Foreign Trade Policy

In India, the main legislation concerning foreign trade is the Foreign Trade (Development and Regulation) Act, 1992. The Act provides for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from, India and for matters connected therewith or incidental thereto. As per the provisions of the Act, the Government :- (i) may make provisions for facilitating and controlling foreign trade; (ii) may prohibit, restrict and regulate exports and imports, in all or specified cases as well as subject them to exemptions; (iii) is authorised to formulate and announce an export and import policy and also amend the same from time to time, by notification in the Official Gazette; (iv) is also authorised to appoint a 'Director General of Foreign Trade' for the purpose of the Act, including formulation and implementation of the export-import policy.

Accordingly, the Ministry of Commerce and Industry has been set up as the most important organ concerned with the promotion and regulation of foreign trade in India. In exercise of the powers conferred by the Act, the Ministry notifies a trade policy on a regular basis with certain underlined objectives. The earlier trade policies were based on the objectives of self-reliance and self-sufficiency. While, the later policies were driven by factors like export led growth, improving efficiency and competitiveness of the Indian industries, etc.

With economic reforms, globalisation of the Indian economy has been the guiding factor in formulating the trade policies. The reform measures introduced in the subsequent policies have focused on liberalization, openness and transparency. They have provided an export friendly environment by simplifying the procedures for trade facilitation. The announcement of a new Foreign Trade Policy for a five year period of 2004-09, replacing the hitherto nomenclature of EXIM Policy by Foreign Trade Policy (FTP) is another step in this direction. It takes an integrated view of the overall development of India’s foreign trade and provides a roadmap for the development of this sector. A vigorous export-led growth strategy of doubling India’s share in global merchandise trade (in the next five years), with a focus on the sectors having prospects for export expansion and potential for employment generation, constitute the main plank of the policy. All such measures are expected to enhance India's international competitiveness and aid in further increasing the acceptability of Indian exports. The policy sets out the core objectives, identifies key strategies, spells out focus initiatives, outlines export incentives, and also addresses issues concerning institutional support including simplification of procedures relating to export activities.

The key strategies for achieving its objectives include:-

• Unshackling of controls and creating an atmosphere of trust and transparency;
  
  
• Simplifying procedures and bringing down transaction costs;
  
  
• Neutralizing incidence of all levies on inputs used in export products;
  
  
• Facilitating development of India as a global hub for manufacturing, trading and services;
  
  
• Identifying and nurturing special focus areas to generate additional employment opportunities, particularly in semi-urban and rural areas;
  
  
• Facilitating technological and infrastructural upgradation of the Indian economy, especially through import of capital goods and equipment;
  
  
• Avoiding inverted duty structure and ensuring that domestic sectors are not disadvantaged in trade agreements;
  
  
• Upgrading the infrastructure network related to the entire foreign trade chain to international standards;
  
  
• Revitalizing the Board of Trade by redefining its role and inducting into it experts on trade policy; and
  
  
• Activating Indian Embassies as key players in the export strategy.
  

The FTP has identified certain thrust sectors having prospects for export expansion and potential for employment generation. These thrust sectors include: (i) Agriculture; (ii) Handlooms & Handicrafts; (iii) Gems & Jewellery; and (iv) Leather & Footwear. Accordingly, specific policy initiative for these sectors have been announced.

• For the agriculture sector :-



• A new scheme called "Vishesh Krishi Upaj Yojana (Special Agricultural Produce Scheme)" to boost exports of fruits, vegetables, flowers, minor forest produce and their value added products has been introduced. Under the scheme, exports of these products qualify for duty free credit entitlement (5 per cent of Free On Board (f.o.b) value of exports) for importing inputs and other goods;
  
  
• Duty free import of capital goods under Export Promotion Capital Goods (EPCG) scheme, permitting the installation of capital goods imported under EPCG for agriculture anywhere in the Agri- Export Zone (AEZ);
  
  
• Utilizing funds from the 'Assistance to States for Infrastructure Development of Exports (ASIDE) scheme' for development of AEZs;
  
  
• Liberalization of import of seeds, bulbs, tubers and planting material, and liberalization of the export of plant portions, derivatives and extracts to promote export of medicinal plants and herbal products.
  
  
• For the handlooms and handicraft sector :-



• Enhancing to 5 per cent of Free On Board (f.o.b) value of exports duty free import of trimmings and embellishments for handlooms and handicrafts;
  
  
• Exemption of samples from countervailing duty (CVD);
  
  
• Authorizing Handicraft Export Promotion Council to import trimmings, embellishments and samples for small manufacturers; and
  
  
• Establishment of a new Handicraft Special Economic Zone.
  
  
• For the gems and jewellery sector :-



• Permission for duty free import of consumables for metals other than gold and platinum up to 2 per cent of Free On Board (f.o.b) value of exports;
  
  
• Duty free re-import entitlement for rejected jewellery allowed up to 2 per cent of f.o.b value of exports;
  
  
• Increase in duty free import of commercial samples of jewellery to Rs.1 lakh; and
  
  
• Permission to import of gold of 18 carat and above under the replenishment scheme.