SYDENHAM COLLEGE OF COMMERCE & ECONOMICS

2015-16

Program under faculty of commerce

MASTER OF COMMERCE (EVENING)

Project Title:

TREND IN INDIA’S TRADE POLICY

IN PARTIAL FULLFILMENT OF THE REQUIRNMENT UNDER SEMESTER

BASED ON

CREDIT & GRADING SYSTEM FOR POST GRADJUATION SEMESTER – I

SUBMITTED BY:

CHINTAN CHIMANBHAI KANABAR

Roll no. 27 (Div – A)

PROJECT GUIDE:

Dr. Anil R Chougule

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DECLARATION

I, CHINTAN CHIMANBHAI KANABAR of Sydenham College of

commerce & economics ‘B’ Road, Church gate, Mumbai – 400020 currently

studying in M.com –I (Evening), Hereby declare that I have completed this

project on Trend in India’s Trade Policies for semester –I of the academic

year 2015-16. The information given under the project is true and fair to the

best of my knowledge.

Signature of Student:

.

CHINTAN C KANABAR

Roll No. 27 (DIV-A)

2

CERTIFICATE

This is to certify that MR. CHINTAN CHIMANBHAI KANABAR of the M.COM – I

(Evening) Semester-I has successfully completed project on Trend in India’s Trade Policies

under the Guidance of Mr. Anil R Chougule

1. Project Guide. : Anil R Chougule

2. Internal Examiner :

3. External Examiner :

Date :

Time :

3

INDEX

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AKNOWLEDGMENT

I would firstly like to thank “UNIVECITY OF MUMBAI” For giving us the liberty to

selectthe topic which will benefit to us in the future. I would like to thanks to the principle of

Sydenham College of commerce & economics Dr. Annasaheb Khemnar for giving me an

opportunity to study in the esteemed college and doing the course of accounting. I would like

to express my sincere gratitude and thanks to professor Dr. Anil R Chougule who is my

project guide , as he has been guiding light on this project and also provided me with the

best of his knowledge, advice and encouragement which helps in the successful completion

of my project.

My colleague and specially my parent who has also supported and encourages me the success

of this project to the large extant is also dedicated to them.

I would like to thanks all those who helped me but I forgotten to mention in this space.

Signature of Student:

.

CHINTAN C KANABAR

Roll No. 27 (DIV-A)

5

INTRODUCTION :

Trade between two or more nations is called foreign trade or international trade

Foreign trade is also known as external trade.

Foreign trade transactions are classified under three categories:

Import Trade

Export Trade

Net Exports

Traditionally, the main objective of the Indian ForeignTrade Policy has been to protect

its market from foreign competition. Up until the 1980s, India was not interested in

exporting its goods and services abroad and not ready to open its economy to foreign

investments. The aim of its economic policy was to ensure the country’s independent

development (the swadeshi principle). At the end of the 1980s, India was one of the

most closed economies in the world. Its bilateral trade policy, heavily skewed toward

the former communist countries, was full of grand statements about technology transfer,

mutually advantageous relations and partnership for development to very little purpose.

SUGGESTIONS :

Government control import of non-essential items through the

EXIM Policy. At the same time, all-out efforts are made to promote exports. Thus,

there are two aspects of Exim Policy; the import policy which is concerned with reg-

ulation and management of imports and the export policy which is concerned with ex-

ports not only promotion but also regulation. The main objective of the Government's

EXIM Policy is to promote exports to the maximum extent. Exports should be pro-

moted in such a manner that the economy of the country is not affected by un -

regulated exportable items specially needed within the country.

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Export control is, therefore, exercised in respect of a limited number of items whose

supply position demands that their exports should be regulated in the larger interests of

the country. In other words, the main objective of the Exim Policy is:

To accelerate the economy from low level of economic activities to high level of

economic activities by making it a globally oriented vibrant economy and to

derive maximum benefits from expanding global market opportunities.

To stimulate sustained economic growth by providing access to essential raw

materials, intermediates, components,' consumables and capital goods required

for augmenting production.

To enhance the techno local strength and efficiency of Indian agriculture, in-

dustry and services, thereby, improving their competitiveness.

To generate new employment.

Opportunities and encourage the attainment of internationally accepted standards

of quality.

To provide quality consumer products at reasonable prices.

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OBSERVATIONS :

Import Policy Prior to 1991

In the pre-reform period Indian import policy had two constituents:

Import Restrictions: In the initial phases of development, India had to import capital

equipment, machinery, spare parts, industrial raw material, etc. From time to time it had

to import food grains too, but because of stagnant exports, government had to decide to

import curtail. High import tariffs were used to control import.

Import substitution means reducing the dependability on imports, i.e., produce goods

that we are importing. Two broad objectives of the program of import substitution in In-

dia were:

(i) To save scarce foreign currency for the import of more important goods,

(ii) To achieve self-reliance in the production of as many goods as possible.

EXIM POLICY OF INDIA

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 import of capital goods and raw materials for in-

dustrialization, utilization and liberalization of REP (Registered Exporters Policy) li-

censes, liberal import of technology and policy for export and trading houses. 

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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. 

RESEARCH METHODOLOGY

DATA AND METHODOLOGY OF THE STUDY:-

In light of the objectives of the research, the paper has been designed to scrutinize the

recent trend in India’s trade policy for business. The information published in the

various newspapers and internet in recent times has been consulted in order to present

the latest trade and performance of Indian and Chinese economies. The gathered data

and information were then processed, charted and analyzed to present the findings in a

reasonable and objective manner.

Statistical tool Trend analysis and regression is tapped to project the export and import

of India from yr. 2015- 2016 to 2019- 2020 from 1990-91 to 2014-15 on export and

import is used.

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SCOPE AND LIMITATIONS :

ECONOMY OF INDIA :

The Economy of India is the seventh-largest in the world by nominal GDP and

the third-largest by purchasing power parity (PPP). The country classified as newly in-

dustrialized country, one of the G-20 major economies, a member of BRICS and a de-

veloping economy with approximately 7% average growth rate for the last two

decades. India's economy became the world's fastest growing major economy from the

last quarter of 2014, replacing the People's Republic of China.

The long-term growth prospective of the Indian economy is moderately positive due to

its young population, corresponding low dependency ratio, healthy savings and in-

vestment rates, and increasing integration into the global economy, The Indian econ-

omy has the potential to become the world's 3rd-largest economy by the next decade,

and one of the largest economies by mid-century.

And the outlook for short-term growth is also good as according to the IMF, the Indian

economy is the "bright spot" in the global landscape. India also topped the World

Bank’s growth outlook for 2015-16 for the first time with the economy having grown

7.3% in 2014-15 and expected to grow 7.5-8.3% in 2015-16.

India has the one of fastest growing service sectors in the world with annual growth rate

of above 9% since 2001, which contributed to 57% of GDP in 2012-13. India has

capitalized its economy based on its large educated English-speaking population to be-

come a major exporter of IT services, BPO services, and software services with $167.0

billion worth of service exports in 2013-14. It is also the fastest-growing part of the

economy. 

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The IT industry continues to be the largest private sector employer in India. India is

also the fourth largest start-up hub in the world with over 3,100 technology start-ups in

2014-15. The agricultural sector is the largest employer in India's economy but

contributes to a declining share of its GDP (17% in 2013-14).

India ranks second worldwide in farm output. The Industry sector has held a constant

share of its economic contribution (26% of GDP in 2013-14). 

The Indian auto industry is one of the largest in the world with an annual production of

21.48 million vehicles in FY 2013-14. India has $600 billion worth of retail marketing

2015 and one of world's fastest growing E-Commerce markets.

India's two major stock exchanges, Bombay Stock Exchange and National Stock Ex-

change of India, had a market capitalization of US$1.71 trillion and US$1.68 trillion re-

spectively as of Feb 2015, which ranks 11th & 12 largest in the world respectively ac-

cording to the World Federation of Exchanges. India also home to world's third

largest Billionaires pool with 97 billionaires in 2014 and fourth largest number of

ultra-high-net-worth households that have more than 100 million dollars.

India is a member of the Commonwealth of Nations, the South Asian Association for

Regional Cooperation, the G20,theInternational Monetary Fund, the World Bank,

the World Trade Organization, the Asian Infrastructure Investment Bank, the United

Nations and the New Development BRICS Bank.

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ECONOMIC DEVELOPMENT IN INDIA :

The economic development in India followed socialist-inspired policies for most of its

independent history, including state-ownership of many sectors; India's per capita in-

come increased at only around 1% annualized rate in the three decades after its in-

dependence. Since the mid-1980s, India has slowly opened up its markets through eco-

nomic liberalization. After more fundamental reforms since 1991 and their renewal in

the 2000s, India has progressed towards a free market economy.

In the late 2000s, India's growth reached 7.5%, which will double the average income in

a decade. Analysts say that if India pushed more fundamental market reforms, it could

sustain the rate and even reach the government's 2011 target of 10%. States have large

responsibilities over their economies. The annualized 1999–2008 growth

rates for Tamil Nadu  (9.9),Maharashtra  (9.7%), Gujarat  (9.6%), Haryana 

(9.1%) ,or  Delhi (8.9%) were significantly higher than for Bihar (5.1%), Uttar

Pradesh (4.4%), or Madhya Pradesh (6.5%). India is the seventh-largest economy in the

world and the third largest by purchasing power parity adjusted exchange rates (PPP).

On per capita basis, it ranks 140th in the world or 129th by PPP.

The economic growth has been driven by the expansion of services that have been

growing consistently faster than other sectors. It is argued that the pattern of Indian de-

velopment has been a specific one and that the country may be able to skip the interme-

diate industrialization-led phase in the transformation of its economic structure. Serious

concerns have been raised about the jobless nature of the economic growth.

Favourable macroeconomic performance has been a necessary but not sufficient

condition for the significant reduction of poverty amongst the Indian population. The

rate of poverty decline has not been higher in the post-reform period (since 1991).

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The improvements in some other non-economic dimensions of social development have

been even less favourable. The most pronounced example is an exceptionally high and

persistent level of child malnutrition (46% in 2005–06).

The progress of economic reforms in India is followed closely. The World Bank sug-

gests that the most important priorities are public sector reform, infrastructure, agricul-

tural and rural development, removal of labor regulations, reforms in lagging states, and

HIV/AIDS. For 2015, India ranked 142nd in Ease of Doing Business Index, which is

setback as compared with China 90th, Russia 62nd and Brazil 120th.

According to Index of Economic Freedom World Ranking an annual survey on eco-

nomic freedom of the nations, India ranks 123rd as compared with China and Russia

which ranks 138th and 144th respectively in 2012.

At the turn of the century India's GDP was at around US$480 billion. As economic

reforms picked up pace, India's GDP grew five-fold to reach US$2.3 trillion in 2015 (as

per IMF estimates).

India's GDP growth during January–March period of 2015 was at 7.5% compared to

China's 7%, making it the fastest growing economy. During 2014-15, India's GDP

growth recovered marginally to 7.3% from 6.9% in the previous fiscal. During 2014-15,

India's services sector grew by 10.1%, manufacturing sector by 7.1% & agriculture by

0.2%. The Indian government has forecast a growth of 8.1-8.5% during 2015-

16.Favourable macroeconomic performance has been a necessary but not sufficient

condition for the significant reduction of poverty amongst the Indian population. The

improvements in some other non-economic dimensions of social development have

been even less favourable. The most pronounced example is an exceptionally high and

persistent level of child malnutrition (46% in 2005–06).

13

The progress of economic reforms in India is followed closely. The World Bank sug-

gests that the most important priorities are public sector reform, infrastructure, agricul-

tural and rural development, removal of labor regulations, reforms in lagging states,

and HIV/AIDS. For 2015, India ranked 142nd in Ease of Doing Business Index, which

is setback as compared with China 90th, Russia 62nd and Brazil 120th.

GROWTH MODEL OF INDIA :

INDIA’S TRADE POLICY :

New Industrial Policy :

Under Industrial Policy, keeping in view the priorities of the country and its economic

development, the roles of the public and private sectors are clearly decided. Under the

New Industrial Policy, the industries have been freed to a large extent from the licenses

and other controls. In order to encourage modernization, stress has been laid upon the

use of latest technology. A great reduction has been effected in the role of the public

sector.

Efforts have been made to encourage foreign investment. Investment decision by com-

panies has been facilitated by ending restrictions imposed by the MRTP Act. Similarly,

Foreign Exchange Regulation Act (FERA) has been replaced with Foreign Exchange

Management Act (FEMA).

Some important points of the New Industrial Policy have been highlighted here

i. Abolition of Licensing :

Before the advent of the New Industrial Policy, the Indian industries were operating

under strict licensing system. Now, most industries have been freed from licensing

and other restrictions.

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ii. Contraction of Public Sector :

A policy of not expanding unprofitable industrial units in the public sector has been

adopted. Apart from this, the government is following the course of disinvestment

in such public sector undertaking. (Selling some shares of public sector enterprises

to private sector entrepreneurs is called disinvestment. This is a medium of privati-

zation.

iii. Free Entry of Foreign Investment :

Many steps have been taken to attract foreign investment. Some of these are as fol-

lows: In 1991, 51% of foreign investment in 34 high priority industries was al-

lowed without seeking government permission.

Non-Resident Indians (NRIs) were allowed to invest 100% in the export houses,

hospitals, hotels, etc.

Foreign Investment Promotion Board (FIPB) was established with a view to speed-

ily clear foreign investment proposals.

Restrictions which were previously in operation to regulate dividends repatriation

by the foreign investors have been removed. They can now take dividends to their

native countries.

MRTP Restrictions Removed: Monopolies and Restrictive Trade Practices Act has

been done away with. Now the companies do not need to seek government permis-

sion to issue shares, extend their area of operation and establish a new unit.

FERA Restrictions Removed: Foreign Exchange Regulation Act (FERA) has been

replaced by Foreign Exchange Management Act (FEMA). It regulates the foreign

transactions. These transactions have now become simpler.

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Increase in the Importance of Small Industries: Efforts have been made to give

importance to the small industries in the economic development of the country.

New Trade Policy :

Trade policy means the policy through which the foreign trade is controlled and

regulated. As a result of liberalization, trade policy has undergone tremendous

changes. Especially the foreign trade has been freed from the unnecessary controls.

The age-old restrictions have been eliminated at one go. Some of the chief

characteristics of the New Trade Policy are as follows:

i. Reduction in Restrictions of Export-Import :

Restrictions on the exports-imports have almost disappeared leaving only a few

items.

ii. Reduction in Export-Import Tax :

Export-import tax on some items has been completely abolished and on some

other items it has been reduced to the minimum level.

iii. Easy Procedure of Export-Import :

Import-export procedure has been simplified.

iv. Establishment of Foreign Capital Market :

Foreign capital market has been established for sale and purchase of foreign ex-

change in the open market.

v. Full Convertibility on Current Account :

In 1994-95, full convertibility became applicable on current account.

Here it is important to clarify the meaning of current account and full con-

vertibility. Therefore, this has been done as follows:

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Current Account:

Transactions with the foreign countries are placed in two categories:

(i) transaction with current account, for example, import-export,

(ii) Capital account transactions, like investment.

(iii) Full Convertibility:

In short, full convertibility means unrestricted sale and purchase of for-

eign exchange in the foreign exchange market for the purpose of pay-

ments and receipts on the items connected with current account. It means

that there is no government restriction on the sale and purchase of foreign

exchange connected with current account.

On the other hand, sale and purchase of foreign exchange connected with capital

account can be carried on under the rates determined by the Reserve Bank of In-

dia (RBI),

vi. Providing Incentive for Export :

Many incentives have been allowed to Export- oriented Units (EOU) and Export

Processing Zones (EPZ) for increasing export trade.

vii. Fiscal Reforms:

The policy of the government connected with the income and expenditure is

called fiscal policy. The greatest problem confronting the Indian government is

excessive fiscal deficit. In 1990-91, the fiscal deficit was 8% of the GDP. (It is

important to understand the meaning of fiscal deficit and GDP.)

Gross Domestic Product (GDP):

The GDP is the sum total of the financial value of all the produced goods and

services during a year in a country. Generally, the financial deficit is calculated

in the form of GDP’s percentage. Presently, the government of India is making

efforts to take it to 4%.

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Solutions of Fiscal Deficit:

In order to handle the problem of fiscal deficit, basic changes were made in the

tax system. The following are the major steps taken in this direction:

The rate of the individual and corporate tax has been reduced in order to

bring more people in the tax net.

Tax procedure has been simplified.

Heavy reduction in the import duties has been implemented.

viii. Monetary Reforms :

Monetary policy is a sort of control policy through which the central bank con-

trols the supply of money with a view to achieving the objectives of the general

economic policy. Reforms in this policy are called monetary reforms. The major

points with regard to the monetary reforms are given below:

Statutory Liquidity Ratio (SLR) has been lowered. (A commercial bank has

to maintain a definite percentage of liquid funds in relation to its net demand

and time liabilities. This is called SLR. In liquid funds, cash investment in

permitted securities and balance in current account with nationalised banks

are included.)

The banks have been allowed freedom to decide the rate of interest on the

amount deposited.

New standards have been laid down for the income recognition for the banks.

(By recognition of income, we mean what is to be considered as the income

of the bank. For example, should the interest on the bad debt be considered as

the income of the bank directions have been issued in this context.

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Permission to collect money by issuing shares in the capital market has been

granted to nationalize banks.

ix. Permission to open banks in the private sector has also been granted : .

Capital Market Reforms

The market in which securities are sold and bought is known as the capital mar-

ket. The reforms connected with it are known as capital market reforms. This

market is the pivot of the economy of a country.

The government has taken the following steps for the development of this mar-

ket:

Under the Portfolio Investment Scheme, the limit for investment by the NRIs

and foreign companies in the shares and debentures of the Indian companies

has been raised. (Portfolio Investment Scheme means investing in securities.)

In order to control the capital market, the Securities and Exchange Board of

India (SEBI) has been established.

The restriction in respect of interest on debentures has been lifted. Now, it is

decided on the basis of demand and supply.

The office of the Controller of Capital Issue which used to determine the

price of shares to be issued has been dispensed with.

Now, the companies are free to determine the price of the shares.

Private sector has been permitted to establish Mutual Fund.

The registration of the sub broker has been made mandatory.

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x. Phasing out Subsidies :

Cash Compensatory Support (CCS) which was earlier given as export subsidy

has been stopped. CCS can be understood with the help of an example.

If an exporter wants to import some raw material which is available abroad for

100, but the same material is available in India for 120 and the governments

wants the raw material to be purchased by the exporter from India itself for the

protection of indigenous industries, the government is ready to pay the differ-

ence of 20 to the exporter in the form of subsidy.The payment of 20 will be con-

sidered as CCS. In addition to this, the CCS has been reduced in case of fertiliz-

ers and petro products.

xi. Dismantling Price Control

The government has taken steps to remove price control in case of many prod-

ucts. (Price Control means that the companies will sell goods at the prices deter-

mined by the government.) The efforts to remove price control were mostly in

respect of fertilizers, steel and iron and petro products. Restrictions on the import

of these products have also been removed.

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INDIA’S TRADE POLICY (2015-20):

A. SIMPLIFICATION & MERGER OF REWARD SCHEMES

Export from India Schemes:

i. Merchandise Exports from India Scheme (MEIS) :

(a) Earlier there were 5 different schemes (Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, VKGUY) for rewarding merchandise exports with different kinds of duty scrips with varying conditions (sector specific or actual user only) attached to their use. Now all these schemes have been merged into a single scheme, namely Merchandise Export from India Scheme (MEIS) and there would be no conditionality attached to the scrips issued under the scheme. The main features of MEIS, including details of various groups of products supported under MEIS and the country groupings are at Annexure-1.

(b) Rewards for export of notified goods to notified markets under ‘Merchandise Exports 2 from India Scheme (MEIS) shall be payable as percentage of realized FOB value (in free foreign exchange). The debits towards basic customs duty in the transferable reward duty credit scrips would also be allowed adjustment as duty drawback. At present, only the additional duty of customs / excise duty / service tax is allowed adjustment as CENVAT credit or drawback, as per Department of Revenue rules.

ii. Service Exports from India Scheme (SEIS) :

(a) Served From India Scheme (SFIS) has been replaced with Service Exports from India Scheme (SEIS). SEIS shall apply to ‘Service Providers located in India’ instead of ‘Indian Service Providers’. Thus SEIS provides for rewards to all Service providers of notified services, who are providing services from India, regardless of the constitution or profile of the service provider. The list of services and the rates of rewards under SEIS are at Annexure-2.

(b) The rate of reward under SEIS would be based on net foreign exchange earned. The reward issued as duty credit scrip, would no longer be with actual user condition and will no longer be restricted to usage for specified types of goods but be freely transferable and usable for all types of goods and service tax 3 debits on procurement of services / goods. Debits would be eligible for CENVAT credit or drawback.

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iii. Incentives (MEIS & SEIS) to be available for SEZs :

It is now proposed to extend Chapter -3 Incentives (MEIS & SEIS) to units located in SEZs also.

iv. Duty credit scrips to be freely transferable and usable for payment of custom duty, excise duty and service tax :

(a) All scrips issued under MEIS and SEIS and the goods imported against these scrips would be fully transferable.

(b) Scrips issued under Exports from India Schemes can be used for the following:- (i) Payment of customs duty for import of inputs / goods including

capital goods, except items listed in Appendix 3A.

(ii) Payment of excise duty on domestic procurement of inputs or goods, including capital goods as per DoR notification.

(iii) Payment of service tax on procurement of services as per DoR notification.

(c) Basic Customs Duty paid in cash or through debit under Duty Credit Scrip can be taken back as Duty Drawback as per DoR Rules, if inputs so imported are used for exports.

v. Status Holders :

(a) Business leaders who have excelled in international trade and have successfully contributed to country’s foreign trade are proposed to be recognized as Status Holders and given special treatment and privileges to facilitate their trade transactions, in order to reduce their transaction costs and time.

(b) The nomenclature of Export House, Star Export House, Trading House, Star Trading House, Premier Trading House certificate has been changed to One, Two, Three, Four, Five Star Export House.

(c) The criteria for export performance for recognition of status holder have been changed from Rupees to US dollar earnings. The new criteria is as under :-

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Status category Export PerformanceFOB / FOR (as converted)

Value (in US $ million) during current and previous two years

One Star Export House 3Two Star Export House 25Three Star Export House 100Four Star Export House 500Five Star Export House 2000

(d) Approved Exporter Scheme - Self certification by Status Holders :

Manufacturers who are also Status Holders will be enabled to self-certify

their manufactured goods as originating from India with a view to qualify

for preferential treatment under different Preferential Trading Agreements

[PTAs], Free Trade Agreements [FTAs], Comprehensive Economic

Cooperation Agreements [CECAs] and Comprehensive Economic

Partnerships Agreements [CEPAs] which are in operation. They shall be

permitted to self-certify the goods as manufactured as per 6 their Industrial

Entrepreneur Memorandum (IEM) / Industrial Licence (IL)/ Letter of Intent

(LOI).

vi. Reduced Export Obligation (EO) for domestic procurement under EPCG

scheme:

Specific Export Obligation under EPCG scheme, in case capital goods are

procured from indigenous manufacturers, which is currently 90% of the normal

export obligation (6 times at the duty saved amount) has been reduced to 75%, in

order to promote domestic capital goods manufacturing industry.

vii. Higher level of rewards under MEIS for export items with high domestic content

and value addition:

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It is proposed to give higher level of rewards to products with high domestic

content and value addition, as compared to products with high import content

and less value addition.

viii. Online filing of documents/ applications and Paperless trade in 24x7

environment :

a) DGFT already provides facility of Online filing of various applications under

FTP by the exporters/importers. However, certain documents like Certificates

issued by Chartered Accountants/ Company Secretary / Cost Accountant etc.

have to be filed in physical forms only. In order to move further towards

paperless processing of reward schemes, it has been decided to develop an

online procedure to upload digitally signed documents by Chartered

Accountant / Company Secretary / Cost Accountant. In the new system, it

will be possible to upload online documents like annexure attached to ANF

3B, ANF 3C and ANF 3D, which are at present signed by these signatories

and submitted physically.

b) Henceforth, hardcopies of applications and specified documents would not be

required to be submitted to RA, saving paper as well as cost and time for the

exporters. To start with, applications under Chapter 3 & 4 of FTP are being

covered (which account for nearly 70% of total applications in DGFT).

Applications 8 under Chapter-5 would be taken up in the next phase.

c) As a measure of ease of doing business, landing documents of export

consignment as proofs for notified market can be digitally uploaded in the

following manner:-

(i) Any exporter may upload the scanned copy of Bill of Entry under his

digital signature.

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(ii) Status holders falling in the category of Three Star, Four Star or Five

Star Export House may upload scanned copies of documents.

ix. Online inter-ministerial consultations :

It is proposed to have Online inter-ministerial consultations for approval of

export of SCOMET items, Norms fixation, Import Authorizations, Export

Authorization, in a phased manner, with the objective to reduce time for

approval. As a result, there would not be any need to submit hard copies of

documents for these purposes by the exporters.

x. Simplification of procedures/processes, digitisation and e-governance :

a) Under EPCG scheme, obtaining and submitting a certificate from an

independent Chartered Engineer, confirming the use of spares, tools,

refractory and catalysts imported for final redemption of EPCG

authorizations has been dispensed with.

b) At present, the EPCG Authorization holders are required to maintain records

for 3 years after redemption of Authorizations. Now the EPCG Authorization

Holders shall be required to maintain records for a period of two years only.

Government’s endeavor is to gradually phase out this requirement as the

relevant records such as Shipping Bills, e-BRC are likely to be available in

electronic mode which can be archived and retrieved whenever required.

c) Exporter Importer Profile: Facility has been created to upload documents in

Exporter/Importer Profile. There will be no need to submit copies of

permanent records/ documents (e.g. IEC, Manufacturing licence, RCMC,

PAN etc.) repeatedly with each application, once uploaded.

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d) Communication with Exporters/Importers: Certain information, like mobile

number, e-mail address etc. has been added as mandatory fields, in IEC data

base. This information once provided by exporters, would help in better

communication with exporters. SMS/ email would be sent to exporters to

inform them about issuance of authorizations or status of their applications.

e) Online message exchange with CBDT and MCA: It has been decided to have

on line message exchange with CBDT for PAN data and with Ministry of

Corporate Affairs for CIN and DIN data. This integration would obviate the

need for seeking information from IEC holders for subsequent amendments/

updating of data in IEC data base.

f) Communication with Committees of DGFT: For faster and paperless

communication with various committees of DGFT, dedicated e-mail

addresses have been provided to each Norms Committee, Import Committee

and Pre-Shipment Inspection Agency for faster communication.

g) Online applications for refunds: Online filing of application for refund of

TED is being introduced for which a new ANF has been created.

xi. Forthcoming e-Governance Initiatives :

DGFT is currently working on the following EDI initiatives:

Message exchange for transmission of export reward scrips from DGFT

to Customs.

Message exchange for transmission of Bills of Entry (import details) from

Customs to DGFT.

Online issuance of Export Obligation Discharge Certificate (EODC).

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Message exchange with Ministry of Corporate Affairs for CIN & DIN.

Message exchange with CBDT for PAN.

Facility to pay application fee using debit card / credit card.

Open API for submission of IEC application.

Mobile applications for FTP

xii. New initiatives for EOUs, EHTPs and STPs :

a) EOUs, EHTPs, STPs have been allowed to share infrastructural facilities

among themselves. This will enable units to utilize their infrastructural

facilities in an optimum way and avoid duplication of efforts and cost to

create separate infrastructural facilities in different units.

b) Inter unit transfer of goods and services have been allowed among EOUs,

EHTPs, STPs, and BTPs. This will facilitate group of those units which

source inputs centrally in order to obtain bulk discount. This will reduce

cost of transportation, other logistic costs and result in maintaining

effective supply chain.

c) EOUs have been allowed facility to set up Warehouses near the port of

export. This will help in reducing lead time for delivery of goods and will

also address the issue of un-predictability of supply orders.

d) STP units, EHTP units, software EOUs have been allowed the facility to

use all duty free equipment/goods for training purposes. This will help

these units in developing skills of their employees.

27

e) 100% EOU units have been allowed facility of supply of spares/

components up to 2% of the value of the manufactured articles to a buyer

in domestic market for the purpose of after sale services.

f) At present, in a period of 5 years EOU units have to achieve Positive Net

Foreign Exchange Earning (NEE) cumulatively. Because of adverse

market condition or any ground of genuine hardship, then such period of

5 years for NFE completion can be extended by one year.

g) Time period for validity of Letter of Permission (LOP) for EOUs/EHTP/

STPI/BTP Units has been revised for faster implementation and

monitoring of projects. Now, LOP will have an initial validity of 2 years

to enable the unit to construct the plant and install the machinery. Further

extension can be granted by the Development Commissioner up to one

year. Extension beyond 3 years of the validity of LOPS, can be granted, in

case unit has completed 2/3rd of activities, including the construction

activities.

h) At present, EOUs/EHTP/STPI units are permitted to transfer capital

goods to other EOUs, EHTPs, STPs, SEZ units. Now a facility has been

provided that if such 14 transferred capital goods are rejected by the

recipient, then the same can be returned to the supplying unit, without

payment of duty.

i) A simplified procedure will be provided to fast track the de-bonding / exit

of the STP/ EHTP units. This will save time for these units and help in

reduction of transaction cost.

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j) EOUs having physical export turnover of Rs.10 crore and above, have

been allowed the facility of fast track clearances of import and domestic

procurement. They will be allowed fast tract clearances of goods, for

export production, on the basis of pre-authenticated procurement

certificate, issued by customs / central excise authorities. They will not

have to seek procurement permission for every import consignment.

xiii. Facilitating & Encouraging Export of dual use items (SCOMET) :

(a) Validity of SCOMET export authorization has been extended from the

present 12 months to 24 months. It will help industry to plan their

activity in an orderly manner and obviate the need to seek revalidation or

relaxation from DGFT.

(b) Authorization for repeat orders will be considered on automatic basis

subject to certain conditions.

(c) Verification of End User Certificate (EUC) is being simplified if

SCOMET item is being exported under Defense Export Offset Policy.

(d) Outreach programs will be conducted at different locations to raise

awareness among various stakeholders.

xiv. Facilitating & Encouraging Export of Defense Exports :

(a) Normal export obligation period under advance authorization is 18

months. Export obligation period for export items falling in the category

of defense, military store, aerospace and nuclear energy shall be 24

months from the date of issue of authorization or co-terminus with

29

contracted duration of the export order, whichever is later. This provision

will help export of defense items and other high technology items.

(b) A list of military stores requiring NOC of Department of Defence

Production has been notified by DGFT recently. A committee has been

formed to create ITC (HS) codes for defence and security items for

which industrial licenses are issued by DIPP.

xv. E-Commerce Exports :

(a) Goods falling in the category of handloom products, books / periodicals,

leather footwear, toys and customized fashion garments, having FOB

value up to Rs.25000 per consignment (finalized using e-Commerce

platform) shall be eligible for benefits under FTP. Such goods can be

exported in manual mode through Foreign Post Offices at New Delhi,

Mumbai and Chennai.

(b) Export of such goods under Courier Regulations shall be allowed

manually on pilot basis through Airports at Delhi, Mumbai and Chennai

as per appropriate amendments in regulations to be made by Department

of Revenue. Department of Revenue shall fast track the implementation

of EDI mode at courier terminals.

xvi. Duty Exemption :

(a) Imports against Advance Authorization shall also be eligible for

exemption from Transitional Product Specific Safeguard Duty.

(b) In order to encourage manufacturing of capital goods in India, import

under EPCG Authorisation Scheme shall not be eligible for exemption

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from payment of anti-dumping duty, safeguard duty and transitional

product specific safeguard duty.

xvii. Additional Ports allowed for Export and import :

Calicut Airport, Kerala and Arakonam ICD, Tamil Nadu have been notified as

registered ports for import and export.

xviii. Duty Free Tariff Preference (DFTP) Scheme :

India has already extended duty free tariff preference to 33 Least Developed

Countries (LDCs) across the globe. This is being notified under FTP.

xix. Quality complaints and Trade Disputes :

(a) In an endeavour to resolve quality complaints and trade disputes,

between exporters and importers, a new chapter, namely, Chapter on

Quality Complaints and Trade Disputes has been incorporated in the

Foreign Trade Policy.

(b) For resolving such disputes at a faster pace, a Committee on Quality

Complaints and 18 Trade Disputes (CQCTD) is being constituted in 22

offices and would have members from EPCs/FIEOs/APEDA/EICs.

xx. Vishakhapatnam and Bhimavaram added as Towns of Export Excellence :

Government has already recognized 33 towns as export excellence towns. It has

been decided to add Vishakhapatnam and Bhimavaram in Andhra Pradesh as

towns of export excellence (Product Category– Seafood).

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Following are some of the diagrams and chart which indicates the increase in

india’s export revenue:-

(Rs. In crores)

S.No Year Exports %Growth Imports %Growth TradeBalance

1 2004-2005 3,75,340 27.94 5,01,065 39.53 -1,25,7252 2005-2006 4,56,418 21.6 6,60,409 31.8 -2,03,9913 2006-2007 5,71,779 25.28 8,40,506 27.27 -2,68,7274 2007-2008 6,55,864 14.71 10,12,312 20.44 -3,56,4485 2008-2009 8,40,755 28.19 13,74,436 35.77 -5,33,6806 2009-2010 8,45,534 0.57 13,63,736 -0.78 -5,18,2027 2010-2011 11,42,922 35.17 16,83,467 23.45 -5,40,5458 2011-2012 14,65,959 28.26 23,45,463 39.32 -8,79,5049 2012-2013 16,34,319 11.48 26,69,162 13.8 -10,34,84310 2013-14(P) 18,94,182 15.9 27,14,182 1.69 -820,000

32

400

350

300

250

US

$ B

ILLI

ON

200150

10050

020042005

20052006

20062007

20072008

20082009

20092010

20102011

20112012

201213

201314

75 100 125 160 200 175 200 300 360 325

83.54 103.09 126.41 163.13 185.30 178.75 251.14 305.96 300.40 312.61

CONCLUSION :

Clearly, the determinants of export performance are numerous and the

complexity of this issue requires an empirical investigation. This relationship

needs to be explored in greater detail in future work which takes into account the

various industry-specific factors discussed above alongside important

macroeconomic factors such as the state of the world economy, the exchange

rate, and the policy environment.

In particular, it would be interesting to examine the role of exchange rate

movements in influencing India’s export competitiveness given the periodic

bouts of appreciation of the Indian Rupee typically on account of rapid inflows

of foreign capital and the concerns such movement typically raises in exporting

sectors of the economy. For instance, during 2007, driven by a surge in FII

inflows, the Indian Rupee appreciated significantly against the US dollar,

reaching the Rs 40/dollar threshold.

This led to demands from Indian industry to prevent further appreciation and

calls for intervention by the RBI to prevent an adverse impact on their exports.

Again, more recently, in the aftermath of the 2008 global financial crisis, similar

concerns about the adverse effects on exports were voiced when the rupee

temporarily appreciated against the dollar.

Hence, in a future study which delves deeper into the micro as well as macro

level factors that shape export competitiveness for Indian manufactures, it would

be worth testing through rigorous empirical analysis whether and to what extent

exchange rate movements really affect India’s export competitiveness. To date,

empirical evidence in this regard is limited and there seems to be a presupposed

conclusion that a depreciated rupee is good for India’s exports.

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However, given the diverse nature of India’s exports, the various structural,

regulatory, industry-specific and other factors that influences competitiveness, as

highlighted in this paper,

Can one expect such a clear cut relationship between exchange rates and export

competitiveness to hold for India?

How important are these other factors compared to the exchange rate?

Are the implications similar across manufacturing and services, across different

manufacturing industries, and for import-intensive exports which might benefit

from cheaper imports following appreciation?

A subsequent working paper under this same research project will empirically

examine these issues and attempt to arrive at some firm conclusions on the

relative importance of industry-specific versus macroeconomic factors in

shaping India’s export competitiveness and specifically on the role of exchange

rate movements in this context.

34