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Fiscal PolicyObjectives:To mobilise resources for economic developmentTo raise the level of savings ang investment to increase capital formation.Optimum use of resourcesTo eradicate poverty and unemploymentTo reduce regional disparityTo control inflationary pressure

Techniques of Fiscal PolicyTaxation policyPublic debt policyPublic expenditure policyDeficit financing policyShortcomings:Negative return to public sectorInflationGrowing inequalityDefective tax structure

*IntroductionTrade 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. Before 1947 when India was a colony of the British, the pattern of her foreign trade was typically colonial. With the dawn of independence, the colonial pattern of trade had to change to suit the needs of a developing economy. An economy which decides to embark on program of development is required to extend its productive capacity at a fast rate. UIAMSIndias Trade Policy

*Main Features of Indias Trade PolicyRestricted foreign competition through- import licensing, import quotas, import duties, extreme cases banning the import of specific goods.Strategy of economic developmentBanning or keeping to the minimum the import of non-essential consumer goodsComprehensive control of various items of importsLiberal import of machinery, equipment and other development goods to support heavy industries-based economic growthFavorable climate for the policy of import substitutionMinimise dependence on foreign countriesUIAMSIndias Trade Policy

*Phases of Indias Trade PolicyDistinct phases in Indias trade policyFirst phase pertains to the period 1947-48 to 1951-52The second phase covers the period 1952-53 to 1956-57The third phase after 1956-57 to June 1966The fourth phase started after devaluation of the rupee in June 1966Phase after 1975-76Export-Import Policy 1985Indias Foreign Trade Policy 1991UIAMSIndias Trade Policy

*Indias Foreign Trade Policy 1991IntroductionBeginning mid-1991, the government of India introduced a series of reforms to liberalise and globalise the Indian economy. Reforms in the external sector of India were intended to integrate the Indian economy with the world economy. India's approach to openness has been cautious, contingent on achieving certain preconditions to ensure an orderly process of liberalisation and ensuring macroeconomic stability. This approach has been vindicated in recent years with the growing incidence of financial crises elsewhere in the world. All the same, the policy regime in India in regard to liberalisation of the foreign sector has witnessed very significant change. UIAMSIndias Trade Policy

*Indias Foreign Trade Policy of 1991Commerce Minister P.Chidambaram annouced a major overhaul of trade policy on July 4,1991, entailing1. suspension of cash compensatory support2. An enlarged and uniform Rupee rate of 30% of f.o.b. value3. Abolition of all supplementary licences except in the case of small-scale sectors4. Removal of all import licensing for capital goods and raw materialUIAMSIndias Trade Policy

*Important Aspect of New Trade Policy of 1991Promotion of exportsAdvance licensing systemTransferable advance licenseExporters allowed to dispose of the material importedReduction in the licensingProcedure for obtaining bank guarantee and legal undertaking liberalisedExport houses and trading house given leewayUIAMSIndias Trade Policy

*Assessment of the new Trade PolicyCut down administrative controls and BarriersPermit imports to the extent of 30% on 100% realisation of export proceedsStreamlined procedures for licensesDecanalisation of importsUIAMSIndias Trade Policy

*FOREIGN TRADE POLICY1st September 2004-31st March 2009

PREAMBLEThe Foreign Trade Policy is rooted in this belief and built around two major objectives. These are:(i) To double our percentage share of global merchandise trade within the next five years(ii) To act as an effective instrument of economic growth by giving a thrust to employment generation.

UIAMSIndias Trade Policy

*STRATEGY

(i) Unshackling of controls and creating an atmosphere of trust and transparency tounleash the innate entrepreneurship of our businessmen, industrialists and traders.

(ii) Simplifying procedures and bringing down transaction costs.

(iii) 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.

(iv) Facilitating development of India as a global hub for manufacturing, trading andservices.

(v) Identifying and nurturing special focus areas which would generate additional employment opportunities, particularly in semi-urban and rural areas, and developinga series of Initiatives for each of these.


*STRATEGY

(vi) Facilitating technological and infrastructural upgradation of all the sectors of theIndian economy, especially through import of capital goods and equipment, therebyincreasing value addition and productivity, while attaining internationally acceptedstandards of quality.

(vii) Avoiding inverted duty structures and ensuring that our domestic sectors are notdisadvantaged in the Free Trade Agreements/Regional Trade Agreements/PreferentialTrade Agreements that we enter into in order to enhance our exports.

(viii) Upgrading our infrastructural network, both physical and virtual, related to the entireForeign Trade chain, to international standards.

(ix) Revitalising the Board of Trade by redefining its role, giving it due recognition andinducting experts on Trade Policy.

(x) Activating our Embassies as key players in our export strategy and linking ourCommercial Wings abroad through an electronic platform for real time tradeintelligence and enquiry dissemination.


*Special Focus InitiativesDoubling percentage share of global trade within 5 yearsExpanding employment opportunities, especially in semi urban and rural areas,focus on agriculture, handlooms, handicraft, gems & jewellery, leather and Marine sectors.Promote exports in these sectors by specific sectoral strategies that shall be notified from time to time.


*New Sectoral InitiativesThe thrust sectors indicated below shall be extended the following facilities:

(i) Agriculture and Village Industry(a) Vishesh Krishi and Gram Udyog Yojana (Special Agricultural and Village Industry Scheme) for promoting export of fruits, Vegetables, Flowers, Minor Forest produce, Dairy, Poultry and their value added products and Gram Udyog products introduced(b) Funds earmarked under ASIDE for development of Agri Export Zones (AEZ)(c) Capital goods imported under EPCG permitted to be installed anywhere in the AEZ.(d) Import of restricted items, such as panels, allowed under the various export promotion schemes(e) Import of inputs such as pesticides permitted under the Advance Authorisation for agro exports(f) New towns of export excellence with a threshold limit of Rs. 250 crore notified


*New Sectoral Initiatives(ii) Handlooms :(a) Specific funds earmarked under MAI/ MDA Scheme for promoting handloom exports.(b) Duty free import entitlement of specified trimmings and embellishments to be 5% of FOB value of exports during the previous financial year.(c) Duty free import entitlement of hand knotted carpet samples be 1% of FOB value of exports during the previous financial year.(d) Duty free import of old pieces of hand knotted carpets on consignment basis for re-export after repair permitted.(e) New towns of export excellence with a threshold limit of Rs. 250 crore notified.(f) Government has decided to develop a trade mark for Handloom on lines similar to Woolmark and Silkmark. This will enable handloom products to develop a niche market with a distinct identity.


*New Sectoral Initiatives(iii) Handicrafts:(a) New Handicraft SEZs established to procure products from the cottage sector and do the finishing for exports.(b) Duty free import entitlement of trimmings and embellishments tol be 5% of the FOB value of exports during the previous financial year. The entitlement broad banded, and extended also to merchant exporters tied up with supporting manufacturers.(c) The Handicraft Export Promotion Council authorized to import trimmings, embellishments and consumables on behalf of those exporters for whom directly importing may not be viable.(d) Specific funds earmarked under MAI & MDA Schemes for promoting Handicraft exports.(e) CVD exempted on duty free import of trimmings, embellishments and consumables.(f) New towns of export excellence with a reduced threshold limit of Rs. 250 crore notified.


*New Sectoral Initiatives(iv) Gems & Jewellery(a) Import of gold of 8k and above allowed under the replenishment scheme subject to the import being accompanied by an Assay Certificate specifying the purity, weight and alloy content.(b) Duty free import entitlement of consumables for metals other than Gold, Platinum be 2% of FOB value of exports during the previous financial year.(c) Duty free import entitlement of commercial samples to be Rs. 300,000.(d) Duty free re-import entitlement for rejected jewellery to be 2% of the FOB value of exports(e) Cutting and polishing of gems and jewellery, treated as manufacturing for the purposes of exemption under Section 10A of the Income Tax ActUIAMSIndias Trade Policy

*New Sectoral Initiatives(v) Leather and Footwear(a) Duty free import entitlement of specified items be 5% of FOB value of exports during the preceding financial year.(b) 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 as 3% of FOB value of exports of the previous financial year. Entitlement covers packing material, such as printed and non printed shoeboxes, small cartons made of wood, tin or plastic materials for packing footwear.(c) Machinery and equipment for Effluent Treatment Plants exempted from basic customs duty.(d) Re-export of unsuitable imported materials such as raw hides & skins and wet blue leathers is permitted.(e) CVD is exempted on lining and interlining material notified at S.No 168 of Customs Notification No 21/2002 dated 01.03.2002.(f) CVD is exempted on raw, tanned and dressed fur skins falling under Chapter 43 of ITC (HS).


*New Sectoral Initiatives(vi) Package for Marine Sector(a) Duty free import of specified specialised inputs / chemicals and flavouring oils etc. allowed to the extent of 1% of FOB value of preceding financial years export.(b) To allow import of monofilament long line system for tuna fishing at a concessional rate of duty.(c) A self removal procedure for clearance of seafood waste prescribed wastage norms.


FOREIGN EXCHANGE MANAGEMENT ACT-1999

FEMA is an act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintainence of foreign exchange market in India.

This act was enacted by Parliament in the Fiftieth Year of the Republic of India.

The law extends to the whole of India. It also extends to all branches , offices and agencies outside India, owned or controlled by a person resident in India.

THE FEMA ACT STATES:

1) Adjudicating Authority means an officer authorised under sub section (1) of section 16.

2) Appellate Tribunal means the appellate tribunal for foreign exchange established under section 18.

3) Authorised Person means an authorised dealer , money changer , off-shore banking unit or any other person authorised under sub section (1) of section 10.

4) Bench means a bench for the Appellate Tribunal.

5) Capital Account Transaction means a transaction which alerts the assets or liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India.

6) Chairperson means the chairperson of the Appellate Tribunal.

7) Chartered Accountant shall have the meaning assigned to it in the clause (b) of sub section (1) of section (2).

8) Currency includes all currency notes, postal notes , postal orders , money orders , cheques , drafts , letters of credit , bills of exchange and promissory notes , credit cards , notified by the Reserve Bank.

9) Currency Notes means cash in the form of coins and bank notes.

10) Currency Account Transaction means a transaction other than a capital account transaction . It includes payments due in connection with foreign trade , paymenst due as interest on loans , remittances for expenses of living parents, spouse and children and expenses in connection with foreign travel.

11) Director of Enforcement means the Director of Enforcement appointed under sub section (1) of section (36).

12) Export means-The taking goods from India to any place outside India.Provision of services from India to any person outside India.

13) Foreign Currency means any currency other than Indian currency.

14) Foreign Exchange means foreign currency and includes-deposits, credits, and balances payable in any foreign currency.Drafts, travellers cheques, letters of credit, bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency.Drafts, travellers cheques , letters of credit , bills of exchange drawn by banks, institutions , or persons outside India, but payable in Indian currency.

15) Foreign Security means any security in the form of shares, stocks, bonds, debentures or any other instrument expressed in foreign currency but interest or dividends is payable in Indian currency.

16) Import means bringing into India any goods or services.

17) Indian Currency means currency which is expressed or drawn in Indian rupees but does not include special bank notes and special one rupee notes issued under section 28A of the Reserve Bank Act 1934.

18) Legal Practitioner shall have the meaning assigned to it in the clause of sub section (1) of section (2) of the Advocates Act, 1961.

19) Member means a member of the Appellate Tribunal and includes the chairperson therof.

20) Notify means to notify in the Official Gazette.

21) Person includes an individual , a Hindu undivided family, an association of persons or a body of individuals.

Person Resident in India means a person residing in India for more than one hundred and eighty two days during the course of the preceding financial year but does not include- A person who has gone outside India or who stays outside India in either case-Taking up employment outside India.For carrying out a business or vocation outside India.For any other purpose, in which he would stay out of India for an uncertain period.

(B) A person who has come or either stays in India, in either case, otherwise than-For or taking up employment in India.For carrying on in India any business or vocation.For any other purpose, in which he would stay in India for an uncertain period.

22) Person Resident outside India means a person who is not resident in India.

23) Prescribed means prescribed by rules made under this Act.

24) Repatriate to India means bringing into India the realised foreign exchange and the selling of such foreign exchange to an authorised person in India in exchange for rupees.

25) Reserve Bank means the Reserve Bank of India constituted under sub section (1) of section 3 of the Reserve Bank of India Act, 1934:

security means shares, stocks, bonds and debentures , government securities as defined in the Public Debt Act, 1944, savings certificates to which the Government Savings Certificates Act, 1959 applies etc.

Service means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, medical assistance, real estate, entertainment etc.

Special Director means an officer appointed under section 18

Specify means to specify by regulations made under this Act.

Transfer includes sale, purchase, exchange, mortgage, gift, loan or any other form of transfer of right, title, possession or lien.

FEMA head office also known as Enforcement Directorate is situated in New Delhi and is headed by a Director.

The Directorate is further divided into 5 zonal offices at Delhi, Mumbai, Calcutta, Madras and Jalandhar and each office is headed by a Deputy Director. Each zone is further divided into 7 sub-zonal offices headed by the Assistant Directors and 5 field units headed by the Chief Enforcement Officers.

Exim Policy* The foreign trade of India is guided by the Export-Import policy of the Government of India.Regulated by The Foreign Trade Development and Regulation Act 1992.Exim policy contain various policy decisions with respect to import and exports from the country.Exim Policy is prepared and announced by the central government.Exim Policy of India aims to developing export potential, improving export performance, encouraging foreign trade and creating favorable balance of payment position.

General Objectives of Exim Policy*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.To augment export by facilitating access to raw material, intermediate, components, consumables and capital goods from the international market.To promote internationally competitive import substitution and self-reliance.

Exim Policy of India 2004-2009* Hon. Shri Kamal Nath minister for commerce and industry has announced on 31st Aug 2004, Indias new Exim policy.The duration of the policy from 1st Sept. 2004 to 31st March 2009.It takes an integrated view of the overall development of Indias foreign trade.

Objectives of Exim Policy 2004-2009*To double our percentage of share of global merchandise trade within the five year.To act as an effective instrument of economic growth by giving a thrust to employment generation.

Highlights of the New Foreign Trade Policy 2004-2009*Special Focus Initiatives: Semi-urban and Rural AreaAgriculture : Vishesh Krishi Upaj Yojana and Agri Export ZonesHandlooms and Handicrafts: Mark under Market Access Initiatives Scheme and Proposed to Start new SEZ.Gems and Jewellery: Import of gold of 18 carat and above has been permitted under the replenishment schemeLeather and Footwear : Duty free import entitlement of specified items shall be 5% of FOB value of exports during the preceding year

*Export Promotion SchemesAssistance to States for Infrastructure Development of Exports [ASIDE]Market Access Initiative [MAI]Marketing Development Assistance [MDA]Towns of Export ExcellenceTarget Plus Scheme.Served from India SchemeService Export Promotion Council

*New Status Holder Categorization

CategoryTotal Performance (In Rs)One Star Export House15 croreTwo Star Export House100 croreThree Star Export House500 croreFour Star Export House1500croreFive Star Export House5000 Crore

*Board of Trade: The role is to advising government on relevant issues connected with Foreign Trade Policy.

Implications of The Foreign Trade 2004-09*Implications on Indian Economy:This policy propose to simplify procedures and develop technology and infrastructure.Implications on Agriculture:Special Agricultural Product Scheme has been introduced for promoting the export of fruits, vegetables, flowers, and their value added products. Implications on Handlooms and Handicraft:Establishment of Handicraft SEZ and Handicraft Export Promotion Council would promote development of Handloom and Handicraft Industry.

*Implications on Gem and Jewellery Sector :This is special thrust area in this policy.Duty free imports of other inputs would give a further boost to this sectorImplications on Leather and Footwear Industry :Duty free import as a specified percentage of exports.Exemption on customs duty on equipment for effluent treatment plants would help promoting export form this sector.

*Implications on Service Industry :An exclusive service promotion council has been set up in order to map the opportunities for key services in key market.Develop strategic market access programmes like brand building in co-ordination with sectoral players and recognize nodal bodies of the service industry.

Annual Supplement to Foreign Trade Policy 2004-09*Minister for Commerce and Industry, Government of India has announced Annual Supplement 2005, to the Foreign Trade Policy 2004-09 on the 8th April 2005.

Highlights of the Supplement*Inter State Trade Council : To engage the State Government in providing an enabling environment for boosting international trade, by setting up an Inter State Trade Council.Removal of Export Cess : Proposed to abolish cess on export of all agricultural and plantation commodities levied under various Commodity Board Acts.Export Promotion Capital Goods Scheme (EPCG) : This scheme is extended to Agricultural sector, SSI sector, Retail Sectors in order to promote exports from them.Service Export : To upgrade infrastructure in the service related companies.

*Agri Export : Benefits under Vishesh Krishi Upaj Yojana have been extended to exports of poultry and dairy products in addition to export of flowers, fruits, vegetables and their value added products.Package for Marine Sector : Duty free import of specified specialized chemicals and flavoring oils as per a defined list shall be allowed to the extent of 1% of FOB value of preceding financial years export.Advance Licensing Scheme : The Scope of Advance License for annual requirement has been extended to all categories of exporters having past export performance.

*Duty Free Replenishment Certificate : Brass scrap, Additives, paper board, and dye stuff have been removed from the list of items prescribed for import under DFRC.Procedural Simplification : Proposed to simplify procedures and reduce the documentation requirements so as to reduce the transaction cost of the exporters and thereby increase their competitiveness.EDI Initiatives : DGFT shall introduce an automated electronic system for filing, retrieval and authentication of documents based on agreed protocols and message exchange with other authorities such including Customs and banks.

Negative List of Exports 2002-07*The negative list consists of goods, the import or export of which is ether prohibited, restricted through licensing or otherwise to be canalized through a designate government agency.The negative list of exports, as per the EXIM Policy 2002-07Prohibited Items : Which items completely banned from the exports. All forms of wild animals including their parts and products.Special Chemicals as notified by the DGFT.Exotic birds as notified by the DGFT.Beef.Sea Shells, as specifiedHuman Skeleton.Peacock TailRed sanders wood in any form.

*Restricted Items : which items allowed for exports under special license issued by the DGFT.Dress materials, ready-made garments, fabrics or textile items with imprints of excerpts or verses of the Holy Quran.Horses Kathiawadi, Marwari, and Manipuri breeds.Fresh and frozen silver prom frets of weight less than 300gm.Paddy (Rice in husk).Seaweeds of all types.Chemical Fertilizer all types.

*Canalized Items : can be exported without an export license through designated State Trading Enterprise

ItemsCanalizing AgencyOnions (Except Bangalore Rose onion and Krishnapuram Onion) Export Permitted through Specified STEsNiger SeedsTribal Cooperative Marketing Federation of India (TRIFED) New DelhiNational Agricultural Cooperative Marketing Federation of India(NAFED)Gum KarayaTribal Cooperative Marketing Federation of India(TRIFED), New DelhiIron ore, Manganese ore, and Chrome ore.Metals and Minearals Trading Corporation (MMTC).Crude OilIndian Oil Corporation Limited

*Freely Exportable Items : can be exported without an export license from DGFT. However export of such items is subject to certain procedures or conditions.

Item DescriptionProcedures or ConditionsMilitary Stores as notified by DGFT No objection certificate from the Department of Deface Production and SuppliesExotic Birds, such as Bangali finches, White finches and ZebraSubject to Pre- shipment inspection.Bones and bone productsSubject to a certificate from chemical and Allied Products Export Promotion Council (CAPEXIL)Basmati RiceSubject to registration of contracts with Agriculture and Processed food Products Export Development Authority.

Industrial Policy

IntroductionThe Industrial Policy indicates the respective roles of the public, private, joint and co-operative sectors; small, medium and large scale industries. It underlines the national priorities and the economic development strategy. It also spells the Governments policy towards industries- their establishment, functioning, growth and management; foreign capital and technology, labor policy, tariff policy etc. in respect of the industrial sector.

The Industrial Policy of India has determined the pattern of economic and industrial development of the economyThe Industrial Policy reflected the socio-economic and political ideology of development.

Industrial Policy upto 1991The objective of the policy were to :Reduce disparities in income and wealthPrevent monopolies and concentration of economic powerBuild a large and heavy public sector and manage the same effectivelyDevelop heavy and machine making industriesAccelerate the rate of industrialization and economic growthHigher employment generationFocus on development of small scale sectorOptimum utilization of installed capacityRural IndustrializationPromotion of export oriented units (Industrial Policy 1980)

The industrial policy of India prior to liberalization in 1991 was characterized by the following features:

Dominance of Public Sector

Entry and Growth Restrictions

Restrictions on Foreign Capital and Technology

Industrial Policy upto 1991 (contd)

The New Industrial Policy 1991The Industrial Policy announced on July 24, 1991

This policy expanded the scope of the private sector by opening up most of the industries for the private sector and did away with the entry and growth restrictions

The most important initiatives are with respect to the virtual scrapping of industrial licensing and registration policies, an end to the monopoly law

Welcoming approach to foreign investments, apart from redefining the role of the public sector

Words like dramatic, revolutionary and drastic have been used to describe this policy..

The New Industrial Policy 1991 (contd)Objectives of the Industrial Policy of the Government are to maintain a sustained growth in productivity;to enhance employment;to achieve optimal utilization of human resources;to attain international competitivenessDevelopment of indigenous technology through greater investment in R&D and bring in new technology to help Indian manufacturing units Incentive for industrialization of backward areasEnsure running of PSUs on business lines and cut their lossesProtect the interests of workersAbolish the monopoly of any sector in any field of manufacture except on strategic or security grounds.to transform India into a major partner and player in the global arena.

Policy focus is on

Deregulating Indian industry;

Allowing the industry freedom and flexibility in responding to market forces and

Providing a policy regime that facilitates and fosters growth of Indian industry.

The New Policy has four features: Liberalisation; privatisation, globalisation and stabilisation

The New Industrial Policy 1991 (contd)Redefinition of the role of the Public Sector: The number of industries reserved for the public sector was reduced to eight and it was later pruned to two ie atomic energy and railway transport.

Also, in respect of public sector enterprises, the following measures were adopted:

Portfolio of public sector investments to be reviewed periodically with a view to focus the public sector on strategic, high tech and essential infrastructure.

Public enterprises which are chronically sick and unlikely to be turned around to be referred to the Board for Industrial and Financial Reconstruction for formulation of revival / rehabilitation schemes.

In order to encourage wider public participation, a part of the Governments shareholding in the public sector would be offered to mutual funds, financial institutions and the general public.

Board of PSU to be more professional and have greater powers

Thrust to be on performance improvement and management would be granted more autonomy in operation.

The New Industrial Policy 1991 (contd)Industrial Licensing: Industrial Licensing was governed by the Industries Development & Regulation Act, 1951. Industrial licensing has been abolished for all projects except for a short list of industries related to security and strategic concerns, social reasons, hazardous chemicals and overriding environmental reasons and items of elitist consumption. All excepting 18 industries were freed from licensing. The number was later reduced to six. Industries are free to select the location of the industry

The New Industrial Policy 1991 (contdLiberalization of Foreign Investment:FDI is allowed in all industries, except industries falling in a small negative list. Approvals for FDI upto 51% in high priority industries requiring large investments and advanced technology will be provided. Since 1992-93, the Indian stock market is open for investment by Foreign Institutional Investors (FIIS) and Indian companies satisfying certain conditions may access foreign capital market

Removal of MRTP Restrictions: Most of the MRTP restrictions pertaining to concentration of economic power (those requiring permission for establishment of new undertaking, substantial expansion, manufacture of new items and mergers and acquisitions) were scrapped.Existing units will be provided a new broad branding facility to enable them to produce any article without additional investment.

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