foregin trade policy

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INDIAS TRADE RELATIONS

India has always maintained a smooth relationship between its trade partners. Although some

territorial and other problems arise between its trade partners India has always managed to

keep all this away from the trade relations. Some of Indias major trade partners are China,

UAE, US, Saudi Arabia , Singapore , Switzerland, Germany , Hong Kong and Iran.

INDO-CHINA RELATIONS

Indias relation with China began in 1950. Indias relation with China with the Bi lateral

agreement had always been benefiting India in increasing its pace of growth towards a super

power in the world. With its bilateral agreement with China, India had improved its share in

exports to China from 0.10 percent in 1990-91 to 6.5 percent in 2007-08.imports have

increased from 0.15 percent to 10.78 percent. India and China are emerging as thepowerhouses of the world .

INDIAUS RELATIONS

With the economic reforms, Indias relation with US have been growing .India stands

24th in terms of export and 18th in terms of import with US . The dialogue between India and

US was one of the major steps in trade relations with US . Indias total merchandise trade

increased from $ 252 bn in 2004 to $794bn in 2012.

INDIAUK RELATIONS

Indias trade relation with UK isone of the major contributor of Indias economic growth.

The India UK trade have increased to 30 % in the year 2012. The bilateral trade crossed 16

billion in 2012.

Different Phases of Indian Foreign Trade Policies

The real aim of the Indian international trade policy has been to protect its market from

foreign players. Till the 1980s, our economy was not ready to open itself to the foreign

investments nor was it interested in exporting its goods and services. Because of this India

was left out of the Asian economic boom. Even if india was not interested in regional policy

and did nothing to join any of the various regional groupings that were starting to emerge, it

became necessary for India to develop a regional trade policy.


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According to the differences in the growth performances the period of growth can be split

into 4 major phases. They are 1950-65, 1965-81, 1981-88, 1988-06. The major points to be

highlighted in Phase IV is that the export of the economy became 2 times in 9 years time

during 1990 to 2000 and it reached to $102.7 billion in 2006 which was only $52.7 in the

year 2002. The same trend was followed in the service industry of the country also. The totalforeign investment has risen from $6 billion in 2002-03 to $20.2 billion in 2005-06.

The average growth of the economy during the period is represented in figure 1.1 and the

GDP growth including the fifth phase is represented in figure 1.2 respectively.

Figure 1.1: Average Growth Rate

4.1

3.2

4.8

6.3

0

1

2

3

4

5

6

7

1951-65 1965-81 1981-88 1988-06

Year Agriculture and Allied Industry Manufacturing Services

1950-51 57 15 9 28

1964-65 49 21 12 31

1980-81 40 24 14 36

1987-88 33 26 16 41

2004-05 21 27 17 52


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Indian foreign trade policy 2009-2014

Earlier this policy known as export import (Exim) policy, it is amended every five year, thegeneral aim was developing export potential. Improving the export performance, create

Figure 1.2: GDP Growth: Business cycle effect or a shift in the growth rate?

4.0

7.1

5.2

8.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1990-93 1993-97 1997-03 2003-07


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favorable situation like balance of payment of country, but the foreign trade policy are update

every year.

Major Highlights of Foreign trade policy

Foreign trade policy help the exporters for technological up gradation of exportsector infrastructure , there would be granted additional focused supports andincentives

Green products production and export zero duty EPCG scheme and incentivesfor exports

Focus market scheme incentives has been increased from 2.5 percent to 3 percent Focus product scheme incentives has been raised from 1.25 percent to 2 percent Under focus market scheme 26 markets are added , this includes 16 in Latin America

and 10 in Asia-Oceania

Minimum value addition under advance authorization scheme for export of tea hasbeen reduced from existing 100 percentage to 50 percentage

Duty free import of samples by exporters, number of samples are increased from 15to 50

Transaction cost is reduced; imported goods are directly from port to the sites. It isallowed under advance authorization scheme for deemed supplies.

Free sales certificate validity increased up to 2 yearTechnological Upgradation

Under EPCG scheme government introduced as zero duty .this schemes coveredengineering& electronic products, chemical & pharmaceuticals, apparels & textiles,

plastic, handicrafts, chemicals & allied products and leather products. The scheme

shall be in opening 31,3,2011

EPCG Scheme Relaxations

Life of existing plant and machinery increasing, normal specific export obligationreduced 50% under EPCG scheme

Support for Green Products and Products from North East

Extended Focus product(FPS) benefit for export of green products

Status Holders Encourage technological upgradation, additional duty credit shall be give to the status

holders at rate of 1 percentage of FOB value of past exports. This credit facilities shall

be available for sectors like leather, textiles, jute, handicraft, engineering, plastic and

basic chemical etc

Transferability for the Duty credit only in the VKGUY scheme has permitted. This isutilized for procurement of cold chain equipment only

Marine sector

Fisheries have been includes in this sector , they are not maintenance of average EOunder EPCG scheme


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Gems & Jewellery Sector

Natural duty on gold Jewellery exports, now its allowed duty drawback on suchexport

To make India a diamond international trading hub New facility will helps to import on consignment basis of diamondsAgriculture sector

Handling and transaction cost are reducing Single window system will facilitate the export of perishable agricultural product

Leather Sector

Allowing re-exporting of unsold imported raw hides, skins and semi finished leatherfrom public bonded warehouse, only 50% export duty are applicable

FPS rate also 2% so it would be benefited the leather sector.Tea sector

Export of tea has been reduced from 100 percent to 50% Tea export has covered under VKGUY scheme benefits

Pharmaceutical sector

Requirement of Handloom Mark for availing benefits under FPS has been removedEOUs

Export Oriented Units have been allowed to sell products manufactured by them indomestic tariff area upto a limit of 90% instead of existing 75% , without changing

the criteria of similar goods .

EOUs will now allowing to procuring finished goods for consideration along withtheir manufacturing goods

Extension of block period by one year is the calculation of net foreign exchangeearnings of EOUs

Thrust to Value Added Manufacturing

Minimum 15 percent value addition on imported inputs under Advance Authorizationscheme. it will help to encourage Value Added Manufacturing

Simplification of Procedures

Duty Free import of samples by exporters, new foreign trade policy increase thenumber of samples has been increase up to 50, previously it was 15 only

Policy has permit to conversion of shipping bill from one export promotional schemeto another export promotional scheme, present conversation limited period is three

month, before it was only one month


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Policy permitted the automobile industry, having their own Research anddevelopment establishment would be allowed free import of reference fuels.Maximum imported up to 5 KL per year.

Free sales certificate has been simplifying and validity of certificate has beenincreased up to 2 years, it will help the medical devices industry.

Reduction of Transaction Cost

No fee charges for grant of incentives, all other authorizations/ licenseapplications , maximum application fee now is around 100000 for manualapplications and 50000 for EDI application

Lest Find out the how this policy Impact on Export and Import of India


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Impact on Indias foreign trade policy on FDI


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Foreign direct investment (FDI) is an integral part of an open and effective international

economic system, which acts as a major catalyst in the development of a country through up-

gradation of technology, managerial skills and capabilities in various sectors. Indian retail

industry is one of the sunrise sectors with huge growth potential. However, in spite of the

recent developments in retail sector and its immense contribution to the economy, it

continues to be the least evolved industries in

India when compared to rest of the world. Undoubtedly, this dismal situation of the retail

sector, despite the ongoing wave of incessant liberalization and globalization, stems from the

absence of FDI encouraging policy in the Indian retail sector

Let us see what are the impacts or issues when Govt. Issuing FDI in the country.

The first foremost factor, fear for FDI in retail trade is that it will certainly disrupt thelivelihood of the poor people engaged in this trade. The opening up of big markets to

foreign sponsored departmental outlets will not necessarily absorb them; rather they

may try to establish the monopoly power in the country. The 51% foreign direct investment (FDI) will obviously have a negative impact on

small retailers, but it will benefit the consumers as they will have wider choices at

competitive prices. It will accelerate the retail market growth and provide more

employment opportunities.

The FDI Bill will definitely have a positive impact on the retail industry and thecountry by attracting more foreign investments.

Once these multi-chain retailers establish themselves, they will create infrastructurefacilities, which will also propel the existing infrastructure. The farmers will be

benefited from FDI as they will be able to get better prices for their products.

The elimination of the intermediate channels in the procurement process will lead toreduction of prices for consumers.

By allowing 51% foreign investments in the Indian market, it will teach the localretailers about real competition and help in insuring that they give better service to

Indian consumers. It is obviously good for local competition. The impact on local

kirana shops will not be affected. The kirana stores operate in a different environment


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catering to a certain set of customers and they will continue to find new ways to retain

them.

One of the justifications for introducing FDI in multi-brand retailing is to transformthe poverty stricken and stagnating rural sphere into a forward moving and prosperous

rural sphere. To actualize this goal it can be stipulated that at least 50% of the jobs in

the retail outlet should be reserved for rural youth and that a certain amount of farm

produce be procured from the poor farmers. Similarly, to develop the small and

medium enterprise (SME), it can also be stipulated that a minimum percentage of

manufactured products be sourced from the SME sector in India.

Permitting foreign investment in food-based retailing is likely to ensure adequate flowof capital into the country, & its productive use in a manner likely to promote the

welfare of all sections of society, particularly farmers and consumers. It would also

help bring about improvements in farmers income & agricultural growth and assist in

lowering consumer prices inflation.

Apart from this, by allowing FDI in retail trade, India will significantly flourish interms of quality standards and consumer expectations, since the inflow of FDI in retail

sector is bound to pull up the quality standards and cost-competitiveness of Indian

producers in all the segments.

Impact on Indias foreign trade policy on Foreign Exchange (FOREX)

The subject is receiving renewed global interest among policy makers andacademicians against the backdrop of increasing globalization of emerging

economies, acceleration of capital flows, and integration of financial markets

domestically as well as globally.

The debt crisis in some of the developing countries in the early nineties, the EastAsian crisis in 1997 and more recently the currency crisis of Argentina have posed

several dilemmas to policy makers on forex reserves.

Multilateral bodies, especially, the Bank for International Settlements (BIS) andInternational Monetary Fund (IMF) are attempting several initiatives in regard to

international financial architecture in the context of the debt-banking-financial crisis

in several countries, and matters relating to forex reserves have become an important


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component of this initiative, encompassing issues on policy, management and

transparency.

There is some interest within India on our level of Forex reserves, as evidenced byseveral articles in financial dailies, economic journals and research papers. There are

also some differences among academics on the direct as well as indirect costs and

benefits of the level of Forex reserves, from the point of view of macro-economic

policy, financial stability and fiscal or quasi-fiscal impact.

foregin trade policy

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