EXIM Policy Project

Study of EXIM policy
INDEX
SR PAG
N E
O. TOPIC NO.
1 PRE – 1991 SCENARIO OF FOREIGN TRADE

Brief Review of India’s Trade Policy
India’s Share In World Trade
General Provisions Regarding Imports And Exports
2 JOURNEY OF EXIM POLICY
Exim Policy, 1992-97
Modified Exim Policy, April 1998
Exim Policy 1999-2000
Mini EXIM Policy, Jan 2004
Foreign Trade Policy, 2004-2009
3 HIGHLIGHTS OF EXIM POLICY & ITS IMPACT
Special Economic Zone (SEZ)
Duty Free Replenishment Certificate (DFRC) Scheme
Duty Entitlement Pass Book (DEPB) Scheme
Quantitative Restrictions (QR)
Agricultural Export Zones (AEZ)
Status Holders
Export Promotion Capital Goods Scheme (EPCG)
Deemed Exports
Advance License Scheme
4 EXIM BANK
5 EXPORTS, IMPORTS & TRADE BALANCE
6 INDIA V/S WORLD: ANNUAL EXPORT GROWTH RATE
7 FUTURE OF EXIM
8 BIBLIOGRAPHY
PRE – 1991 SCENARIO OF FOREIGN TRADE
Exim is the principal financial institution in the country for co-

coordinating working of institutions engaged in financing exports and
imports. The import policy in the post independence period was guided
by consideration of a growth oriented policy which should ultimately lead
us to the objective of self reliance:
a) Imports should be limited as far as possible so as to conserve

foreign exchange.
b) Imports of those items were to be encouraged which would help the

industrialization of the economy and imports of such items which
could be produced at home were discouraged or completely banned.
This distinction between essential and non-essential items of imports
were necessary in view of the fact that even the demand for imports
of capital goods and other equipment in a developing economy could
be of such a magnitude that it might become difficult to find foreign
exchange for developmental imports.
c) The nature of imports should be so modified that it helped export

promotion, and thus mitigate the deficit in the balance of payments
position ultimately.
The government appointed the Import and Export Policy

Committee headed by Mr. Mudaliar in 1962 to review Government’s
trade policy. The recommendations of the committee were accepted by
the government. Mr.V.P.Singh, the then Commerce Minister, announced
the Export Import policy on the 12th of April, 1985.It was here that for the
first time the Government announced the policy on a three year basis.
The basic aim of the policy was to facilitate production through easier
and quicker access to imported inputs, impart continuity and stability of

Exim Policy, strengthen the export production base, facilitate
technological up gradation and affect all possible savings in imports.
 Brief Review of India’s Trade Policy
India’s foreign trade policy during the last five decades may be
broadly split into import substitution policy, export drive policy and export
acceleration policy. The import substitution was followed in the first two
decades. With fears of external dominance, the Indian planners adopted
a somewhat introvert external trade strategy which relied on
encouraging domestic production for the domestic market with the help
of high tariffs and high degree of protection. Far from viewing foreign
trade as an engine of growth, Indian planners sought to minimise import
demand by adopting an import substitution policy and gave secondary
place to exports primarily as a source to generate the foreign exchange
earnings to meet that part of the import bill not covered by external
assistance. There were controls over both imports and exports.
However, this policy of import substituting industrialisation and system of
controls failed to produce rapid growth and self-reliance.
With the realisation of the drawbacks of the excessively inward-

looking strategy on one hand and the need for modernisation and
technology upgradation on the other, certain policy measures were
initiated in the late seventies. Export incentives in the form of cash
compensatory support (CCS), import replenishment (REP), duty
drawback (DDS), market development assistance (MDA) etc and export
services in the form of export promotion councils, commodity boards and
specialised services institution were introduced. The strategy towards a

greater integration of the Indian economy with the rest of the world has
been pursued since then. In 1975-76 import policy was liberalised to
make available imported inputs for registered exporters. In mid-1980s
the government adopted a three-year import-export policy (1985-88) with
the aim to provide easy access to imports, essential for maximizing
production and exports. The main policy changes were abolition of
automatic licensing, inclusion of 201 items of industrial machinery under
capital goods import under OGL, decentralisation of 53 import items and
granting facility for import of capital goods against REP license from Rs
1 lakhs to Rs 2 lakhs.
The second three-year policy (1988-91) carried forward the

process of trade liberalisation to make exports more competitive. The
policy was designed to stimulate industrial growth by providing easy
access to essential imported capital goods, raw materials and
components to industry so as to sustain movements towards
modernization, technological upgradation and making Indian industry
competitive internationally. The liberal imports of capital goods and
technology were viewed as a means to enable exporters to undertake
technological upgradation in order to compete more effectively in the
international market.
In the 1990s many short run adjustments were made in the trade
policy in order to overcome the external sector crisis, which hit the
country in 1991. Two major measures taken in trade policies were (a)
liberalisation of imports entailing successive expansion in the OGL list
and (b) linking expansion in exports to import liberalisation. CCS scheme
was suspended; REP license was substituted by EXIM scrips. The rupee
was devalued in July 1991 and the country saw transition towards the
market-based exchange rate regime.
From Independence in 1947 till mid 1990s, India with some

exceptions, always faced deficit in its balance of payments i.e. imports
always exceeded exports. This was characteristic of a developing
country struggling for reconstruction and modernization of its economy.
Imports galloped because of increasing requirements of capital goods,
defence equipments, petroleum products, and raw materials. Exports
remained relatively sluggish owing to lack of exportable surplus,
competition in the international market, inflation at home, and increasing
protectionist policies, of the developed countries.
India embarked on the path of globalization in the early 1990s

with the objective of improving overall productivity, competitiveness and
efficiency of the economy in order to attain a higher growth profile.
Concomitantly, industrial, financial and external sector reforms were
initiated with a view to creating an environment conductive for the
expansion of trade. As a result, growth in trade accelerated in the early
part of the 1990s. This momentum however could not be sustained in
the face of various domestic bottlenecks and exogenous constraints like
East Asia crisis and slowdown in the US economy. These external
factors along with stagnation in investment rate, sluggish industrial
growth and slow down in manufacturing productivity, predicted India’s
trade during the closing years of the 1990s. Thus while the opening of
the economy presented a range of opportunities and advantages to the
trade sector in India, the greater integration with the global economy has
posed several challenges as well.
Since the initiation of economic reforms, India’s outward

orientation has increased considerably. The destination pattern of Indian
exports has remarkably changed in the sense that the importance of
developing countries as an export market has increased considerably.
There are, however, concerns that the country the dramatic changes in
exports of East Asia. India’s experience has seemingly fallen short of
expectation. India’s share in global trade did not rise as impressively
and the commodity structure of India’s export remained almost
unchanged until the mid 1990s.
Moreover, unlike the East Asian countries where industry has

been the major driver of exports growth, the contribution of industrial
exports in India has been comparatively low. This could perhaps be
attributed to small scale industry reservations and inflexible labour laws
besides infrastructural bottlenecks. The labour cost in India however is
one of the lowest among the competitor countries. Given the export
structure on India, the potential for higher exports of manufactures,
especially to the developed countries is high.
On the imports side, despite some initial apprehensions,

liberalization has not adversely affected India’s balance of payments.
On the contrary, increased trade liberalization along with the prudent
management of capital account liberalization has imparted with
significant strength to the balance of payments since the mid 1990a.
With the increased competitiveness of Indian Industries imports of low
and medium technology intensive products have declined. At the same
time, imports of high technology intensive products and imports used for
export production have increased. There is growing evidence that
accessibility to imports has a positive impact on the growth performance
of the country.
In the 1990s, a liberalised trade regime was put in place, which

marked a significant turnaround from the earlier controlled regime. The
challenge of restoring the macro-economic balance initially was
combined with a long term new trade policy which formed a major
ingredient of the economic reforms programme. It was recognized that
trade policies should form a part of an integrated policy framework if the
aim was to improve the overall productivity and efficiency of the
economic system. Apart from devaluation of the exchange rate and a
switch over to a unified marked determined exchange system in 1993,
the new trade policy was characterized by a short negative list of imports
and exports, lowering of the level and dispersion of nominal tariffs,
withdrawal of quantitative restrictions on imports and phasing out of the
system of import licensing. The new trade policy reforms also
encompassed significant changes in the system of export incentives,
moving away from direct subsidies to indirect export promotional
measures.
The multi-pronged strategy undertaken in the beginning of the

1990s gradually had its desired effects on the economy and ushered in a
phase of a stable and high growth. The rising exports combined with
significant surge in capital flows provided opportunities for further
liberalization of essential imports from quantitative restrictions. The
stability in the exchange rate of the rupee maintained the
competitiveness of Indian exports and at the same time prevented the
upsurge of cheap imports. The loss of the East European markets since
the early 1990s was successfully countered by diversifying into newer
markets of developing countries of Asia and the Organization of the
petroleum Exporting Countries(OPEC).
The economic reform process introduced in the beginning of

the 1990s wit focus on liberalization had enabled increased integration
of the Indian Economy with the rest of the world. The growth rate of
India’s trade is increasingly dependent on exogenous factors such as
world trade growth, international price changes and developments in the
competitor countries. Cross currency exchange rates as well as solar-
rupee exchange rate movements also get reflected in the performance
of India’s trade. Although the level and dispersion of India’s tariff have
considerably come down since the early 1990s it remains among the
highest as compared to emerging market economies.
It is increasingly being realized that the desirable structure of

tariff rates should comply with the basic principles of simplicity,
transparency, stability and international practices. As noted in the tenth
plan document, the most effective means of encouraging outward
orientation is to lower tariffs on imports so that the anti-export bias
corrected. Further, it may be noted that as the duty rates fall, the need
for refunds will commensurately decline thereby bringing down the
transaction cost.
It has been observed that in contrast to the structural and

compositional shifts in world trade towards higher technology intensive
products, the commodity structure of India’s exports remained largely
unchanged until the mid 1990s. Although, of late India’s exports have
shown a steady trend towards higher technology content, India’s
specialization of in exports lies in manufacturing goods, especially to the
developed markets remains high. However, given the general trend of
movement of terms of trade towards higher technology intensive
products, it may be imperative for India to move up the technology
ladder.
At the same time, the policy of reservation for SSIs had

declined successful small scale units to expand and achieve economies
of scale and upgrade technology. This in turn has affected export
growth, manufacturing production and employment generation.
A noteworthy fact is that despite significant liberalization of

imports during the 1990s the overall balance of payments has been in
surplus for most of the years with the country foreign exchange reserves
crossing US$ 100 billion mark. Thus, in contrast to fears expressed at
the time if the opening up of the economy, import, and liberalization
policies have in fact strengthened the country’s external sector since
1990-91. The implication is that continued reduction in import tariffs will
help in inducing greater efficiency and competitiveness in the economy,
while reducing avoidable transaction costs in trade. For the future, the
prospects of sustained growth in exports of goods and services are
bright provided the Indian economy can face the challenge of enhancing
productivity and competitiveness in an increasingly integrated global
environment.
 Import Substitution: Cornerstone of Trade Policy
India adopted an inward looking development strategy after

independence wherein import substitution constituted a major element of
both trade and industrial policies. The focus in the initial stages of
planned development was on stimulating home grown industrialization,
essentially based on the infant industry argument ,wherein production for
domestic market was shielded behind high tariff walls and high
effective protection .this policy not only underestimated the export
possibilities but also the import intensity of the import substitution

process itself.
Import substitution was the prime objective of India’s trade policy till
the mid 1970’s. This policy was largely based on the imports and exports
act of 1947. Liberal incentives were granted to firms if they were
undertaking production of an imported item that was not domestically
produced.
Protective quotas however remained more or less intact and

domestic industry continued to be shielded from import competition.
Production for exports cannot be isolated from production for the home
market and trade policy would have to be integrated with the policy for
domestic industrialization.
A three year export import policy was introduced in 1985 to provide a

definite focus to the trade sector. A major ingredient of this policy was
the provision of easy access to essential capital goods, raw materials
and component from abroad since these were viewed as a major
incentive for exporters in undertaking technological up gradation for
reducing cost and improving quality.
In short prior to mid 1991, foreign trade of India suffered from strict
bureaucratic and discretionary control. Foreign exchange transactions
were controlled by the government and the Reserve Bank of India.
Beginning mid1991 the government of India introduced a series of
reforms to liberalize and globalize the Indian economy. The process of
globalization is a reality which cannot be denied and also should not be
avoided .It needs to be managed so that we can derive the maximum
advantage from world markets.
 Balance of payment crisis, 1991
The balance of payment situation became very difficult in 1991-

1992 despite of softening of oil price in the world market. Even with a
substantial import compression, the pressure on the balance of
payments persisted throughout the current financial year.
The government attempted to mobilize support for balance of

payments for multilateral financial institutions– the international monetary
fund, the World Bank and the Asian development bank.
Another important initiative taken by the government to meet the

urgent need for the balance of payments financing was the
announcement of two schemes designed to encourage the inflow of
capital funds from abroad .The India development bond scheme and the
immunity scheme for repatriation of funds held abroad were introduced
in October1991.
Foreign currency assets, which had declined to $1.1 billion at their

lowest point in june1991, had risen to $4.4 billion by February1992.
The build up of the reserves in the course of 1991-92 was

necessary to restore confidence in the system, but it also meant the
additional resources mobilized from the multilateral financial institutions
and the IDB and immunity schemes were primarily used for building up
reserves and not to liberalize imports, which remain severely constrained
in 1991-92.
Following adjustments were called for a broad based, rapid and

sustained growth of exports.
• Reduction in the excess domestic demand-Domestic demand had

to be restrained and supply increased.
• Enhanced Competiveness-This required two changes, a change in

the exchange rate of rupee and a reduction in a relative prices of
those products which were costly vis-à-vis competing goods
abroad. The first step was taken by means of a downward
adjustment of about 18 percent in the external value of the
rupee .The second step required a phasing down of import
restrictions and a reductions in the high levels of protection ,which
characterize Indian industries.
• Deregulation-One of the obstacles to exports lied in the

cumbersome administrative procedures involved, arising from
controls over imports and exports, exchange control and also
procedures.
Measures which were taken for lowering the inflation rate in the
economy are:-
• Reducing subsidies and external support to production enterprises

so as to make more responsive to price and demand changes.
• Ensuring that buffer stock operations for food grains and

interventions in agricultural markets were counter cyclical.
• Encouraging savings to be high not only as a proportion of GDP

but in relation to demand for investment funds in the economy.
• Keeping entry barriers low in the industrial sector and improving

industry’s access to imported inputs at low tariffs.
 India’s Share In World Trade
In 1950, India accounted for 1.8 percent (1.85 percent of exports

and 1.71 percent of imports) of world trade, gradually declining to 0.53
percent by 1991; it marginally improved to 0.61 percent in 1994. The
decline in India’s share in world trade has not only been arrested but
reversed. Below table shows trends in India’s share in the world trade
during the post-Independence period. It is discernible that of late India’s
share in world exports in on the increase. It s noteworthy that India
commands an important place in world trade in tea, precious, and semi-
precious stone, spices, iron ore, leather and coffee. The Foreign Trade
Policy, 2004 – 2009 has set an ambitious task of achieving 1.5 percent
share in the world trade by the year 2009.
Selected Years
(percent)
Year Exports Imports Trade

1950 1.85 1.71 1.78
1960 1.03 1.69 1.36
1970 0.64 0.65 0.65
1980 0.42 0.72 0.57
1990 0.52 0.66 0.59
1991 0.50 0.56 0.53
1992 0.53 0.61 0.57
1993 0.58 0.60 0.59
1994 0.60 0.63 0.61
1998 0.60 - -
2000 0.70 - -
2001 0.70 - -
2003 0.86 - -
Sources: Government of India, Economic Survey, 1996-1997, p.88, and

Economic Survey, 2005-2006 p. S-95
 General Provisions Regarding Imports And Exports
Exports and Imports free unless regulated

2.1 Exports and Imports shall be free, except in cases where
they are regulated by the provisions of this Policy or any
other law for the time being in force. The item wise export
and import policy shall be, as specified in ITC(HS)
published and notified by Director General of Foreign
Trade, as amended from time to time.
Compliance with Laws
2.2 Every exporter or importer shall comply with the provisions
of the Foreign Trade (Development and Regulation) Act,
1992, the Rules and Orders made there under, the
provisions of this Policy and the terms and conditions of
any license/certificate/permission granted to him, as well as
provisions of any other law for the time being in force. All
imported goods shall also be subject to domestic Laws,
Rules, Orders, Regulations, technical specifications,
environmental and safety norms as applicable to
domestically produced goods.
Interpretation of Policy
If any question or doubt arises in respect of the
interpretation of any provision contained in this Policy, or
regarding the classification of any item in the ITC(HS) or
Handbook (Vol.1) or Handbook (Vol.2), the said question or
doubt shall be referred to the Director General of Foreign
Trade whose decision thereon shall be final and binding.
If any question or doubt arises whether a licence/

certificate/permission has been issued in accordance with
this Policy or if any question or doubt arises touching upon
the scope and content of such documents, the same shall
be referred to the Director General of Foreign Trade whose
decision thereon shall be final and binding.
Procedure
The Director General of Foreign Trade may, in any case or
class of cases, specify the procedure to be followed by an
exporter or importer or by any licensing or any other
competent authority for the purpose of implementing the
provisions of the Act, the Rules and the Orders made there
under and this Policy. Such procedures shall be included in
the Handbook (Vol.1), Handbook (Vol.2) and in ITC(HS)
and published by means of a Public Notice. Such
procedures may, in like manner, be amended from time to
time.
The Handbook (Vol.1) is a supplement to the EXIM Policy

and contains relevant procedures and other details. The
benefits available under various schemes of the Policy are
given in the Handbook (Vol.1).
Exemption from Policy / Procedure

Any request for relaxation of the provisions of this Policy or
of any procedure, on the ground that there is genuine
hardship to the applicant or that a strict application of the
Policy or the procedure is likely to have an adverse impact
on trade, may be made to the Director General of Foreign
Trade for such relief as may be necessary. The Director
General of Foreign Trade may pass such orders or grant
such relaxation or relief, as he may deem fit and proper.
The Director General of Foreign Trade may, in public
interest, exempt any person or class or category of persons
from any provision of this Policy or any procedure and may,
while granting such exemption, impose such conditions as
he may deem fit. Such request may be considered only
after consulting ALC if the request is in respect of a
provision of Chapter-4 (excluding any provision relating to
Gem & Jewellery sector) of the Policy/ Procedure.
However, any such request in respect of a provision other
than Chapter-4 as given above may be considered only
after consulting Policy Relaxation Committee.
Principles of Restriction
DGFT may, through a notification, adopt and enforce any
measure necessary for:-
• Protection of public morals.

• Protection of human, animal or plant life or
health.
• Protection of patents, trademarks and copyrights
and the prevention of deceptive practices.
• Prevention of prison labour.
• Protection of national treasures of artistic, historic

or archeological value.
• Conservation of exhaustible natural resources.
• Protection of trade of fissionable material or
material from which they are derived; and
• Prevention of traffic in arms, ammunition and

implements of war.
Restricted Goods
Any goods, the export or import of which is restricted under
ITC(HS) may be exported or imported only in accordance
with a license/ certificate/ permission or a public notice
issued in this behalf.
Terms and Conditions of a License / Certificate / Permission
Every license/certificate/permission shall be valid for the
period of validity specified in the license/
certificate/permission and shall contain such terms and
conditions as may be specified by the licensing authority
which may include:
a. The quantity, description and value of the goods;

b. Actual User condition;
c. Export obligation;
d. The value addition to be achieved; and
e. The minimum export price.

Licence/ Certificate/ Permission not a Right
No person may claim a license/certificate/ permission as a
right and the Director General of Foreign Trade or the
licensing authority shall have the power to refuse to grant
or renew a license/certificate/permission in accordance with
the provisions of the Act and the Rules made there under.
Penalty
If a license/certificate/permission holder violates any
condition of the license/certificate/ permission or fails to
fulfill the export obligation, he shall be liable for action in
accordance with the Act, the Rules and Orders made there
under, the Policy and any other law for the time being in
force.
State Trading
Any goods, the import or export of which is governed
through exclusive or special privileges granted to State
Trading Enterprise(s), may be imported or exported by the
State Trading Enterprise(s) as specified in the ITC(HS)
Book subject to the conditions specified therein. The
Director General of Foreign Trade may, however, grant a
license/certificate/permission to any other person to import
or export any of these goods.
In respect of goods the import or export of which is

governed through exclusive or special privileges granted to
State Trading Enterprise(s), the State Trading Enterprise(s)
shall make any such purchases or sales involving imports
or exports solely in accordance with commercial
considerations, including price, quality, availability,
marketability, transportation and other conditions of
purchase or sale. These enterprises shall act in a non
discriminatory manner and shall afford the enterprises of
other countries adequate opportunity, in accordance with
customary business practices, to compete for participation
in such purchases or sales.
Importer-Exporter Code Number
No export or import shall be made by any person without

an Importer-Exporter Code (IEC) number unless specifically
exempted. An Importer-Exporter Code (IEC) number shall
be granted on application by the competent authority in
accordance with the procedure specified in the Handbook
(Vol.1).
Trade with Neighbouring Countries
The Director General of Foreign Trade may issue, from
time to time, such instructions or frame such schemes as
may be required to promote trade and strengthen economic
ties with neighbouring countries.
Transit Facility
Transit of goods through India from or to countries adjacent
to India shall be regulated in accordance with the bilateral
treaties between India and those countries.
Trade with Russia under Debt- Repayment Agreement
In the case of trade with Russia under the Debt Repayment
Agreement, the Director General of Foreign Trade may
issue, from time to time, such instructions or frame such
schemes as may be required, and anything contained in
this Policy, in so far as it is inconsistent with such
instructions or schemes, shall not apply.
Actual User Condition
Capital goods, raw materials, intermediates, components,
consumables, spares, parts, accessories, instruments and
other goods, which are importable without any restriction,
may be imported by any person. However, if such imports
require a license/certificate/ permission, the actual user
alone may import such goods unless the actual user
condition is specifically dispensed with by the licensing
authority.
Second Hand Goods

All second hand goods shall be restricted for imports and
may be imported only in accordance with the provisions of
this Policy, ITC(HS), Handbook (Vol.1), Public Notice or a
licence/certificate/permission issued in this behalf.
Import of samples
Import of samples shall be governed by the provisions
given in Handbook (Vol.1).
Import of Gifts
Import of gifts shall be permitted where such goods are
otherwise freely importable under this Policy. In other
cases, a Customs Clearance Permit (CCP) shall be
required from the DGFT.
Passenger Baggage
Bonafide household goods and personal effects may be
imported as part of passenger baggage. Samples of such
items that are otherwise freely importable under this Policy
may also be imported as part of passenger baggage
without a licence/certificate/ permission. Exporters coming
from abroad are also allowed to import drawings, patterns,
labels, price tags, buttons, belts, trimming and
embellishments required for export, as part of their
passenger baggage without a licence/certificate/
permission.
Import on Export basis
New or second hand capital goods, equipments,
components, parts and accessories, containers meant for
packing of goods for exports may be imported for export
without a licence/certificate/permission on execution of
Legal Undertaking/ Bank Guarantee with the Customs
Authorities.
Re-import of goods repaired abroad
Capital goods, equipments, components, parts and

accessories, whether imported or indigenous, may be sent
abroad for repairs, testing, quality improvement or
upgradation or standardization of technology and re-
imported without a licence/certificate/permission.
Import of goods used in projects abroad
After completion of the projects abroad, project contractors
may import, without a licence/certificate/permission, used
goods including capital goods provided they have been
used for at least one year.
Sale on High Seas
Sale of goods on high seas for import into India may be
made subject to this Policy or any other law for the time
being in force.
Import under Lease Financing
Permission of licensing authority is not required for import
of new capital goods under lease financing.
Clearance of Goods from Customs
The goods already imported/shipped/arrived, in advance,
but not cleared from Customs may also be cleared against
the licence/ certificate/ permission issued subsequently.
Execution of BG/LUT
Wherever any duty free import is allowed or where
otherwise specifically stated, the importer shall execute a
Legal Undertaking (LUT)/Bank Guarantee (BG) with the
Customs Authority before clearance of goods through the
Customs, in the manner as may be prescribed. In case of
indigenous sourcing, the licence/certificate/ permission
holder shall furnish BG/LUT to the licensing authority
before sourcing the material from the indigenous
supplier/nominated agency.
Private/ Public Bonded Warehouses for Imports
Private/Public bonded warehouses may be set up in the

Domestic Tariff Area as per the terms and conditions of
notification issued by Department of Revenue. Any person
may import goods except prohibited items, arms and
ammunition, hazardous waste and chemicals and
warehouse them in such private/public bonded
warehouses. Such goods may be cleared for home
consumption in accordance with the provisions of this
Policy and against Licence/certificate/ permission,
wherever required. Customs duty as applicable shall be
paid at the time of clearance of such goods. If such goods
are not cleared for home consumption within a period of
one year or such extended period as the custom authorities
may permit, the importer of such goods shall re-export the
goods.
Free Exports
All goods may be exported without any restriction except to
the extent such exports are regulated by ITC(HS) or any
other provision of this Policy or any other law for the time
being in force. The Director General of Foreign Trade may,
however, specify through a public notice such terms and
conditions according to which any goods, not included in
the ITC(HS), may be exported without a licence/ certificate/
permission.
Export of samples
Export of samples shall be governed by the provisions
given in Handbook (Vol.1)
Export of Passenger Baggage
Bonafide personal baggage may be exported either along
with the passenger or, if unaccompanied, within one year
before or after the passenger's departure from India.
However, items mentioned as Restricted in ITC(HS) shall

require a licence/certificate/permission, except in the case
of edible items.
Export of Gifts
Goods, including edible items, of value not exceeding
Rs.1,00,000/- in a licensing year, may be exported as a gift.
However, items mentioned as restricted for exports in
ITC(HS) shall not be exported as a gift, without a licence/
certificate/ permission, except in the case of edible items.
Export of Spares
Warranty spares, whether indigenous or imported, of plant,
equipment, machinery, automobiles or any other goods
may be exported upto 7.5% of the FOB value of the exports
of such goods along with the main equipment or
subsequently but within the contracted warranty period of
such goods.
Third Party Exports
Third party exports, as defined in paragraph 9.56 shall be
allowed under the Policy.
Export of Imported Goods
Goods imported, in accordance with this Policy, may be
exported in the same or substantially the same form without
a licence/certificate/ permission provided that the item to be
imported or exported is not mentioned as restricted for
import or export in the ITC(HS). Exports of such goods
imported against payment in freely convertible currency
would be permitted against payment in freely convertible
currency.
Goods, including those mentioned as restricted item for

import or export (except prohibited items) in ITC(HS), may
be imported under Customs Bond for export in freely
convertible currency without a licence/certificate/

permission.
Export of Replacement Goods
Goods or parts thereof on being exported and found
defective/damaged or otherwise unfit for use may be
replaced free of charge by the exporter and such goods
shall be allowed clearance by the customs authorities
provided that the replacement goods are not mentioned as
restricted items for exports in ITC(HS).
Export of Repaired Goods
Goods or parts thereof on being exported and found
defective, damaged or otherwise unfit for use may be
imported for repair and subsequent re-export. Such goods
shall be allowed clearance without a licence/certificate/
permission and in accordance with customs notification
issued in this behalf.
Private Bonded Warehouses for Exports
Private bonded warehouse exclusively for exports may be
set up in DTA as per the terms and conditions of the
notifications issued by Department of Revenue. Such
warehouse shall be entitled to procure the goods from
domestic manufacturers without payment of duty. The
supplies made by the domestic supplier to the notified
warehouses shall be treated as physical exports provided
the payments for the same are made in free foreign
exchange.
Denomination of Export Contracts
All export contracts and invoices shall be denominated in
freely convertible currency and export proceeds shall be
realised in freely convertible currency. Contracts for which
payments are received through the Asian Clearing Union
(ACU) shall be denominated in ACU Dollar. The Central

Government may relax the provisions of this paragraph in
appropriate cases. Export contracts and Invoices can be
denominated in Indian rupees against EXIM
Bank/Government of India line of credit.
Realisation of Export Proceeds
If an exporter fails to realise the export proceeds within the
time specified by the Reserve Bank of India, he shall,
without prejudice to any liability or penalty under any law for
the time being in force, be liable to action in accordance
with the provisions of the Act, the Rules and Orders made
there under and the provisions of this Policy.
Free movement of export goods No seizure of Stock
2.42.1 No seizure of stock shall be made by any agency so as to
disrupt the manufacturing activity and delivery schedule of
export goods. In exceptional cases, the concerned agency
may seize the stock on the basis of prima facie evidence.
However, such seizure should be lifted within 7 days.
Export Promotion Council
2.43 The basic objective of export promotion councils is to
promote and develop the exports of the country. Each
Council is responsible for the promotion of a particular
group of products, projects and services. The list of the
councils and their main functions are given in Handbook
(Vol.1).
Registration -cum-Membership Certificate
2.44 Any person, applying for (i) a licence/ certificate/ permission
to import/ export, [except items listed as restricted items in
ITC(HS)] or (ii) any other benefit or concession under this
policy shall be required to furnish Registration-cum-
Membership Certificate (RCMC) granted by the competent
authority in accordance with the procedure specified in the

Handbook (Vol.1) unless specifically exempted under the
Policy.
JOURNEY OF EXIM POLICY
India`s foreign trade is regulated by the foreign trade

(Development and Regulation) Act, 1992 which replaced the import and
export (control) Act, 1947. The act of 1992 empowers the central
government to formulate and announce from time to time the export and
import policy and to amend it in like manner.
Prior to mid -1991, foreign trade of India suffered from strict

bureaucratic and discretionary controls. However, the new government
which took over at the centre in June 1991 soon realised that India’s
foreign trade policy must respond to the changes (liberalization and
openness) sweeping across the world. To reduce controls, simplify
procedures and to create a congenial environment for trade, the
government made a statement on trade policy in parliament on august
13, 1991, ushering a new era in the foreign trade policy of India. Instead
of controls and regulations, the focus shifted to promotion and
development of foreign trade.
Before 1985-86, the annual export-import policy was announced at

the beginning of the financial year. In 1985-86 , a three year export-
import policy was announced for the period April 1985 through march
1988, providing a reasonable degree of stability to the policy framework.
On its expiry, the new policy for three years 1988-91 was announced in
March 1988 which laid even greater emphasis on promotion of exports.
 EXIM POLICY, 1992-97
On March 31, 1992, the government announced the export and

import policy for a period of five years (April 1, 1992 to march 31, 1997),
coinciding with the period of eighth five year plan. The chief controller of
imports and exports was re-designated as director general of foreign
trade. EXIM Policy, 1992-97 made a conscious effort to dismantle
various protectionist and regulatory policies and accelerate India`s
transition towards a globally oriented economy. The export-import policy
was further liberalized by the government on March 31, 1993.
Substantial concessions were announced to boost agricultural exports.
The government also announced a centrally sponsored scheme to set
up industrial parks in different states.
 EXIM POLICY, 1997-2002
The export and import policy, 1997- 2002 (coinciding with the period
of ninth five year plan) sought to consolidate the gains of the previous
policy and further carry forward the process of liberalization by
deregulating and simplifying procedures and removing quantitative
restrictions in a phased manner. It set an ambitious target of attaining an
export level of US$ 90-100 billion by the year 2002 and achieving 1 per
cent share in world trade.
Objectives:
The principal objectives of the policy were the following:
1. To accelerate the country`s transition to a globally – oriented vibrant

economy to derive maximum benefits from expanding global market
opportunities.
2. To stimulate sustained economic growth by providing access to

essential raw materials, intermediates, Components, consumables and
capital goods required for augmenting production.
3. To enhance the technological strength and efficiency of Indian

agriculture, industry and services, thereby improving their competitive
strength while generating new employment opportunities, and
encourage the attainment of internationally accepted standards of
quality.
4. To provide consumers with good quality products at reasonable

prices.
Salient Features:
Following were the salient features of the policy:
1. Exports and imports shall be free, except to the extent they are
regulated by the provisions of this policy.
2. The Central Government may in public, interest, regulate the import

or exports of goods by means of a negative list of imports or a negative
list of exports, as the case may be.
3. The negative list may consist of goods, the import or export of which
is prohibited, restricted through licensing, or canalised.
4. Prohibited items in the Negative list of Imports shall not be imported

and prohibited items in the Negative list of exports shall not be exported.
5. Any goods, the export or import of which is restricted through

licensing , may be exported or imported only in accordance with a
license issued in this behalf.
6. Any goods, the import or export of which is canalised, may be

imported or exported by canalising agency specified in the negative list.
7. No export or import shall be made by any person without an importer

– exporter code (IEC) number unless specifically exempted.
 MODIFIED EXIM POLICY, APRIL 1998
The new government at the centre, which assumed office in March

1998, announced its exports and import policy for the year 1998-99 on
April 13, 1998. As part of the annual export-import policy modification,
the government freed from import restrictions a large number of
consumer goods and liberalized all major export promotion schemes.
This new dose of liberalization of the trade regime by the new
government was necessitated by the commitments made by India at the
World Trade Organization (WTO). The timing of the import policy
liberalization coincided with the scheduled review of India`s trade policy
by WTO on April 16 and 17, 1998. Apart from the general global
pressure on India to remove restrictions on imports, the US had filed a
complaint with the WTO against India`s import regime. The following
were the main provisions of the modified Export-import policy unveiled
by the Commerce Minister on April 13, 1998.
1. 340 more items were shifted from restricted list to open general
licence (OGL). Thus out of the total number of 10, 202 items covered
under the export-import policy, only 2200 remained on the restricted
list.
2. The revised policy set an export growth target of 20 percent for the
year 1998-99 which in other words required total exports of the order
of US$ 41.4 billion during 1998-99.
3. Zero –duty export promotion capital goods (EPCG) scheme was

extended to all the software exporters by lowering the threshold limit
of importable capital goods from Rs 20 crore to Rs 10 lakhs. The
lowering of the threshold limit was expected to help the software
companies to proliferate throughout the length and breadth of the
country. In other words they could import any capital goods without
paying any import duty and in return sign an export obligation of 5
times the value of capital goods on net foreign exchange earning
basis for a period of six years. In the case of garments, agriculture,
food processing, gems and jewellery, electronics leather, sport goods
and toys the minimum limit was lowered to Rs 1 crore.
4. In a bid to prevent cheap imports being dumped at unreasonable

prices, the government set up an anti-dumping cell called Directorate
General (DG) of Anti-Dumping and Allied Duties. The DG would be
responsible for investigation into alleged cases of dumping as well as
subsidised cases. DG would be recommended Anti –Dumping duties
where it is found that dumped imports are causing harm to the
domestic industry. Where harm is caused to the domestic industry by

subsidising exports of the exporting countries then the DG would have
the jurisdiction to investigate all such cases and recommend possible
imposition of countervailing duties. The DG would also advice the
industry groups and consumer for on how to go about collecting
information and procedures involved in making out a case for anti-
dumping duties.
5. Other provisions include:
Delegation of powers to regional licensing offices, Doing away with

the minimum value addition of 33 percent under advance licensing
scheme, Simplified procedures for clubbing of advance license
scheme and Private bonded warehouses to be set up to import, stock
and sell even negative list items.
 EXIM POLICY 1999-2000
In its effort to further dismantle the import control regime and hasten
the integration of the Indian economy with the world economy, the
government announced a revised export-import policy on March 31,
1999 which came into force on April1, 1999.
The new export –import policy freed import of 894 items of consumer
goods, agricultural products and textile from licensing requirements. In
other words a number of
Consumer items could now be imported license-free subject only to the

payment of import duty. Physical controls on imports were removed and
the only control over imports was fiscal in nature, i.e. adjusting import
duty to regulate imports. These adjustments were to be made within the
upper limit prescribed by WTO.
Moreover, another 414items were removed from the restricted list,

allowing these to be imported against special import licenses. India`s
international commitments require it to remove licensing curbs on
imports by the year 2003.
 EXIM POLICY 2000-2001
The union commerce and industry minister announced on march 31,

2000 the new export-import policy of the government of India for the
year 2000-2001. The export –import policy envisaging a 20 percent
export growth in dollar terms in 2000-2001, brought about a major
rationalisation in export promotion schemes and launched a series of
sector specific initiatives.
Export Promotion: In a major initiative to boost exports, the

Government announced the following measures:
Special Economic Zones (SEZ): in the pattern of Chinese models the

government announced the setting up of two SEZs at Positra in Gujarat
and Nangunery in Tamil Nadu ]. Industrial units located in SEZs will be
exempted from rules and regulations governing exports and imports. The
entire production will have to be exported from these zones. Sales from
Domestic Tariff Area (DTA) can be done only on full payment of custom
duty. Several Export Processing Zones (EPZs)will shortly be converted
into SEZs. The EPZs located in Kandla, Vizag and Kochi will be
converted into SEZs immediately. It was further announced that 100
percent foreign direct investment (FDI) would be allowed in all products
in SEZs.
SEZs would be treated as if they are outside the customs

territory of the country. The units would be able to import capital goods
and raw material duty free. The movement of goods to and from SEZs
would be unrestricted.
It is noteworthy that SEZs have played a crucial role in

boosting China`s exports and presently the country derives 40 percent of
its exports from such zones. However, Chinese SEZs are based on
contract labour system (hire and fire policy). The commerce minister
while announcing the EXIM policy categorically ruled out any changes in
labour laws. Moreover, there is no systems of reservation of items for

small scale industries in China. It is unclear if the Government of India
would allow the production of reserved item for small industries in the
SEZs. Still further there are various infrastructural bottlenecks like power
shortage, lack of transport facility and of course procedural delays.
Hence the success of SEZs in India is a moot question
Sector-Specific Packages: the Export-import policy 2000-2001

announced sector-specific packages for sever core areas to boost
export, viz. Gems and jewellery, pharmaceuticals, agrochemicals,
biotechnology, silk, leather and garments.
For the gems and jewellery exporters, the government announced

a diamond-dollar account (DDA) scheme export proceeds can be
retained in a dollar account and the exporters can use funds in this
account for import of rough diamonds.
For agrochemicals, biotechnology and pharma units (considered

as knowledge-intensive), the government has allowed duty free imports
of laboratory equipment, chemicals and reagents upto 1% of the FOB
value of exports. Similarly the government increased duty free import of
trimmings, embellishments and other items from 2 to 3% of the total
export value
Involvement of State Governments in Export Promotions: Since the

stages forgo taxes (mainly sales tax) on exports, they have little
incentive to promote exports. [1] the 2000-2001 export -import policy
announced financial incentives to states based on their export
performance. An incentives scheme with an initial outlay of Rs. 250
crores to secure states involvement in the national export drive was
unveiled. The states can use the funds for export promotions activities
such as infrastructure development. The commerce and industry
minister said that he would request the state to treat all units exporting
more than 50 percent of their turnover as public utility services. This
would enable them to keep their international commitment on delivery
schedule.
Furthermore, the minister observed that the recent spectacular growth of

software exports was, apart from India’s knowledge in high-tech, due to
hands off policy of government towards this sector .A similar approach
to hardware electronics is called for.
Import liberalisation: The export import policy 2000 to 2001 lifted

quantitative restrictions on 714 commonly used items (agricultural
products and consumer durables ) which can now be freely imported.
Thus, commodities like meat, milk powder, coffee, tea, fish, pickles,
cigars , cigarettes, television , radio , tape recorders , foot wares &
umbrellas can be imported freely from April 1, 2000. However most of
these items will attracts peak rates of basic import duty.
The lifting of licensing and quota restrictions on 714 import items was in
line with India’s WTO obligations. The government promised to abolish
licensing and quota curbs on the remaining 715 items (such liquor, cars
etc) in April 2001.
Many critics of new policy fear that that removal of licensing and quota
restriction will lead to surge in imports of these items, hurting the
domestic industry. However, it is noteworthy that import restrictionare
being phased out since 1966 but no extraordinary growth has occurred
in the import of freed items. The commerce minister maintain that anti-
dumping and anti-subsidy tariffs and other safeguards would be used if
there is sudden search in imports, causing serious injuries to the
domestic industry.
 EXIM Policy, 2001-2002
The union commerce And industry minister unveiled on march 31, 2001,
the export –import policy for the year 2001-2002.
Removal of Quantitative restrictions: The process of removal of import

restrictions , which began in 1991, was completed in a phased manner
bye the Export-Import Policy 2001-2002 with the removal of restriction
on the remaining of 715 items. This was in tune with the commitments
made to the WTO. Out of these 715 items 342 were textile products, 147
were agricultural products and 226 were other manufactured products.
However, import of agricultural products like wheat, rice, maze, copra

and coconut oil was placed in the category safe trading . the nominated
state trading enterprise will conduct the import of this commodity solely
as per commercial consideration . similarly, import of petroleum products
including petrol , diesel & ATF was placed in the category of state
trading in all 27 out of 715 items taken of the quantitative restrictions list
were put under the state trading category.
The minister was confident that the Indian market will not swamped by
imported brands of commonly used articles. To prevent dumping,
government will take recourse to anti-dumping duties and other non-tariff

barriers. Arrangements have been made to track, collate and analyse
data on 300 sensitive items which mainly comprise farm goods and
items produced by small scale sectors.
Agricultural Export Zones: With a view to boost agricultural exports and

provide remunerative returns to the farming community, the Export-
Import policy proposed the setting up of agricultural export zones. Three
such zones are proposed to be set up in himanchal Pradesh , jammu
Kashmir (to promote export of apples) and Maharashtra. Government
will make efforts to provide improved access to the produce/products of
the agriculture and allied sectors in the international market. State
governments have been asking to identify product specific agricultural
export zones for development for export of specific products from a
geographically contiguous area.
 EXIM Policy , 2002-2007
The EXIM Policy 2002-07 was unveiled on march 31, 2002. The policy
entailed several institutional, infrastructural and fiscal measures intended
to promote exports which are conductive to the economic development
of the country. The following were the salient features of the policy.
Special Economic zones (SEZs): Offshore banking units (OBUs) were

permitted in SEZs . Units in SEZ were permitted to undertake hedging of
commodity price risks, provided such transactions are undertaken by the
units on stand-alone basis. This will impart security to the returns of the
unit.
It has also been decided to permit external commercial borrowings

(ECBs) for tenure of less than three years in SEZs. The detailed
guidelines will be worked out by RBI. This will provide opportunities for
accessing working capital loan for these units internationally competitive
rates.
Employment Generation: In an effort to generate additional

employment , the following announcements were made pertaining to
agricultural and small industry sectors.
Exports restrictions like registration and packaging requirement were

removed forthwith on butter, wheat & wheat products, coarse grains
groundnuts oil and cashew to Russia . Quantitative and packaging
restrictions on wheat and its products, butter, pulses, grains and flour of
barley, maize, bajra, ragi and jowar had already been removed on march
5, 2002.
• Restrictions on export of all cultivated varieties of seed, except jute

and onion, were removed.
• To promote export of agriculture and agriculture-based products, 20
agriculture export zones were notified.
• In order to promote diversification of agriculture, transport subsidy
shall be available for export of fruits, vegetables, floriculture, poultry
and dairy products.
• 3 percent special DEPB rate was announced for primary and
processed foods exported in retail packaging of 1 kg or less
• An amount of Rs 5 crore under Market Access Initiative (MAI)
• Was earmarked for promoting cottage sector exports coming under te
KVIC.
• The units in the handicrafts sector can also access funds from MAI
scheme for development of website for visual exhibition of their
product.
• Under the export of Promotion Capitals Goods (EPCG) scheme, these

units will not be required to maintain average level of exports, while
calculating the export obligation.
• These units shall be entitled to the benefit of Export House Status on
achieving lower average export performance of Rs 5 crore as against
Rs 15 crore for others.
• The units in handicraft sector will be entitled to duty free imports of an
enlarged list of items as embellishments up to 3 percent of FOB value
of their exports.
• With a view to encouraging further development of centers of
economics and export excellence such as Tirupur for hosiery, wollen
blanket in Panipat, wollen knitwear in Ludhiana, following benefits
shall be available to small scale sector:
1. Common service providers in these areas shall be entitled for facility
of EPCG scheme.
2. The recognized associations of units in these areas will be able to
access the funds under the Market Access initiative scheme for
creating focused technological services and marketing abroad.
3. Such areas will receive priority for assistance for identified critical
infrastructure gaps from the scheme on Central Assistance to States.
4. Entitlement for Export House Status at Rs 15 crore for others.
Technology Upgradation: Electronic Hardware Technology

Park(EHTP) scheme was modified to enable the sector to face the
zero duty regime under ITA(Information Technology Agreement)-1.The
units shall be entitled to following facility.
• Net Foreign Exchange as a Percentage of Exports (NFEP) positive in

5 years.
• No other export obligation for units in EHTP.
• Supplies of ITA-1 items having zero duty in the domestic market to be
eligible for counting of export obligation.
Growth-oriented: The status holders shall be eligible for the following

new/special facilities.
• License/Certificate/Permissions and customs clearance for both

exports imports on self-declaration basis.
• Fixation of input-output norms on priority.
• Priority finance for medium and long-term capital requirement as per
conditions notified by rbi.
• Exemption from compulsory negotiation of documents through banks.
The remittances, however, would continue to be received through
banking channels.
• 100 percent retention of foreign exchange in Exchange Earners
Foreign Currency (EEFC) account.
• Enhancement in normal repatriation period from 180 days to 360
days.
 EXIM Policy, 2003-2004
It had the following provisions:
• The policy provided a massive thrust to export of services by

introducing duty free export facility for the service sector units having a
minimum foreign exchange earning of Rs 10 lakh.
• Encouragement of corporate sector with proven credential to sponsor

Agri-Export Zones for boosting farm exports.
• EPCG scheme made more flexible and attractive so that even the
small scale sector could set up and expand its manufacturing base for
exports.
• Fixing of input-output norms for status holders on priority basis within
a period of 60 days and permission to status holders in Software
Technology Parks India(STPI) for free movement of professional
equipments.
• Simplification and codification of rules, regulations and procedures
application on SEZ and EOU units by putting all these rules and
regulations in one place, thus greatly facilitating both potential
investors and existing units.
• To increase the overall competitiveness of export clusters, a scheme
for upgradation of infrastructure in existing clusters/industrial locations
would be implemented.
• Extension of Duty Free Replenishment Certificate(DFRC)scheme to
deemed exports and reduction in its value addition norms from 33
percent to 25 percent.
 Mini EXIM policy, Jan 2004
Preceding the dissolution of the 13th Lok Sabha on Feb. 6, 2004 the
government of India announced mini EXIM policy on Jan 28, 2004. It
included facilitation and simplification measure to sustain the momentum
of export growth. Specifically it was aimed at providing boost to exports
of gems and jewellery, encouraging tourism and making energy
generation cheaper. Highlights of new policy were.
• Free import of gold and silver for export purpose permitted. In other
words, gold and silver can now be imported without paying any
commission to channelling agents. (in 10997, the government
authorized three canalizing agencies viz MMTC, STC and HHEC, and
eight banks to import gold and silver for sales in the domestic
market ). Likewise, import of rough, uncut and semi polished
diamonds will not be valued for export obligations. Quantitative
restriction on gold and silver imports has also been lifted. Government
also announced the introduction of a gold card for creditworthy
exporters to make available cheaper foreign currency debt on easier
terms.
• Duty free import facility available to star hotels extended the heritage,
one and two star hotels and stand alone restaurants. All these hotels
have been allowed duty free import equivalent to 5% of their export
earnings in three preceding years.
• Restriction on import of electrical energy lifted
• Online license electronic fund transfer facility for exporters. These

measures are expected to reduce transaction cost for exporters and
make export administration transparent
 FOREIGN TRADE POLICY, 2004-2009
In radical move the government of India announced on August 31

2004 a new forign trade policy for the period 2004-09, replacing the
hitherto nomenclature of EXIM policy by foreign Trade policy. A vigorous
export led growth strategy of doubling India’s share in global
merchandise trade in the next 5 years , with a focus on the sector having
prospectus for export expansion and potential for employment

generation, constitute the mail plank of the policy. These measures are
expected to enhance international competiveness and aid in further
increasing the acceptability on Indian exports.
Objective and strategy
The new FTP takes an integrated view of the overall development

of India’s foreign trade and essentially provides a roadmap for the
development of this sector. It is built around two major objectives of
doubling India’s share of global merchandise trade by 2009 and using
trade policy as an effective instrument of economic growth with a thrust
on employment generation. Key strategies to achieve these objectives,
inter alia, include: unshackling of controls and creating an atmosphere of
trust and transparency; incidence of all levies on input used in export
products; facilitating development of India as a global hub of
manufacturing, trading and services; identifying and nurturing special
focus area to generate additional employment opportunities, particularly
in semi urban and rural areas; facilitating technological and
infrastructural up gradation of the Indian economy, epically and ensuring
that domestic sector are not disadvantage in trading agreements
upgrading the infrastructural 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 export strategies.
Special focus initiatives

The FTP 2004 has indentified certain thrust sector having

prospects for export expansion and potential for employment generation.
These thrust sector include agriculture, handlooms and handicraft, gems
and jewellery and leather footwear sector. Sector specific policy
initiatives for the thrust sector include for agriculture sector introduction
of new scheme called vishesh krishi upaj yojana to boost export exports
of fruit, vegetables, flowers minor forest produce and their value added
products. Under the scheme exports of these products qualify for duty
free credit entitlement for importing inputs and other goods under EPCG
scheme permitting the installation of capital goods imported under
EPCG for agriculture anywhere ASIDE scheme for development of
AEZ’s, liberalization of import of seeds bulbs tuberts and planting
material and liberalization of the exports of plant portion, derivatives and
extract to promote export of medicinal plants and herbal produce
The special focus initiatives for handlooms and handicraft sector

include extension of facilitating like enhancing duty free imports of
trimming and embellishment for handlooms and handicrafts exemption of
samples from CVD authorizing handicraft export promotion council to
import trimmings embellishment and samples for small manufacturing
and establishment of a new handicraft special economic zone.
New Export Promotion scheme
A new scheme to accelerate growth of export called the target plus

has been introduced. Under the scheme exporters achieving a quantum
growth in exports are entitled to duty free credit based on incremental
exports substantially higher than the general actual export target fixed.
Rewards are granted based on a tired approach. For incremental growth
of over 20%, 25% and 100%, the duty free credit are 5%, 10%, and 15%
of f.o.b value of incremental exports. Another new scheme called

vishesh kishi upaj yojana has been introduced to boost exports of fruits,
vegetables and flower. Exports of these products qualify for duty free
credit entitlement equivalent to 5% of f.o.b value of exports. The
entitlement is freely transferable and can be used for import of a variety
of input and goods. To accelerate growth in export of service so as to
create a powerful and unique served from India brand instantly
recognized and respected the world over the earlier duty free export
credit scheme for service has been revamped and re –cast into the
served from India scheme. Individual service providers who earn foreign
exchange of at least 5 lakh, and other service providers who earn
foreign exchange of at least Rs. 10 lakh are eligible for a duty-credit
entitlement of 10% of total foreign exchange earned by them. In the case
of hotels it is 5%. Hotels and restaurants can use their duty credit
entitlement for import of good items and alcoholic beverages. To make
India into global trading hub a new scheme to establish Free trading and
warehousing zones has been introduced to create trade related infra to
facilitate the import and export of goods and service with freedom to
carry out trade transaction in convertible currency. Besides permitting
FDI up to 100% in the development outlay of Rs 100 cr and five lakh sq.
mts built up area. Units in the FTWZ qualify for all other benefits as
applicable for SEZ units.
 Simplification, rationalization and modification of ongoing

schemes:
EPCG scheme has been further improved upon by providing

additional flexibility for fulfilment of export obligation, facilitating and
providing incentives for technological up gradation, permitting transfer of
capital goods to group companies and managed hotels, doing away with
the requirement of certificate from central excise and improving the
viability of specified projects by calculating their exports obligating based
on concessional duty permitted to them. Import of second hand capital
goods without any restriction on age has been permitted and the
minimum depreciated value for plant and machinery to be re located into
India has been reduced from Rs 50 cr to Rs 25 cr. The new policy has
been allowed transfer of the import entitlement under duty free
replenishment certificate scheme in respect of fuel to the marketing
agencies authorized by the ministry of petroleum and natural gas to
facilitate sourcing of such import by individual exporters.
The Duty Entitlement passbook scheme will continue until replaced

by a new scheme to be drawn up in consultation with exports. Additional
benefits have been provided to EOU , including exemption from service
tax in proportion to their goods and service, permission to retain 100% of
exports earnings in export earners foreign currency accounts, extension
of income tax benefits on plant and machinery to DTA unit which convert
to EOU, EHTP, STP, BTP units allowing imports of capital goods on self
certification basis and permission to dispose of leftover material and
fabrics up to 2% of c.i.f value or quantity of import on imports on
payment of duty on transaction value only. Minimum investment criterion
has been waived for handicraft, agriculture, floriculture. The FTP
propose setting up to BTP’s by granting all facilitates of 100% EOUs.
The FTP 2004 has introduced a new rationalization scheme of
categorization of status holders as star export houses with
benchmarking for exports performance varying from Rs15 cr to Rs

5000cr.
 Simplification of rules and procedure and institutional

measures:
Policy measures announced to further rationalize/simplify the rule

and procedure include exemption for exporters with minimum turnover of
Rs 5cr and good track record from furnishing bank guarantee in any of
the scheme service tax exemption for exporters of all goods and service
uniformly to 24 months reduction in number of return of returns and
forms to be filled delegation of more power to zonal and regional offices
and time bound introduction of electronic data interface. Institutional
measures proposed in the FTP 2004 include revamping and revitalizing
the board of trade setting up of council to map opportunities for key
service in key markets and setting up of common facility centres for use
of professional home based service providers in state and district level
towns.
 Annual supplement 2005-06 to the foreign trade policy 2004-05
The union commerce and industry minister announcement on april 8

2005, the 2005-06 supplement to the five year foreign trade policy,
giving a big boost to exports from agriculture and manufacturing sector.
Auto components pharmaceutical’s gems and jewellery and seafood
exports firms stood to gain the most. Highlights of the annual
supplement were as follows
• Push to exports of farm, marine, manufacture and pharma

products
• Exports cess on farm commodities abolished
• Infra imitative to reduce port congestion
• Imports by hotels, other service industry made duty free
• Setting up of interstate trade council mooted
• Procedure simplified cut transaction costs aayat niryat introduced
HIGHLIGHTS OF EXIM POLICY & ITS IMPACT
SPECIAL ECONOMIC ZONE (SEZ)
Special economic zone is a particular area inside a state which acts as

foreign territory for tariff and trade operations. Govt. provides tax
exemption (IT, Excise, customs, sales etc.), subsidised water and
electricity etc.
SEZ can be sector specific or multi product SEZ. It helps in the

development of infrastructure of the area around the SEZ, provides
employment to people, makes the exports more viable. All this will helps
the country's products to become more competitive vis-a-vis providing all
round development of region.
It should be noted that if 100 acres are allotted for SEZ, then only 30-
35% of area is used for setting up plants. rest of the area is used to
provide housing facilities, malls, multiplexes etc.

Also Tax exemption is for specific period say for 10 yrs or so
Units in SEZ would be permitted to It has also been decided to permit

Special Economic Zones (SEZs)
Offshore Banking Units (OBUs) shall be permitted in SEZs. Detailed

guidelines are being worked out by RBI. This should help some of our
cities emerge as financial nerve centres of Asia & undertake hedging of
commodity price risks, provided such transactions are undertaken by the
units External Commercial Borrowings (ECBs) for a tenure of less than
three years in SEZs. The detailed guidelines will be worked out by RBI.
This will provide opportunities for accessing working capital loan for
these units at internationally competitive rates.
The SEZ scheme has undergone few changes:
• FDI permitted under automatic route for all manufacturing sectors,

except a small negative list.
• No licence required to set up units for items reserved under SSI.
• Units in SEZs can bring back their proceeds in 365 days and retain
100 per cent of proceeds in EEFC account.
• No CR waiver is required for sending sample goods for participation
in exhibitions.
• SEZ developers will be given infrastructure status under the Income-
Tax Act, as provided in the Finance Bill, 2001, and will be entitled to
concessional duty for procuring goods for setting up SEZs.
All the necessary steps were initiated to give permission to set up SEZs
to the States, the private sector and the joint sector.
Special Economic Zones Scheme
• Sales from Domestic Tariff Area (DTA) to SEZs to be treated as

export. This would now entitle domestic suppliers to Drawback/
DEPB benefits, CST exemption and Service Tax exemption.
• Agriculture/Horticulture processing SEZ units will now be allowed
to provide inputs and equipments to contract farmers in DTA to
promote production of goods as per the requirement of importing
countries. This is expected to integrate the production and
processing and help in promoting SEZs specialising in agro
exports.
• Foreign bound passengers will now be allowed to take goods from
SEZs to promote trade, tourism and exports.
• Domestic sales by SEZ units will now be exempt from SAD.
• Restriction of one year period for remittance of export proceeds
removed for SEZ units.
• Netting of export permitted for SEZ unit provided it is between
same exporter and importer over a period of 12 months.
• SEZ units permitted to take job work abroad and exports goods
from there only.
• SEZ units can capitalise import payables.
• Wastage for subcontracting/exchange by gem and jewellery units
in transactions between SEZ and DTA will now be allowed.
• Export/import of all products through post parcel/courier by SEZ
units will now be allowed.
• The value of capital goods imported by SEZ units will now be

amortised uniformly over 10 years.
• SEZ units will now be allowed to sell all products including gems
and jewellery through exhibitions and duty free shops or shops set
up abroad
• Goods required for operation and maintenance of SEZ units will
now be allowed duty free.
According to the Exim Policy (1997-2002), SEZs may be set up for

manufacture of goods and rendering of services, production, processing,
assembling, trading, repair, remaking, reconditioning, re-engineering,
including of making of gold/silver/platinum jewellery and articles.
An SEZ is a specially delineated `duty free' enclave and shall be

deemed to be foreign territory for trade operations, duties and tariffs.
Thus, there should be necessary `check posts' and Customs duty

vigilance as in the case of airport and ports. However, there are many
advantages, and of course, one or two disadvantages.
In a major step towards achieving sustained, quantum growth in exports,

Special Economic Zones (SEZs) will soon be established in different
parts of the country, as in China. Announcing the annual Export & Import
(Exim) Policy for 2000-2001 at a press conference here today, Shri
Murasoli Maran, Union Minister of Commerce and Industry, said that
India's first two Special Economic Zones would come up in the States of
Gujarat and Tamil Nadu. The SEZs would come into operation very
soon, with the basic idea being to establish the Zones as areas where
export production could take place free from all rules and regulations
governing imports and exports and to give them full operational
flexibility. The movement of goods to and from the SEZs would be

unrestricted and without any hindrance and any State government or
corporate entity or individual may furnish proposals for setting up such
Zones in the country. Land for the first two SEZs in Gujarat and Tamil
Nadu has already been earmarked, the Minister said. Observing that
India, by not following vigorous policies, was ceding billions of dollars in
FDI to its East Asian neighbours each year (investment flows that
otherwise would have come to India), Shri Maran expressed the hope
that with the establishment of the SEZs, procedural constraints and
delays would be taken care of and foreign direct investment in the export
sector would become attractive. The units in the SEZs would be able to
import capital goods and raw materials duty-free and would also be able
to access the same from the Domestic Tariff Area (DTA) without
payment of terminal excise duty. The entire production of the units in
these SEZs would be exported and DTA sales would be permitted on
payment of full applicable customs duty. The minimum size of the SEZs
would be 400 to 500 hectares or more. Shri Maran also announced that
immediately, the existing Export Process Zones at Santa Cruz, Kandla,
Vizag and Cochin would be converted into SEZs, although the area of
these existing Zones were limited due to historical reasons
Major advantages
• SEZs may export goods and services, including agro-products, partly

processed jewellery, sub-assemblies and components. It may also
export by-products, rejects, waste from the production process.
• SEZs may import all types of goods without payment of duty. This
includes capital goods, but not prohibited items for imports.
• Even SEZ units can lease capital goods from a domestic/foreign

leasing company.
• But, both the SEZ unit and domestic foreign lease company shall
jointly file the documents to enable import/procurement of the capital
goods.
• SEZs may procure goods required by it without payment of Duty from
bonded warehouses in the DTA set up under the policy.
• SEZ units may import goods for creating a central facility for use by
software development units, without payment of duty.
• SEZs may also import gold/silver/platinum and specified goods from
DTA through the nominated agencies for setting up units without
duty, but subject to government conditions.
• SEZ gem and jewellery units, with the Development Commissioner's
permission, shall be entitled to personal carriage of
gold/silver/platinum jewellery, precious, semi-precious stones and
articles.
• They can export jewellery, including branded jewellery, which is also
permitted for display/sale in the permitted shops set up abroad.
• SEZs may bring back sold goods for repair and replacement.
• Goods may be transferred to DTA for replacement/repair/testing or
calibration, quality testing and R&D purposes under intimation to the
Customs authorities.
• SEZ units, with the maintained records and prior intimation to
Customs authority, may supply or sell samples in the DTA for
display/market promotion on payment of applicable duties.
• Remove samples on furnishing a suitable undertaking to customs
authorities for bringing the goods back within a stipulated time
without payment of duty.
• No duty shall be payable if the goods are destroyed with the

permission of Customs authorities.
• SEZs may subcontract a part of their production or production
process through units in the DTA.
Major disadvantages
• The SEZ shall execute a legal undertaking with the Development

Commissioner that if it fails to achieve positive foreign exchange
earnings, it will be liable to penalty in terms of the legal undertaking,
or under any other law for the time being in force.
• SEZ units may be debonded with the approval of the Development
Commission. Debonding shall be subjected to payment of applicable
Customs and excise duties and the imported and indigenous capital
goods, raw materials, finished goods in stock, and so on.
DUTY FREE REPLENISHMENT CERTIFICATE (DFRC) SCHEME
DFRC Scheme announced in 2002-07 EXIM Policy has been continued

in 2003-04 Policy. Henceforth supplies made under Deemed Export
Scheme in terms of Para 8.2 of the EXIM Policy would also be entitled
for benefit of DFRC Scheme. Import of inputs against DFRC License
(issued against supplies made under Deemed Export Scheme) shall
also be permitted from sea-ports, airports, ICDs and CFSs specified in
the DFRC Notification as usual. For this purpose, DFRC licence issued
under Deemed Export Scheme shall inter-alia contain details of excise
certified invoice number and date with value of supplies in Indian rupees.
All other conditions of the DFRC Scheme remain unchanged.
In order to monitor revenue outflow under DFRC scheme, the concerned

Custom Houses shall send a monthly report containing details of CIF
value of goods imported and amount of duty foregone under the Scheme
on the 10th of the succeeding month to JS(DBK). The first such report
shall be sent by 10th May, 2003.
Duty Free Replenishment Certificate is issued to a merchant-exporter or

manufacturer-exporter for the import of inputs used in the manufacture
of goods without payment of basic customs duty, and special additional
duty. However, such inputs shall be subject to the payment of additional
customs duty equal to the excise duty at the time of import.
Duty Free Replenishment Certificate shall be issued only in respect of

export products covered under the SIONs as notified by DGFT.
However, DFRC shall not be issued in respect of SIONs which are
subject to "actual user" condition or where the input is allowed with prior
import condition or where the norms allow import of acetic anhydride,
ephedrine and pseudo ephedrine in the Handbook (Vol-II).
Duty Free Replenishment Certificate shall be issued for import of inputs,

as per SION, having same quality, technical characteristics and
specifications as those used in the end product and as indicated in the
shipping bills. The validity of such licences shall be 18 months. DFRC
and or the material(s) imported against it shall be freely transferable
• Validity of DFRC to be extended from 12 months to 18 months.

• Dispensing with the need of technical characteristics for inputs

except for items in the sensitive list.
• Automatic calculation of CIF value under DFRC scheme without
reference to international price of individual inputs.
• Provision incorporated for claim of DFRC against advance
payment.
• Coverage of additional ports under DFRC
• Split up facility extended to DFRC scheme to give operational
flexibility to the holder of DFRC.
The Duty Free Replenishment Certificate shall be subject to a minimum

value addition of 33%.
The export products, which are eligible for modified VAT, shall be
eligible for CENVAT credit. However, non excisable, non dutiable or non
centrally vatable products, shall be eligible for drawback at the time of
exports in lieu of additional customs duty to be paid at the time of
imports under the scheme.
The exporter shall be entitled for drawback benefits in respect of any of

the duty paid materials, whether imported or indigenous, used in the
export product as per the drawback rate fixed by Directorate of
Drawback (Ministry of Finance). The drawback shall however be
restricted to the duty paid materials not covered under SION.
DUTY ENTITLEMENT PASS BOOK (DEPB) SCHEME

DEPB Scheme announced in 2002-07 EXIM Policy has been continued.

In this regard earlier Customs Notification No.45/2002-Cus. dated
22.4.2002 and DOR Circular No.24/2002-Cus. dated 6.5.2002 refers.
Henceforth, supplies made by DTA units to units in SEZ would be
entitled for DEPB benefits. The area of the Special Economic Zone shall
be a Customs Station and all the functions relating to the enforcement of
the Customs Act shall be controlled by the Commissioner of Customs
with the assistance of proper officers of Customs. The goods entered
into the SEZ from the DTA shall be under the cover of a Bill of Export.
This Bill shall be registered in the SEZ Customs formation and assigned
a running serial number. Thereafter the goods shall be examined by the
Customs Officers posted in the SEZ like a normal export consignment.
These goods shall be eligible for DEPB benefit & the DEPB scrips shall
be issued by the licensing authority to the SEZ Unit receiving supplies
from DTA Unit on the basis of a disclaimer certificate given by the DTA
Unit in favour of SEZ Unit. This is because it has now been decided to
treat supplies made by DTA Unit to a unit in SEZ as exports for the
purpose of granting DEPB benefit.
For the purpose of allowing DEPB benefit against DEPB licenses issued
for supplies to SEZ units, verification of the DEPB license shall be done
in the same manner as specified in earlier DOR Circular No.14/99-Cus.
dated 15.3.99 excepting that in case of supplies made to SEZ units, the
Bill of Export and other related documents shall be verified. Since the
port of registration in respect of such DEPB license would be the place
where the receiver SEZ unit is located, import against such DEPB scrips
shall be permitted either from the same Custom House or from any other
place notified in DEPB Custom Notification No.45/2002 against TRA in
terms of para 6 of DOR Circular No.85/99-Cus. dated 23.12.99 and also
in terms of DOR Circular No.66/2001-Cus. dated 19.11.2001 when the

Custom House of receiver SEZ unit is a non-notified place. For this
purpose, both Commissioner Incharge of Customs House (who issues
TRA) and the Custom House receiving the TRA shall follow the
procedure as specified in DOR Circular No.66/2001.
Objectives
The objective of DEPB is to neutralise the incidence of Customs duty

on the import content of the export product. The neutralisation shall be
provided by way of grant of duty credit against the export product.
Under the DEPB, an exporter may apply for credit, as a specified

percentage of FOB value of exports, made in freely convertible
currency. The credit shall be available against such export products
and at such rates as may be specified by the Director General of
Foreign Trade by way of public notice issued in this behalf, for import of
raw materials, intermediates, components, parts, packaging material
etc.
The holder of DEPB shall have the option to pay additional customs
duty, if any, in cash as well.
Validity
The DEPB shall be valid for a period of 12 months from the date of
issue.
Transferability
The DEPB and/or the items imported against it are freely transferable.
The transfer of DEPB shall however be for import at the port specified
in the DEPB, which shall be the port from where exports have been
made. Imports from a port other than the port of export shall be allowed
under TRA facility as per the terms and conditions of the notification
issued by Department of Revenue.
Applicability of Drawback
Normally, the exports made under the DEPB Scheme shall not be
entitled for drawback. However, the additional customs duty/excise duty
paid in cash on inputs under DEPB shall be adjusted as CENVAT
Credit or Duty Drawback as per rules framed by the Department of
Revenue. In cases, where the additional customs duty is adjusted from
DEPB, no benefit of CENVAT/ Drawback shall be admissible.
In another major initiative to boost agri and allied products exports, Shri
Jaitley said that fixation of DEPB rates for selected agro products would
factor in the cost of inputs such as fertilisers, pesticides and seeds. This
would help the farmers to use the required inputs in a scientific manner
to boost productivity and quality
QUANTITATIVE RESTRICTIONS (QR)
Quantitative Restrictions are explicit limits usually by volume on the

amount of a specified commodity that may be imported into a country
sometimes also indicating the amounts that may be imported from each
supplying country. Compared to tariffs the protection afforded by QR’s
tend to be more predictable being less affected by changes in
competitive factors. Quotas have been used at times to favour preferred

sources of supply.
Quantitative Restrictions were being maintained ever since 1947 on

balance of payments grounds under the GATT to which we were a
signatory. We participated in the Uruguay Round negotiations and
became a founder-member of WTO and subscribed to all the
Agreements but we continued to maintain QRs on the same balance of
payments grounds.
However, with the improvement in the balance of payments position,

certain members of the WTO had disputed our need or justification to
continue Quantitative Restrictions for BOP reasons. India could
negotiate with most of the trading partners, with the exception of USA, to
arrive at a mutually agreeable solution for phasing out these Quantitative
Restrictions.
The USA filed a dispute and the Dispute Settlement Panel constituted in
November 1997 ruled against India. India filed an appeal before the
Appellate Body of WTO against the findings of the Panel but the
Appellate Body also upheld the findings of the Panel challenged by
India. Consequently, we are now obliged to withdraw Quantitative
Restrictions.
An agreement was signed between India and USA for determining the
reasonable period of time, under which the Quantitative Restrictions on
the remaining 1429 tariff lines were to be removed by April 1, 2001, of
which 714 before April 1, 2000.
The tariff line-wise import policy was first announced on March 31,1996
and at that time itself 6161 tariff lines were made free. Since then 1905
tariff lines have been made free till now. In this connection, I would like
to point out that the QRs in respect of these 1429 tariff lines were
withdrawn preferentially for imports from SAARC countries with effect
from August 1, 1998 itself.
It is to be noted that tariff protection will continue to be available. Further

in the event of unfair trade practices like dumping or subsidisation of
exports by other countries causing injury to the Indian industry, adequate
protection under anti-dumping or anti-subsidy mechanisms or if there is
a sudden surge in imports causing serious injury to the industry,
protection under safeguard provisions will always be available. The
industry can always approach either the Anti-dumping Directorate or the
Safeguard Directorate for appropriate relief.
Removal of QR
The process of removal of import restrictions, which began in 1991, has

been completed in a phased manner with removal of restrictions on 715
items. Out of these 715, 342 are textile products, 147 are agricultural
products including alcoholic beverages and 226 are other manufactured
products including automobiles.
Import of agricultural products like wheat, rice, maize, other coarse

cereals, copra and coconut oil has been placed in the category of State
Trading. The nominated State Trading Enterprise will conduct the
imports of these commodities solely as per commercial considerations.
Similarly, import of petroleum products including petrol, diesel and ATF
has also been placed in the category of State Trading. Import of urea will
also be done through the mechanism of State Trading.
Care has been taken to ensure a level playing field to domestic

producers vis-à-vis imports. In conformity with the "National Treatment
Principle" of GATT, imports have also been made subject to the
following domestic regulations:
(i) Import of all food products will be subject to compliance of all the
provisions of Food Adulteration Act and Rules there under;
(ii) Import of meat and poultry products will be subject to compliance of

all the provisions of Meat Food Product Order;
(iii) Import Tea Waste will be subject to compliance of Tea Waste

(Control Order);
(iv) No import of textile material using the prohibited dyes like azo dye
shall be allowed. For this purpose, a pre-shipment inspection certificate
has been made mandatory.
In view of road safety and environment considerations, imports of

second hand automobiles have been allowed subject to the following
conditions:
(i) Import of automobiles older than three years is not allowed;
(ii) Imported vehicles need to conform to Central Motor Vehicle Rules;
(iii) Import of left hand drive vehicles not allowed;
(iv) For ensuring the requirements, pre shipment as well as post

shipment certification made mandatory;
(v) Imported automobiles to have a minimum residual life of five years

and the importer to ensure supply of spares and service during this
period; and
(vi) Such imports allowed only through customs port at Mumbai.
Similarly, import of new automobiles allowed subject to following

conditions:
(i) Import allowed only from the country of manufacture;
(ii) Import of left hand drive vehicles not allowed;
(iii) Imported vehicles to conform to the provisions of Motor Vehicles Act,

1988;
(iv) Prototype of vehicle to be approved by notified agencies in India;

and
To ensure that import of agricultural products do not lead to unwanted

infiltration of exotic diseases and pests in the country, it has been
decided to subject import of primary products of plant and animal origin
to 'Bio Security & Sanitary and Phyto-Sanitary Permit' to be issued by
Deptt. of Agriculture and Cooperation. This permit will be based on
Import Risk Analysis of the product to be conducted on scientific
principles, in accordance with the WTO agreement on Application of
Sanitary and Phyto-Sanitary Measures.
Impact of removal of QRs on imports

The Government has been unilaterally liberalizing imports since 1991 by

removing Quantitative Restrictions(QRs) on imports (Box6.3). The EXIM
Policy 2001 has completed this process by dismantling QRs on BOP
grounds on the remaining 715 items from April 1, 2001.Apprehensions
have, therefore, been expressed
that such removal of QRs may result in a surge and dumping of imports
in the country, thus affecting adversely the domestic industry. However,
the apprehensions are not borne out by actual import growth over this
period. Import data for the full financial year 2000-01 on 714 items,
restrictions on which were removed with
effect from 31.3.2000, do not reveal any surge in their imports following
removal of such restrictions. Out of 714 items, no imports were made for
151 items either before or after removal of QRs. Only 92 items recorded
imports worth more than Rs 5 crore. Diamonds and semiprecious stones
constituted 35 per cent of these imports and another 14 per cent was
contributed by imports of telephonic/telegraphic equipment,
industrial vacuum cleaners and cathode ray picture tubes, items

necessary for domestic industrial activity. Although some growth was
seen in the import of prepared foodstuff, beverages and tobacco, plastic
and rubber, leather products, glassware, ceramic products and products
like footwear and umbrellas, instruments and apparatus, the absolute
quantum of imports was not significant in relation to the
aggregate domestic production of these items. Further, the monitoring

reports on imports of 300 sensitive items, for the current financial year so
far also do not indicate any unusual surge in imports of these items. The
total imports of these
sensitive items (in Dollar terms) during the first nine months of the
current financial year have increased by only 2.1 per cent due mainly to
higher imports of edible oils, cotton & silk, spices , rubber and marble &
granite.
AGRICULTURAL EXPORT ZONES (AEZ)
In a fast changing international trade environment and with a view to

providing remunerative returns to the farming community in a sustained
manner the concept of the agri export zones (AEZ) was floated. These
zones have been set up for end to end development for export of
specific products from a geographically contiguous area.
AEZ are to be identified by the State Government, who would evolve a

comprehensive package of services provided by all State Government
agencies, State agriculture universities and all institutions and agencies
of the Union Government for intensive delivery in these zones.
Corporate sector with proven credentials would be encouraged to
sponsor new agri export zone or take over already notified agri export
zone or part of such zones for boosting agri exports from the zones.
Services which would be managed and co-ordinated by State

Government/corporate sector and would include provision of pre/post
harvest treatment and operations, plant protection, processing,
packaging, storage and related research & development etc. APEDA
will supplement, within its schemes and provisions, efforts of State
Governments for facilitating such exports.
Units in AEZ would be entitled for all the facilities available for exports
of goods in terms of provisions of the respective schemes.
Agri Export
Unless we ensure that the rural sector and Indian farmers receive
visible benefits from economic reforms and the process of globalization,
it may not be possible to accelerate economic growth. You would
recollect that we had introduced the Scheme of Agro Export Processing
Zones (AEZ) in the 2002-2007 Policy for end to end development of
export of specific products from a geographically contiguous area. We
are gratified that there has been an enthusiastic response to the scheme
from the States and the rural community. As many as 45 AEZs have
been notified so far in different parts of the country. We want to further
accelerate this process. Agriculture and allied products is our core
competence. Not only is it diversified with a large variety of crops, fruits,
vegetables and flourishing dairy sector, but we are among the world
leaders in output of many products.
One of the limiting factors in the increase in agricultural productivity and

quality and for protecting it from the vagaries of monsoon is the lack of
or inadequate investment in this sector for bringing to the farmer the
latest technology and knowledge and for setting up critical infrastructure
in the form of water harvesting and soil management, better quality of
seeds and optimal use of inputs, adoption of scientific pre and post
harvest treatment and storage and establishment of linkage with
international marketing. In spite of the enthusiasm shown by many of the
State Governments, availability of investible resources in creation of
such critical infrastructure even in the AEZs has been a constraint. In
view of this, we propose to also facilitate and promote association of

corporate with proven credentials in the implementation of AEZs in order
to give a boost to productivity and quality of specified agro products
leading to accelerated exports. For this purpose, we are having
consultations with Ministry of Finance who are receptive to the idea, to
provide appropriate incentives to enable investments by these
corporates to infrastructure, agricultural extension, processing, packing,
storage, R&D and other facilities relating to exports in the approved
AEZs.
Another major initiative to boost agri and allied products exports will be
the modification of norms for fixing DEPB rates for export of agriculture,
horticulture and allied products. In fixing DEPB rates for such products,
we shall take into account inputs such as fertilizers, pesticides, certified
seeds etc. used by the farmers prior to processing of the products for
exports. This would also ensure that the Indian farmer uses the required
inputs in a scientific manner to boost productivity and quality. To begin
with, this facility will be extended only to selected products on the basis
of the recommendation of an Inter-Ministerial Committee.
STATUS HOLDERS
"Status holder" means an exporter recognised as "Export

House/Trading House/Star trading House/ Super Star Trading House" or
service provider recognised as "Service Export House, International
Service Export House, International Star Service Export House
International Super Star Service Export House" by the Director General
of Foreign Trade.
Over the last few decades certain areas of strength have emerged in the
export sector. Definite export surpluses have emerged in sectors like
food grains, sugar, yarn, garments, steel, cement, aluminium &

petroleum products and pharmaceuticals. Certain Small & Medium
Enterprises (SMEs) and other units in DTA have been exporting more
than 75% of their production. Similarly export oriented units and units in
export processing zones have been contributing significantly to exports.
Certain industrial clusters have evolved on their own without any
significant official assistance, each of them collectively producing goods
and services worth more than Rs.1,000 crore per year and exporting a
substantial part thereof. Status certificates have been issued to units on
the basis of their export performance.
Keeping the above in mind, the status holders shall be eligible for the
following new/ special facilities:
• Licence/Certificate/Permissions and Customs clearances for both

imports and exports on self-declaration basis.
• Fixation of Input-Output norms on priority;
• Priority Finance for medium and long term capital requirement as
per conditions notified by RBI;
• Exemption from compulsory negotiation of documents through
banks. The remittance, however, would continue to be received
through banking channels;
• 100% retention of foreign exchange in EEFC account;
• Enhancement in normal repatriation period from 180 days to 360
days.
• Status holders with a minimum export turnover of Rs 250 mn
entitled to duty-free import of capital goods, spares, office
equipments and consumables, upto 10% of the incremental growth
in exports subject to their achieving more than 25% growth in value
of exports.
• Status holders to be given Annual Advance Licence facility to
enable them to plan for their imports of raw material and
components on an annual basis and take advantage of bulk
purchases.
EXPORT PROMOTION CAPITAL GOODS SCHEME (EPCG)

The Export Promotion Capital Goods Scheme (EPCG) has been for
several years now instrumental in promoting exports. The high growth
rate of East Asian countries was facilitated by the transformation of their
exports from producing cheap-labour intensive to high technology
intensive manufacturing goods.
The Exim Policy has announced a series of steps to make the EPCG
scheme more flexible and attractive, so that even the small-scale sector
can set up and expand its manufacturing base for exports. This is
considered essential, as manufactured goods account for more than 77
per cent of India's total exports in the last five years.
Thus, allowing the import of up to 10-year-old capital goods for pre- and
post-production, removal of use conditions, and allowing import of
spares to facilitate the upgradation of existing plant and machinery will
make export sectors, such as textile, more competitive.
Further, the rationalisation of export obligation and dispensing with the

existing condition of imposing an additional export obligation of 50 per
cent for products in the higher value chain will provide flexibility.
Moreover, the relatively low value exports obligation will be a boon to

investment in the domestic economy. Therefore, the EPCG scheme
along with the reduction of transaction cost through the EDI will give a
boost to the manufacturing sector and over all export growth.
• The scheme shall now allow import of capital goods for pre-
production and post-production facilities also.
• The Export Obligation under the scheme shall now be linked to the
duty saved and shall be 8 times the duty saved.
• To facilitate upgradation of existing plant and machinery, import of

spares shall also be allowed under the scheme.
• To promote higher value addition in exports, the existing condition
of imposing an additional Export Obligation of 50% for products in the
higher product chain to be done away with.
• Greater flexibility for fulfilment of export obligation under the
scheme by allowing export of any other product manufactured by the
exporter. This shall take care of the dynamics of international market.
• Capital goods upto 10 years old shall also be allowed under the
scheme.
• To facilitate diversification into the software sector, existing
manufacturer exporters will be allowed to fulfil export obligation arising
out of import of capital goods under the scheme for setting up of
software units through export of manufactured goods of the same
company.
• Royalty payments received from abroad and testing charges
received in free foreign exchange to be counted for discharge of export
obligation under EPCG scheme.
The scheme allows import of capital goods for pre production,

production and post production (including CKD/SKD thereof as well as
computer software systems) at 5% Customs duty subject to an export
obligation equivalent to 8 times of duty saved on capital goods imported
under EPCG scheme to be fulfilled over a period of 8 years reckoned
from the date of issuance of licence. Capital goods would be allowed at
0% duty for exports of agricultural products and their value added
variants.
However, in respect of EPCG licences with a duty saved of Rs.100 crore

or more, the same export obligation shall be required to be fulfilled over
a period of 12 years.
In case CVD is paid in cash on imports under EPCG, the incidence of

CVD would not be taken for computation of net duty saved provided the
same is not Cenvated.
The capital goods shall include spares (including refurbished/

reconditioned spares), tools, jigs, fixtures, dies and moulds. EPCG
licence may also be issued for import of components of such capital
goods required for assembly or manufacturer of capital goods by the
licence holder.
Second hand capital goods without any restriction on age may also be
imported under the EPCG scheme.
Spares (including refurbished/ reconditioned spares), tools, refractory’s,

catalyst and consumable for the existing and new plant and machinery
may also be imported under the EPCG scheme .
However, import of motor cars, sports utility vehicles/ all purpose

vehicles shall be allowed only to hotels, travel agents, tour operators or
tour transport operators whose total foreign exchange earning in current
and preceding three licensing years is Rs 1.5 crores. However, the parts
of motor cars, sports utility vehicles/ all purpose vehicles such as chassis
etc cannot be imported under the EPCG Scheme
Spares (including refurbished/ reconditioned spares), tools, spare

refractory’s, catalyst & consumable for the existing plant and machinery
may also be imported under the EPCG Scheme subject to an export
obligation equivalent to 8 times of duty saved to be fulfilled over a period

of 8 years reckoned from the date of issuance of license
The export obligation for such EPCG licences would be eight times the
duty saved. The duty saved would be the difference between the
effective duty under the aforesaid Customs Notification and the
concessional duty under the EPCG Scheme.
The scheme covers manufacturer exporters with or without supporting

manufacturer(s)/ vendor(s), merchant exporters tied to supporting
manufacturer(s) and service providers. The following conditions shall
apply to the fulfilment of the export obligation:-
The export obligation shall be fulfilled by the export of goods capable of

being manufactured or produced by the use of the capital goods
imported under the scheme.
The export obligation may also be fulfilled by the export of same goods,
for which EPCG licence has been obtained, manufactured or produced
in different manufacturing units of the licence holder/specified supporting
manufacturer (s).
When Capital Goods are imported for pre/ post- production or license is
taken for import of spares, the license holder shall fulfil the export
obligation by export of products manufactured from the plant / project to
which the pre/ post- production capital goods/ spares are related.
The import of capital goods for creating storage and distribution facilities
for products manufactured or services rendered by the EPCG licence
holder would be permitted under the EPCG Scheme.
The export obligation under the scheme shall be, over and above, the
average level of exports achieved by him in the preceding three
licensing years for same and similar products except for categories
mentioned in Handbook
Alternatively, export obligation may also be fulfilled by exports of other

good(s) manufactured or service(s) provided by the same firm/company
or group company/ managed hotel which has the EPCG licence.
However, in such cases, the additional export obligation imposed under

EPCG scheme shall be over and above the average exports achieved
by the unit/company/group company/ managed hotel in preceding three
years for the original and the substitute product(s) /service (s) even in
cases where the average is exempt for the substitute product (s)/ service
(s).
The incremental exports to be fulfilled by the licence holder for fulfilling

the remaining export obligation can include any combination of exports
of the original product/ service and the substitute product (s)/ service (s).
The exporter of goods can opt to get the export obligation re-fixed for the
export of services and vice versa.
The licence can also opt for the re-fixation of the balance export
obligation based on 8 times of the duty saved amount for the CIF value
in proportion to the balance Export obligation under the scheme
The aforesaid facilities shall only be available to manufacturer exporters/

service provider on all the licences where export obligation period
including extended export obligation period is valid on the date of
application. In this regard, exports made only on or after submission of
application for alternate item and/ or re-fixation of the export obligation
based on duty saved amount will be taken into account for fulfilment of
export obligation.
The export obligation under the scheme shall be, in addition to any other
export obligation undertaken by the importer, except the export
obligation for the same product under Advance Licence, DFRC, DEPB
or Drawback scheme.
The export obligation can also be fulfilled by the supply of ITA-1 items to
the DTA provided the realization is in free foreign exchange.
Royalty payments received in freely convertible currency and foreign

exchange received for R& D services shall also be counted for discharge
under the EPCG scheme. Payment received in rupee terms for the port
handling services, in terms of Chapter 9 of the Foreign Trade Policy shall
also be counted for export obligation discharge under the Scheme.
DEEMED EXPORTS
Deemed Exports" refers to those transactions in which the goods

supplied do not leave the country.
The following categories of supply of goods by the main/ sub-contractors

shall be regarded as "Deemed Exports" under this Policy, provided the
goods are manufactured in India:
• Supply of goods against Advance Licence/DFRC under the Duty

Exemption /Remission Scheme;
• Supply of goods to Export Oriented Units (EOUs) or units located in

Export Processing Zones (EPZs) or Special Economic Zone (SEZs)
or Software Technology Parks (STPs) or to Electronic Hardware
Technology Parks (EHTPs);
• Supply of capital goods to holders of licences under the Export
Promotion Capital Goods (EPCG) scheme;
• supply of goods to projects financed by multilateral or bilateral
agencies/funds as notified by the Department of Economic Affairs,
Ministry of Finance under International Competitive Bidding in
accordance with the procedures of those agencies/ funds, where
the legal agreements provide for tender evaluation without
including the customs duty;
• supply of capital goods, including in unassembled/ disassembled
condition as well as plants, machinery, accessories, tools, dies and
such goods which are used for installation purposes till the stage of
commercial production and spares to the extent of 10% of the FOR
value to fertilizer plants.
• supply of goods to any project or purpose in respect of which the
Ministry of Finance, by a notification, permits the import of such
goods at zero customs duty coupled with the extension of benefits
under this chapter to domestic supplies;
• Supply of goods to the power and refineries not covered in (f)
above.
• Supply of marine freight containers by 100% EOU (Domestic freight
containers-manufacturers) provided the said containers are
exported out of India within 6 months or such further period as
permitted by the Customs; and
• Supply to projects funded by UN agencies.
Benefits for Deemed Exports
Deemed exports shall be eligible for the following benefits in

respect of manufacture and supply of goods qualifying as deemed
exports
• Advance Licence for intermediate supply/ deemed export.

• Deemed Exports Drawback.
• Refund of Terminal Excise duty.
ADVANCE LICENSE SCHEME
An advance licence is granted for the import of inputs without payment

of basic customs duty. Such licences shall be issued in accordance with
the policy and procedure in force on the date of issue of the licence and
shall be subject to the fulfillment of a time-bound export obligation, and
value addition as maybe specified. Advance licences maybe either value
based or quantity based.
As per the latest amendments to the EXIM Policy, the facility of Back to
Back Inland Letter of Credit has been introduced, to enable an Advance
Licence holder to source his inputs from domestic suppliers.
Value based advance license
Under a value based advance licence, any of the inputs specified in the
licence maybe imported within the total CIF value indicated for those
inputs, except inputs specified as sensitive items.
Under a value based advance licence, both the quantity and the FOB
value of the exports to be achieved shall be specified. It shall be
obligatory on the part of the licence holder to achieve both the quantity
and FOB value of the exports specified in the licence.
Amendments to the Advance License Scheme
The Advance License Scheme has been expanded and liberalized with
the amendments made to the EXIM Policy, announced on 31st March
1995.
• Modvat credit can be taken on inputs which go into the

manufacture of export products, under the Advance License
Scheme.
• Expansion of the concept of Advance Intermediate License, which
hitherto was only quantity based to value based.
• Advance licenses can now be transferred after the export
obligation has been fulfilled, and the bank guarantee or
• Drawbacks are permitted in respect of duty paid materials, which
are imported or indigenous.
• Import of mandatory spares upto 5% of the CIF value of the
license is now allowed.
• The list of sensitive items has been pruned. Flexibility has also
been granted to the exporter for using the unutilized CIF value of
sensitive items for importing non-sensitive items.
On the 1st of March, 1995, the Engineering Products Export

(Replenishment of Iron and Steel Intermediates) scheme was
announced as an alternative to the International Price Reimbursement
Scheme, which was withdrawn in April 1994. Under the new scheme,
primary steel producers would be able to import intermediates like coal

and fuel, using advance licences, and then provide steel to engineering
exporters at international prices.
EXIM BANK
Exim Bank is managed by a Board of Directors, which has

representatives from the Government, Reserve Bank of India, Export
Credit Guarantee Corporation (ECGC) of India, a financial institution,
public sector banks, and the business community.
Functions
Exim Bank plays four-pronged role with regard to India's foreign trade:
those of a coordinator, a source of finance, consultant and promoter.
Exim Bank is the Coordinator of the Working Group Mechanism for

clearance of Project and Services Exports and Deferred Payment
Exports (for amounts above a certain value currently US$ 100 million).
The Working Group comprises Exim Bank, Government of India

representatives (Ministries of Finance, Commerce, External Affairs),
Reserve Bank of India, Export Credit Guarantee Corporation of India
Ltd. and commercial banks who are authorised foreign exchange

dealers.
Exim Bank plays a pivotal role in promoting and financing project

exports. Promoting Trade and Investment Promotion Agencies. Exim
Bank offers Rediscounting Facility to commercial banks, enabling them
to rediscount export bills of their SSI customers.
We also offer Refinance of Supplier's Credit, enabling commercial banks

to offer credit to Indian exporters of eligible goods, who in turn extend
them credit over 180 days to importers overseas.
Term loans for export production: Exim Bank provides term

loans/deferred payment guarantees to 100% export oriented units, units
in free trade zones and computer software exporters. In collaboration
with International Finance Corporation, Washington, Exim Bank provides
loans to enable small and medium enterprises upgrade export
production capability. Facilities for deeded exports; Deemed exports are
eligible for funded and non- funded facilities from Exim Bank.
Overseas Investment finance: Indian companies establishing joint

ventures overseas are provided finance towards their equity contribution
in the joint venture.
Finance for export marketing: This programme, which is a component of

a World Bank loan, helps exporters implement their export market
development plans.
Guaranteeing of Obligations: Exim Bank participates with commercial

banks in India in the issue of guarantees required by Indian companies
for the export contracts and for execution of overseas construction and
turnkey projects.
Advantages of EXIM
Over the last four decades India has recorded remarkable expansion
and diversification in practically all areas of industrial development.
India's vast resources-human, agricultural, mineral and industrial- have
been fully exploited for this purpose. The New Industrial Policy has
helped in catalyzing foreign investment into India. The total amount of
foreign direct investment approval which was Rs 5,341 million in 1991,
swelled to Rs 141,871.9 million in 1994. Of the total FDI approvals, 80%
are in the priority sectors such as power, oil refineries, electronics and
electrical equipment, chemicals, telecommunications, food processing
etc.
Policy Resolution of 1956 and the Statement on Industrial Policy of 1991

provide the basic framework for the overall industrial policy of the
Government in regard to the manufacturing industries. In the initial
stages of the country's development, growth of industry was regulated
through the granting of industrial licenses and other industrial approvals.
The Industries (Development and Regulation) Act, 1951 was the
principal legislation providing the legal basis for industrial licensing. The
industrial policy announced on 24th July, 1991 substantially dispensed
with industrial licensing, announced measures facilitating foreign
investment and technology transfers, and threw open the areas hitherto
reserved for the public sector.
The private sector can now operate in all areas except those of strategic
concern such as defense, railway transport and atomic energy. The list
of industries reserved for the public sector now stands reduced to 6.
Private participation is permitted in some specific areas in this list as
well, such as mining; oil exploration, refining and marketing; and parts of
the railway transport sectors.
The requirement of obtaining an industrial license for manufacturing

activity is limited to:
1. Industries reserved for the pubic sector.

2. 16 industries of strategic, social or environmental concern.
3. Industries reserved for the small scale sector.
All other industries are exempt from licensing, and only subject to the
location restrictions of metropolitan areas.
Exports-Imports Free Unless Regulated: Exports and imports shall be

free, unless regulated by FTI or any other law enforced. The item wise
export and import policy shall be specified in ITC notified by DGFT as
amended from time to time OLD: exports and imports shall be free,
except in cases where they are regulated by the provision of this policy
or any other law from the time being enforced.
Restricted Goods: Any goods, export or import of which is restricted

under ITC may be exported or imported only in accordance with an
authorisation or in terms of a public notice issued in this regard OLD.

any goods, export or import of which is restricted under ITC may be
exported or imported only in accordance with license/ certificate/
permission or in terms of a public notice issued in this behalf
Employment Generation: The second objective of the FTP was providing

thrust to employment generation particularly in semi-urban and rural
areas. The FTP announced special focus initiatives in the employment
intensive areas of agriculture, handicrafts, handlooms, gems & jewellery
and leather & footwear sectors. The employment generation has been
encouraging not only in these sectors, but in other sectors across the
board. A study commissioned by the Ministry reveals that exports
generated an incremental direct employment of 10 lakh jobs in the year
2004-05, over the previous year. The total employment generated during
the year corresponding to export activity valued at 78 billion was 1 crore
jobs - 86 lakhs of direct employment, and 14 lakhs of indirect
employment in the logistics, transport and related sectors. The study
further reveals that if we achieve our target of 150 dollars over the next
four years, we shall be adding a further 1 crore jobs: 85% of it direct
employment, and 15% indirectly associated jobs.
Sector Wise Performance: Sectors registering positive growth during

1998-99 include cereal and gems and jewellery. Commodities showing
positive growth include tea, rice leather, footwear, gems and jewellery,
manufacture of metals, readymade garments, etc. During the current
year, so far (April-May’99) a number of items such as leather, footwear,
gem & jewellery, textiles, handicrafts and carpets have shown positive
growth. Among the importable, edible oil, precious and semi-precious
stones, electrical machinery, project goods, gold and silver have
registered significant growth during 1998-99. Imports for April-July’99
show a rise of only 1.01 per cent in dollar terms, while imports in July’99
show a decline of 5.84 per cent in dollar terms. Engineering goods and
chemicals are the main items showing a fall in imports which is a cause
for concern. Gold and silver imports have also fallen.
Issues
Infrastructure: In the Custom Notification No. 138/91 dated 20.10.90 as

amended from time to time, allows import of duty free capital goods for
creating central facility to Software Technology Parks of India (STPI) and
do not include other service providers in the private sector. With the
advancement of technologies in electronics and computer software, the
cost to create such infrastructure required for export is becoming
exorbitant. Therefore, it is necessary that private and public
organisations interested in providing infrastructure/common facilities
should also be included for duty exemption to import capital goods, etc.
The Service Provider in view of capital imported would undertake the
export obligations as provided for capital goods in the STP Scheme. The
scheme was discussed in the DGFT/CBEC which need to be
implemented immediately.
Anti- Dumping: Where any article is exported from any country or

territory to India at less than its normal value then upon the importation
of such article to India the central Govt. may be notification in the official
gazette impose an anti dumping duty not exceeding the margin of
dumping in relation to such article. For purpose of identification,
assessment and collection of Anti Dumping Duty on dumped articles and
for determination of injury, the Govt. has appointed Additional Secretary
to the Govt. of India Ministry of Commerce as designated Authority for
purpose of above rules.
It is to be understood that imposition of Anti Dumping Duty is based on

Commodity to Commodity, country to country and suppliers in Exporting
countries
Others: THE first Export-Import (Exim) policy of the new millennium

coinciding with the Tenth Plan has evoked enthusiastic response from
the exporting community and some policy analysts for its perceived new
initiatives to drive export growth.
It is essential that the modalities of granting transport subsidy be

finalised without delay. Together with a depreciating rupee, transport
assistance can provide that little extra push necessary in case of
commodities facing a marginal price disparity. However, an Exim policy
for a five-year period, which merely liberalises exports and removes
procedural irritants, is unlikely to provide any significant boost to export
earnings of farm goods. A coordinated effort by various ministries at the
Centre including finance, food and agriculture is necessary.
There are instances of export efforts thwarted by customs authorities. In

their drive to increase revenue, some customs houses pressurise
exporters not to use DEPB licence, but pay up customs duty on raw
material import.
A strong input delivery system, advise on agronomic practices and

market intelligence is key to success. AEZs must make use of
information technology to deliver benefits to primary producers in the
area.
In sum, intentions of the new Exim policy are laudable. But how far these
intentions will be translated into action remains to be seen. Having
removed the cobwebs that hitherto restrained farm exports, the
Government must now proceed to invest export products with
competitive edge in terms of cost and quality.
Exim Bank signed pact with IFC
Exim Bank of India has signed an agreement with International Finance

Corporation (IFC), Washington, a member of the World Bank group,
under the Global Trade Finance Programme (GTFP) of IFC. This
arrangement will enable Exim Bank to confirm letters of credit,
guarantees and other trade instruments issued by approved banks in
more than forty countries of Central Asia, Central and Eastern Europe,
Latin America and the Caribbean, West Asia and North Africa as also
other regions of Asia and Africa. The Exim Bank Chief General
Manager, Prabhakar, and the IFC Associate Director, Mamta H. Shah,
signed the agreement on December 14, 2007.
EXPORTS, IMPORTS & TRADE

BALANCE
Year Exports Imports Trade Exports Imports Exports Imports

($ ($ (% (% (% to (% to
mln.) mln.) Balances change) change) GDP) GDP)
($ mln.)
1990-
91 18148 23464 -5316 9.25 10.59 5.72 7.39
1991-
92 17998 19551 -1553 -0.83 -16.68 6.73 7.31
1992-
93 17437 20583 -3146 -3.12 5.28 7.13 8.42
1993-
94 22213 23305 -1092 27.39 13.22 8.06 8.45
1994-
95 26337 28662 -2325 18.57 22.99 8.14 8.86
1995-
96 31842 36730 -4888 20.9 28.15 8.92 10.29
1996-
97 33498 39165 -5667 5.2 6.63 8.62 10.08
1997-
98 35049 41535 -6486 4.63 6.05 8.52 10.1
1998-
99 33211 42379 -9168 -5.24 2.03 7.98 10.18
1999-
00 36760 49799 -13039 10.68 17.51 8.15 11.04
2000-
01 44147 50056 -5909 20.1 0.52 9.58 10.86
2001-
02 43958 51567 -7609 -0.43 3.02 9.16 10.75
2002-
03 52823 61533 -8710 20.17 19.33 10.38 12.09
2003-
04 63886 78203 -14316 20.94 27.09 10.61 12.99
2004- 11147
05 83502 2 -27970 30.7 42.54 12 16.03
2005- 14914
06 103075 4 -46068 23.44 33.8 12.79 18.51
2006- 19043
07 126246 8 -64192 22.48 27.69 13.86 20.9
INDIA V/S WORLD: ANNUAL EXPORT

GROWTH RATE
FUTURE OF EXIM
The new five-year Exim policy is expected to bring about a positive

growth in exports in the days to come. The policy was the result of a
paradigm shift from narrow issues of mere procedural formalities to
much larger aspects of exports which would work as the ``true engine of
growth''. The policy was clear and required involvement of the state
government to make it successful. Adequate measures have been taken
to curtail transaction costs. the concept of using special economic zone
(SEZ) and agriculture export zones to boost exports of goods, services
and agricultural products is a positive step. Processed foods such as
marine products, coconuts, cashews, areca nuts and fruits like mangoes
need to be encouraged. In order to catch up with the changing world
scenario in the export trade, he felt that there was a requirement of a
mindset change in government officials as well as in the industry. The
participants concentrate on policy-related matters and understand the
subject thoroughly and make use of seminars and workshops to update
them with the latest changes and techniques. referring to the SEZ for
Goa. It is required to have a proper study by international consultants,
and the involvement of competent persons to push the proposal further
Goa has a natural advantage and it can have a unique SEZ in the
service sector.
Prospects For Indian Export: For the period April-July’99, exports

registered a growth of 4.04 per cent in dollar terms and 8.45 per cent in
rupee terms over April- June’98. The world merchandise exports
declined by 2 per cent during 1998, the strongest decrease since 1982.
In fact, if we see the export performance of all the south Asian and south
east Asian countries, it was negative for most of them including China.
Only in the case of Philippines, the export performance was good due to
its electronics sector and the FTZs. The export growth has been picking
up in the current fiscal. However, the demand situation per se has not
improved since the east Asian crisis and the fall in commodity prices
worldwide is still far from over. An improvement in these factors will help
increase exports from India
Future Lies In Service Sectors: This is a very important sector for the
future. We have already included the 161 services under EXIM POLICY.
They will be able to avail of facilities under schemes like EPCG, Star and
Super Star Houses, EPZs, etc. Unlike the goods sector, there is no
possibility of any of these schemes to be considered as WTO
inconsistent in the services sector as the general commitments in
services sector till now are only extension of MFN. With services
emerging as the major sector in our GDP
and India showing proven competitiveness in many services, the Future
growth depends on how we use the opportunities thrown open by a
more open services commitments by some of our trading partners and
negotiating for the removal of barriers in this sector.
One Percent Share In World Exports: The demand situation in the

world for India’s exports have not been favourable in the last two years.
The government is trying to increase the supply situation by laying
emphasis on improving infrastructure, credit to exporters and policy
implification. Government also working towards creating an environment

for second generation reforms. If we include services sector and informal
trade which crosses our borders, the share of India in world exports
would definitely be higher.
BIBLIOGRAPHY
 Book on Foreign Trade of India: 1947-2007 (Chapter 2 & 3)
 Centre for Monitoring Indian Economy – Foreign Trade & Balance

of Payments (August 2007)
 www.economictimes.com (25th July 2006)
 www.exim.indiamart.com
 www.eximbank.com
 www.commerce.nic.in
 www.thehindubusinessline.com
 www.rediff.com

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Study of EXIM policy

1 PRE – 1991 SCENARIO OF FOREIGN TRADE

PRE – 1991 SCENARIO OF FOREIGN TRADE

Exim is the principal financial institution in the country for co-

a) Imports should be limited as far as possible so as to conserve

b) Imports of those items were to be encouraged which would help the

c) The nature of imports should be so modified that it helped export

The government appointed the Import and Export Policy

and quicker access to imported inputs, impart continuity and stability of

 Brief Review of India’s Trade Policy

With the realisation of the drawbacks of the excessively inward-

specialised services institution were introduced. The strategy towards a

The second three-year policy (1988-91) carried forward the

From Independence in 1947 till mid 1990s, India with some

India embarked on the path of globalization in the early 1990s

Since the initiation of economic reforms, India’s outward

Moreover, unlike the East Asian countries where industry has

On the imports side, despite some initial apprehensions,

In the 1990s, a liberalised trade regime was put in place, which

The multi-pronged strategy undertaken in the beginning of the

The economic reform process introduced in the beginning of

It is increasingly being realized that the desirable structure of

It has been observed that in contrast to the structural and

At the same time, the policy of reservation for SSIs had

A noteworthy fact is that despite significant liberalization of

 Import Substitution: Cornerstone of Trade Policy

India adopted an inward looking development strategy after

possibilities but also the import intensity of the import substitution

Protective quotas however remained more or less intact and

A three year export import policy was introduced in 1985 to provide a

 Balance of payment crisis, 1991

The balance of payment situation became very difficult in 1991-

The government attempted to mobilize support for balance of

Another important initiative taken by the government to meet the

Foreign currency assets, which had declined to $1.1 billion at their

The build up of the reserves in the course of 1991-92 was

Following adjustments were called for a broad based, rapid and

• Reduction in the excess domestic demand-Domestic demand had

• Enhanced Competiveness-This required two changes, a change in

• Deregulation-One of the obstacles to exports lied in the

• Reducing subsidies and external support to production enterprises

• Ensuring that buffer stock operations for food grains and

• Encouraging savings to be high not only as a proportion of GDP

• Keeping entry barriers low in the industrial sector and improving

 India’s Share In World Trade

In 1950, India accounted for 1.8 percent (1.85 percent of exports

Year Exports Imports Trade

Sources: Government of India, Economic Survey, 1996-1997, p.88, and

 General Provisions Regarding Imports And Exports

Exports and Imports free unless regulated

If any question or doubt arises whether a licence/

The Handbook (Vol.1) is a supplement to the EXIM Policy

Exemption from Policy / Procedure

• Protection of public morals.

• Protection of national treasures of artistic, historic

• Prevention of traffic in arms, ammunition and

a. The quantity, description and value of the goods;

e. The minimum export price.

In respect of goods the import or export of which is

No export or import shall be made by any person without

Second Hand Goods

Capital goods, equipments, components, parts and

Private/Public bonded warehouses may be set up in the