Foreign Trade Policy Of India

The Govt. of India, Ministry of Commerce and Industry announce Export Import Policy every five years. The current policy covers the period 2002-2007. The Export Import Policy (Foreign Trade Policy) is updated every year on the 31st of March and the modifications, improvements and new schemes are effective w.e.f. 1st April of every year.

Context of new Foreign Trade Policy
Trade is not an end in itself, but a means to economic growth and national development. The primary purpose is not the mere earning of foreign exchange, but the stimulation of greater economic activity.
For India to become a major player in world trade, an all encompassing, comprehensive view needs to be taken for the 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 maximizing the contribution of such policies to development. Thus, while incorporating the existing practice of enunciating an annual Foreign Trade Policy, it is necessary to go much beyond and take an integrated approach to the developmental requirements of India's foreign trade.

The Foreign Trade Policy is built around two major objectives. These are:

To double our percentage share of global merchandise trade within the next five years; and
To act as an effective instrument of economic growth by giving a thrust to employment generation.

STRATEGY
For achieving these objectives, the following strategies need to be adopted:

Unshackling of controls and creating an atmosphere of trust and transparency to unleash the innate entrepreneurship of our businessmen, industrialists and traders.
Simplifying procedures and bringing down transaction costs.
Neutralizing incidence of all levies and duties on inputs used in export products, based on the fundamental principle that duties and levies should not be exported.
Facilitating development of India as a global hub for manufacturing, trading and services.
Identifying and nurturing special focus areas which would generate additional employment opportunities, particularly in semi-urban and rural areas, and developing a series of 'Initiatives' for each of these.
Facilitating technological and infrastructure up gradation of all the sectors of the Indian economy, especially through import of capital goods and equipment, thereby increasing value addition and productivity, while attaining internationally accepted standards of quality.
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.

The new Policy envisages merchant exporters and manufacturer exporters, business and industry as partners of Government in the achievement of its stated objectives and goals

The new Exim-Policy is essentially a roadmap for the development of India's foreign trade. It contains the basic principles and points the direction in which we propose to go. By virtue of its very dynamics, a trade policy cannot be fully comprehensive in all its details. It would naturally require modification from time to time. We propose to do this through continuous updating, based on the inevitable changing dynamics of international trade. It is in partnership with business and industry that we propose to erect milestones on this roadmap. With a view to doubling our percentage share of global trade within 5 years and expanding employment opportunities, especially in semi urban and rural areas, certain special focus initiatives have been identified for the agriculture, handlooms, handicraft, gems & jewellery and leather sectors.

The thrust sectors indicated below shall be extended the following facilities:

AGRICULTURE
A new scheme called the Vishesh Krishi Upaj Yojana (Special Agricultural Produce Scheme) for promoting the export of fruits, vegetables, flowers, minor forest produce, and their value added products has been introduced (Para 3.8).

Funds shall be earmarked under ASIDE for development of Agri Export Zones (AEZ)

Units in AEZ shall be exempt from Bank Guarantee under the EPCG Scheme.

Import of capital goods shall be permitted duty free under the EPCG Scheme

Units in AEZ shall be exempt from Bank Guarantee under the EPCG Scheme.

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

Import of restricted items, such as panels, shall be allowed underNew towns of export excellence with a threshold limit of Rs 250 crore shall be notified the various export promotion schemes.

Import of inputs such as pesticides shall be permitted under the Advance Licence for agro exports.

HANDLOOMS
Specific funds would be earmarked under MAI/ MDA Scheme for promoting handloom exports

Duty free import entitlement of specified trimmings and embellishments shall be 5% of FOB value of exports during the previous financial year.

Duty free import entitlement of hand knotted carpet samples shall be 1% of FOB value of exports during the previous financial year.

Duty free import of old pieces of hand knotted carpets on consignment basis for re-export after repair shall be permitted.

New towns of export excellence with a threshold limit of Rs 250 crore shall be notified.

HANDICRAFTS
New Handicraft SEZs shall be established which would procure products from the cottage sector and do the finishing for exports

Duty free import entitlement of trimmings and embellishments shall be 5% of the FOB value of exports during the previous financial year. The entitlement is broad banded, and shall extend also to merchant exporters tied up with supporting manufacturers

The Handicraft Export Promotion Council shall be authorized to import trimmings, embellishments and consumables on behalf of those exporters for whom directly importing may not be viable Specific funds would be earmarked under MAI & MDA Schemes for promoting Handicraft exports

CVD is exempted on duty free import of trimmings, embellishments and consumables.

GEMS AND JEWELLERY
Import of gold of 18 carat and above shall be allowed under the replenishment scheme

Duty free import entitlement of consumables for metals other than Gold, Platinum shall be 2% of FOB value of exports during the previous financial year.

Duty free import entitlement of commercial samples shall be Rs 100,000.

Duty free re-import entitlement for rejected jewellery shall be 2% of the FOB value of exports

Cutting and polishing of gems and jewellery, shall be treated as manufacturing for the purposes of exemption under Section 10A of the Income Tax Act

LEATHER AND FOOTWEAR
Duty free import entitlement of specified items shall be 5% of FOB value of exports during the preceding financial year.

The duty free entitlement for the import of trimmings, embellishments and footwear components for footwear (leather as well as synthetic), gloves, travel bags and handbags shall be 3% of FOB value of exports of the previous financial year. The entitlement shall also cover packing material, such as printed and non printed shoeboxes, small cartons made of wood, tin or plastic materials for packing footwear

Machinery and equipment for Effluent Treatment Plants shall be exempt from basic customs duty.

Re-export of unsuitable imported materials such as raw hides & skins and wet blue leathers is permitted CVD is exempted on lining and interlining material notified at S.No 168 of Customs Notification No 21/2002 dated 01.03.2002

CVD is exempted on raw, tanned and dressed fur skins falling under Chapter 43 of ITC(HS).

EXPORT PROMOTION SCEHEMES

Target plus scheme to accelerate growth of exports.
Vishesh krishi upaj yojna for agro-exports.
Served from India scheme
Additional flexibility under EPCG
Import of fuel under DFRC entitlement allowed to be transferred to marketing agencies authorized by Min of Petroleum and Natural Gas.
The DEFB scheme will be continued.
EOUs shall be exempted from Service Tax in proportion to their exported goods and services.
A scheme to establish Free Trade and Warehousing Zone is introduced to create trade-related infrastructure to facilitate import and export with freedom to carry out trade transactions in free currency.

In order to showcase India's industrial and trade prowess to its best advantage and leverage existing facilities to enhance the quantity of space and service the govt plans to transform Pragati Maidan into a world-class complex with visitor friendliness ingress and egress system.

A Note on Special Economic Zones (SEZ)
SEZ are growth engines that can boost manufacturing, augment exports and generate employment. The private sector has been actively associated with the development of SEZs. The SEZs require special fiscal and regulatory regime in order to impart a hassle free operational regime encompassing the state of the art infrastructure and support services. The proposed legislation on SEZs to be enacted in the near future would cover the concepts of the developer and co- developer , incorporate the provision of virtual SEZs, have fiscal concessions under the Income Tax and Customs Act, provide for Offshore Banking Units (OBUs) etc.

Out of the 24 new Special Economic Zones (SEZs) approved for establishment (as on 31/3/2004), 3 SEZs at Salt Lake (Manikanchan), Indore and Jaipur have become operational and another two Zones are now ready for operation. The new SEZs are being set up largely by the State Governments or their agencies or by the private sector in association with the State Governments or by the private sector on their own. Periodic meetings are held by the Department of Commerce with the State Governments/promoters of the SEZs to expedite the projects. Eight SEZs at Kandla and Surat (Gujarat), Santa Cruz (Maharashtra), Cochin (Kerala), Chennai (Tamil Nadu), Vishakapatnam (Andhra Pradesh), Falta (West Bengal) and NOIDA (UP) converted from Export Processing Zones (EPZs) are operational.