fertilizers other
than urea reduced from 7.5% and from 5% to 2.5% respectively
2. Concessional import duty is available for installation of
mechanized handling systems and pallet racking system in
mandis or warehouse4s extended for agricultural produce.
3. Full exemption from basic customs duty for coal mining
products.
4. Basic custom duty on plant and machinery imported for
setting up or substantial expansion of iron ore pellet plants
or iron ore beneficiation plants reduced from 7.5% to 2.5%.
5. Basic custom duty increased on standard gold bares,
gold coins of purity exceeding 99.5%and platinum from 2%
to 4% and on non-standard gold from 5% to 10%
B. CREDIT RELATED
1.W.e.f 5th may 2012, banks were allowed to determine
their interest rate on export credit in foreign currency
with the objective of increasing the availability of funds
to exporters.
2. The 2% Interest Subvention Scheme, earlier meant
for only handlooms, handicrafts, carpets and SMEs, was
extended on 1st April 2012 to 31march 2013 for labour
intensive sectors also, viz. toys, sports goods, processed
agricultural products and ready made products.
3. On 18 join 2012, the RBI enhanced the eligible limi8t
of export credit refinance(RRB) facility for scheduled
banks from 15% of the outstanding export credit
eligible for refinance to50% w.e.f 30 June 2012
FOREIGN TRADE POLICY (2015-20)
 FOREIGN TRADE POLICY
(2015-20)
The Foreign Trade Policy (FTP) 2015-20 Was unveiled By MS
Nirmala Sitharaman, Minister of State for Commerce And
Industry, Government Of India on April 1,2015

OBJECTIVES OF INDIA’S FOREIGN TRADE POLICY

2015-20
1. FTP 2015-20 provides a framework for increasing
exports of goods and services as ell as generation of
employment and increasing value addition in the
country, in the line with the ‘MAKE IN INDIA’
Programme.
2. The policy aims to enable India to respond to the challenges
of the external environment, keeping in step with a rapidly
evolving international trading architecture and make trade
major contributor to the country’s economic growth and
development.
3. To arrest and reverse declining trend of exports is the main
aim of the policy. This aim will be reviewed after two and half
years.
4) Simplification of the application procedure for availing various
benefits
5) To set in motion the strategies and policy measures which
catalyze the growth of exports
6) To encourage exports through a mix of measures including
fiscal incentives, institutional changes, procedural
rationalization and efforts for enhance the market access
across the world and diversification of export markets
 OTHER HIGHLIGHTS OF FTP (2015-20)
 FTP 2015-20 introduces two new schemes namely, ‘Merchandise Exports
from India scheme (MEIS)’ for export of specified goods to specified
markets and ‘Services Exports From India Scheme (SEIS)’ for increasing
exports of notified services.
 Duty credit scrip's issued under MEIS and SEIS and the goods imported
against these scrip's are fully transferable.
 For grant of reward under MEIS ,the countries have been categorized into 3
groups, whereas the rates of reward under MEIS range from 2%to 5%.
Under SEIS the selected services would be rewarded at the rate of 3% and
5%.
 Measures have been taken to give boost to exports of defense and hi-tech
items.
 E-commerce exports of handloom products, books/periodicals, leather
footwear, toys and customized fashion garments through courier or foreign
post office would also be able to get benefits of MEIS(FOR VALUE UP TO
INR 25000)
 Manufactures who are also status holders, will now be able to self
certify their manufactured products in phases, as originating from
India with a view to qualifying for preferential treatment under
various forms of bilateral and regional trade agreements. This
‘Approved Exporter System ‘will help manufacturer exporters
considerably in getting fast access to international markets.
 108 MSME clusters have been identified for focused interventions
to boost exports. Accordingly, ‘NIRYAT BANDHU SCHEME ‘has
been galvanized and repositioned to achieve the objectives of
‘SKILL INDIA’.

 One of the major objective of new FTP is to move towards

paperless working in 24x7
 BACKROUND-from GATT to WTO
Along with world bank and the international monetary fund, GATT was set up
to understand the process of post-war reconstruction of the global economy.
The General Agreement Tariff and Trade (GATT) was established in Geneva to
pursue the objectives of free trade in order to help in the growth and
development of all member countries. In 1947,23 countries signed GATT. India
was one of the founder members of GATT. On 31 December,1994,118 countries
were members of GATT-it was the day when GATT ceased to exist .The main
purpose of GATT was to ensure competition in commodity trade by removal of
trade barriers .it was neither an organisation nor a court of justice which could
enforce its decisions. It was simply a multinational tready , subscribed by nation
covering 85 percent of the world trade .it provided a forum to discuss trade
problems faced by member countries , known as contracting parties though
successive round of negotiation, the barriers obstucting the free flow of trade
were slowly and steadily lowered. however it was realised that GATT did not
have any mechanism for resolving trade dispute among the member ratio .
 FIVE CORE PRINCIPLES
1. Trade without discrimination : it involves most-favourable
nations(MFN) status and national treatments. national treatment
guarantee equal treatment of imported with domestically produced
output in nation market.
2. Liberalization of trade regimes: free trade through the progressive
liberalization of trade regimes.
3. The predictability of trade rules : predictability prevents governments
from arbitrarily raising existing tariffs or non-tariff trade barriers.
4. Fair competition: fair competition attempts to level of playing field in
international trade and minimize the market distortion caused by
export subsidy, dumping and other disruptive trade practices.
5. Economic , development through trade: Economic development for
the world’s poorer countries should be enhanced by trade assistance
an d increased market access through preferential trade
arrangements.
 STRUCTURE OF WTO
The structure of WTO can be classified as follow:
1. The Ministerial Conference (MC)
It is the highest level consisting of representative members . it
carry the functions of the WTO and has the authority to take
decision in any matter under the multilateral trade
agreement(MTA). The MC meets at least once in every two years.
Functional committee under MC
There are 3 functional committee
(a) Committee on Trade and Development
(b) Committee on Balance of payments restrictions
(c) Committee on Budget ,Finance and Administration.
2. The General council (GC)
It discharges functions of MC during interval between two meetings .It
is responsible for discharge of responsibilities of the dispute
settlement body and the trade policy review body . it has its own rules
and procedures and approves rules of the functional council.
Functional Councils of GC
There are 3 functional council are as follow;
(a) Council for Trade in Goods
(b) Council for Trade in Service
(c) Council for Trade related aspects of Intellectual property Rights
(TRIPs)

3. Dispute Settlement Body (DSB)

A Trade complaint is made to the WTO’s dispute Settlement Body
(DSB),which consist of the entire WTO membership .the DSB in turn ,
establish a panel of three of five expert s to hear the evidence and
render a ruling.
 FEATURES OF WTO
1. The WTO is global in its membership .At present ,there are 153
member countries (as on 23 july,2008).
2. It is the main organ of implementing the multilateral trade
agreements.
3. It has a much wider scope than its predecessor GATT.
4. Each member of WTO has a single voting right.
5. The representative of the members and all officals of the WTO
enjoy international privileges.
6. It is a full-fledged international organisation in its own right.
 OBJECTIVES OF WTO
1. To raise the standard of living in member countries by ensuring
full employment and by expanding production and trade in
goods and services.
2. To develop an integrated ,viable and durable multilateral
trading system;
3. To promote sustainable development in member countries by
the optimal use of resources;
4. To ensure linkages between trade policies, environment
policies and sustainable development.
5. To help developing countries to get a shares in the growth of
international trade.
 FUNCTIONS OF WTO
1. It provides the forum for negotiation among its members
concerning their multilateral trade relations.
2. It administers the ‘Trade Review Mechanism’.
3. It administers ‘rules and procedures governing the settlement
disputes’.
4. It co-operates with IMF,IBRD and its affiliated agencies to
achieve a better place In global economic policy.
5. It is a watch dog of international trade. it examines the trade
regimes of individual members .
6. Trade disputes that cannot be solved through bilateral talk are
forwarded to the WTO dispute settlement ‘Court’.
 AGREEMENT ON AGRICULTURE(AOA)
AOA aims at enolving an equitable reforms programme on trade in
agriculture among the member countries. it provide for
liberalisation of trade in agricultural products by progressive
reduction of Tariff and non-Tarff barriers and thus ensure relative
free access to member country’s market while also taking into
consideration concern for food security in the case of poor
countries. it is well reconized that rapid development of agriculture
in the under developed countries where it contribute significant
share of GDP and provides employment to large proportion of
workforce-is essential for the food security and alleviation of
poverty. it is expected that commitments under AOA would help to
ensure food security under for the under-develop countries.
TRADE RELATED INTELLECTUAL PROPERTY RIGHTS(TRIPS)

TRIPS seeks to protect through exclusive rights ,return in the

form of fee or royalty for undertaking innovations .At the
same time it seeks to ensure a balance between the interest
of the innovator on the one hand an d user on the another
hand. it is suppose to contribute to the promotions of
technological innovations and also dissemination of
knowledge to the mutual advantage of the producers and
users of this new knowledge. the agreement cover
copyright ,trademarks ,patents , design etc . the member
countries of WTO required to implements TRIPS through laws
and regulations and take effective action against any
infringements.
 GENERAL AGREEMENT ON TRADE IN SERVICES(GATS)

• GATS is first set of legally enforceable rules covering

international trade in services. it cover services like international
telephony, tourism and , banking , legal advice communication
and movement of natural person such as professionals. GATS
aims to liberalize trade in the services covered by the framework
.the objective of GATS is to achieve progressively higher level of
liberalization so as to promote economic growth among trading
partner and development of under-developing countries.
• The implementation of GATS is of special concern to india,
which have a distinct superiority and a vast reservoir of
professional and services like computer and information
technology etc. GATS will be considerable benefit to india.