Export – Import Policy or Foreign Trade Policy
No country is self-sufficient in the world today. Therefore, every country has to import goods and to pay for imports it has to export goods to other countries. The ideal situation would be if every country specialized in the production of those goods in which it has a comparative cost advantage. But in addition to comparative cost several other factors including political considerations have played an important part in determining the pattern of imports and exports. To protect domestic industries, many countries in the past had imposed heavy tariffs to restrict imports.
EXIM policy refers to the policy measures adopted by a country with reference to its exports and imports. Such a policy become particularly important in a country like India, where the import and export of items plays a crucial role not just in balancing budgetary targets, but also in the over all economic development of the country.
The principal objectives of the policy are:
Ø To facilitate sustained growth in exports of the country so as to achieve larger percentage share in the global merchandise trade.
Ø To provide domestic consumers with good quality goods and services at internationally competitive prices as well as creating a level playing field for the domestic producers.
Ø To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production and providing services.
Ø To enhance the technological strength and efficiency of Indian agriculture, industry and services, thereby improving their competitiveness to meet the requirements of the global markets.
Ø To generate new employment opportunities and to encourage the attainment of internationally accepted standards of quality.
Ø To establish the framework for globalization.
Ø To promote the productivity competitiveness of Indian Industry.
Ø To augment export by facilitating access to raw material, intermediate, components, consumables and capital goods from the international market.
Ø To promote internationally competitive import substitution and self-reliance.
Export- Import (EXIM) Policy 2002-07
In order to maintain the balance of payments and to avoid trade deficit the government of India has announced a trade policy for imports and exports. After every five years the government of India reviews the import and export policy in view of the changing international economic situation. The policy relates to promotion of exports and regulation of imports so as to promote economic growth and overcome trade deficit. Accordingly, the export-and import policies (EXIM Policy) were announced by the government first in 1985 and then in 1988 which was again revised in 1990. All these policies made necessary provision for extension of import liberalisation measures. All these policies made necessary provision for import of capital goods and raw materials for industrialization, utilisation and liberalisation of REP (Registered Exporters Policy) licenses, liberal import of technology and policy for export and trading houses. The government announced its new EXIM policy for 2002-2007 which is mainly a continuation of the EXIM policy of 1997-2002. The new export-import policy for 2002-2007 aims at pushing up growth of exports to 12 per cent a year as compared to about 1.56 per cent achieved during the financial year 2001-2002.
The main features of this export- import policy are given below:
a) Concessions to exporters: To enable Indian companies to compete effectively in the competitive international markets and to give a boost to sagging exports various concessions had been given to the exporters in this new EXIM policy 2002-2007. These concessions are:
i) Exporters will now have 360 days to bring in their foreign exchange remittances as compared to the earlier limit of 180 days.
ii) Exporters will be allowed to retain the entire amount held in their exchange earner foreign currency (EEFC) accounts.
iii) Exporters will now get long-term loans at the prime lending rate for that tenure.
b) Duty Entitlement Pass Book (DEPB) and Export Promotion Capital Goods (EPCG) Schemes: DEPB and EPCG are important tools of promoting exports. These schemes have been made more flexible. In the DEPB and EPCG schemes new initiatives have been granted to the cottage industries, handicrafts, chemicals and pharmaceuticals, textile and leather products.
c) Strengthening Special Export Zones (SEZ): The new long-term EXIM policy has sought to enable Indian SEZs to be at par with its international rivals. The EXIM policy has given a boost to the banking sector reforms by permitting Indian banks to set up overseas banking units in SEZs.
d) Soft options for computer hardware industry: The export import (EXIM) policy has put the Indian computer manufacturers at par with manufacturers in other parts of the world. Companies manufacturing or assembling computers in the country will be able to import both capital and raw materials at lower duty rates to sell in the domestic market.
As per the information technology agreement which is part of the world trade organisation zero duty the agreement on I. T. sector, 217 I. T. components would attract a zero duty by 2005. Therefore, foreign companies can import these products into the country while Indian manufacturers who did the same had to meet export obligations on their imports. Now, the new EXIM policy states that domestic sales will be considered as a fulfillment of the export obligation, thereby freeing the domestic manufacturers from exports completely.
Features of EXIM Policy (2009 – 2014)
The new Foreign Trade Policy (FTP) takes an integrated view of the overall development of India’s foreign trade and goes beyond the traditional focus on pure exports. This would be clear from the following statement in the policy document, “Trade is not an end in itself, but a means to economic growth and rational development. The primary purpose is not the mere earning of foreign exchange, but the stimulation of greater economic activity.” The government unveiled a mix of procedural measures and fiscal incentives to trade with non- traditional destinations to bolster export order books drying out in two top regional markets-the US and the European Union.
New emerging markets have been given a special focus to enable exports to be competitive. Incentive schemes are being rationalised to identify leading products which would catalyse the next phase of export growth.
The government plans to introduce a nation-wide uniform GST from next year that would subsume the complex web of indirect taxes imposed by state governments. The introduction of zero duty capital goods scheme will add to expansion and modernization of production base at a time when investment is drying up in export industries.
Other important features of the policy include:
(i) $ 200 billion or Rs 98,000 crore is the export target for 2010-11.
(ii) 100% growth of India’s export of goods and services by 2014.
(iii) 15% growth target for next two years; 25% thereafter.
(iv) 3.28% targeted India’s share of global trade by 2020 double from the current 1.64%.
(v) Jaipur, Srinagar Anantnag, Kanpur, Dewas and Ambur identified as towns of export excellence.
(vi) 26 new markets added to focus market scheme.
(vii) Provision for state-run banks to provide dollar credits.
(viii) Duty entitlement passbook scheme extended till Dec. 2010. Etc.