Foreign Trade of India

Post Liberalization Exim Policy (1991-01)

Indias Export Performance in the post liberalisation period i.e., 1991-2001 has been much
better than the pre-reform period. From a level of () 1.5% growth rate during 1991-92 the value
of exports in dollar terms witnessed a growth rate of 21% in 2000-01. Consequently, Indias
share in world exports increased from 0.41% in 1992-93 to 0.67% in 2000-01. In terms of
openness of Indian economy, that is trade measured as percentage of value of GDP, the degree of
openness, has almost doubled from a level of 13% in 1990-91 to 22% in 2000-01. The highest
export growth rate for the decade was achieved in 2000-01 at 21%. Such a commendable
performance on the export front could be attributed to the favourable international economic
environment, the domestic reforms undertaken during the last few years and the responsiveness
of the exporters to the market trends.
A compositional change has been witnessed in the export basket of India with the opening
up of the economy. During the last 10 years there has been a significant shift in the composition
of the export basket . The share of manufactured goods in total export of India has increased
from 76% in 1991-92 to 83% in 2000-2001. Chemicals & related products, Engineering goods,
Electronic goods, Gems & jewellery, Marine products and Textiles have witnessed steady export
growth, barring some inter year variations, during the period. The growth rates of Agricultural &
allied products and Leather & manufactures have lagged behind during the last 10 years. The
export growth rates of items within the manufactured goods groups have shown an increasing
trend throughout the decade and include items like Gems & Jewellery, Manufactures of Metals,
Drugs, Pharmaceuticals & Chemicals and Textiles.
Another important sector is that of Petroleum products export in which the share has risen
from a level of 2.58% to 4.10%. Destination-wise, the share of Indias exports to Asia &
Oceania region has improved significantly over the decade from 30% in 1990-91 to 37.48% in
2000-01. Similarly, North Americas share has increased substantially from 16% to 24.73% and
Africas share has more than doubled from 2.61% to 5.3%. However, the West European region
has slipped from its top position as Indias main export destination to the second position with its
share falling from 33.64% in 1990-91 to 27.7% in 2000-01.
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Another important trading partner of India whose share has fallen substantially is that of
East European region. Indias exports to this region have declined from a level of 17.87% in
1990-91 to 2.95% at the end of the decade. In terms of growth performance, high growth rates
have been recorded in the case of Asia & Oceania, Africa, America and Latin American
Countries (LAC). Low growth rates have been seen in our exports to West Europe and East
Europe.
Country-wise, share of Hong Kong in Indias total exports has shown an increase from
3.29% to 5.94% in the decade.The share of Indias exports to China to the total has also
increased from 0.10% to 1.87%. Other countries to which Indias exports during the last decade
have increased are Bangladesh, Sri Lanka, Indonesia and Malaysia. The countries that have
declined in importance in this region are Japan, Australia and Singapore. Among countries other
than ESCAP region in Asia & Oceania, the share of Indias exports to UAE has more than
doubled. The substantial fall in the share of Western Europe can be attributed to decline in the
share of Indias exports to Germany, U.K., Italy, Belgium, Switzerland and Finland. The East
European story is largely explained by the fall in the share of Indias exports to CIS countries.
Review of Past Export Strategies
In the past, the Ministry of Commerce had formulated several export strategies that
identified growth markets and products. The essential assumption behind such strategies is that
since resources are limited, concentration on selected products and market segments would
provide better return in terms of incremental export expansion compared to the strategy where
the limited resources are distributed thinly over a large spectrum of products and markets.
The Extreme Focus Product Strategy was introduced in 1992 with the objective of giving
a focussed attention to products that have high production capacity in India and potential for
export competitiveness. The target for the Focus Products was to induce growth of 30%
volume/value in the medium term and stabilise growth in the subsequent period. The success of
this strategy has been mixed.
The 15X15 Matrix Strategy was first launched in the year 1995. The objective of this
strategy was to identify market diversification and commodity diversification. An examination of
the effectiveness of the strategy shows that the share of the total top 15 product groups exported
to the top 15 market destinations declinesd from 71% in 1996-97 to 66% in 2000-01 in respect of
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the total export of these 15 product groups for all destinations taken together. There has thus
been a market derivsification for these product groups. The top three items of Indias exports
contained in the Matrix continue to remain the same during 2000 - 01 i.e. Gems and Jewellery,
RMG Cotton including accessories and Cotton Yarn, Fabrics and Made Ups. The top three
destinations changed from US, UK and Japan to US, Hong Kong and UAE.The ranking of other
countries has also changed. These developments need to be factored into the new strategy.
Focus LAC was another strategy launched in 1997 with the objective of boosting exports of
select items like Textiles including RMG, Engineering goods and Chemical products to Latin
American Region. The highest ever growth rate of exports to this region was achieved in the year
2000-01 when the value of exports touched an all time high of US$ 982 million. Although the
current volume of trade between LAC and India is still low, there is scope for enhancing two-
way trade between India and the LAC region. It is obvious that the overall export strategy must
include regional focus wherever potentialities are identified.
The main lesson that we learn from the export strategies of the last decade is that the
composition, competitiveness and complexion of world merchandise trade are changing very fast
and a dynamic approach with a built in institutional mechanism for constant review is essential
for any medium term export strategy in order to achieve a higher share of global exports on a
sustainable basis. The focus of the past strategies was on the existing export products of India;
what is additionally necessary is to review the import baskets of our current and potential
markets and also to examine our export competitiveness, both revealed and real based on our
potentialities.
While the overall medium term strategy would have to be necessarily evolved on the basis
of the perspective of a longer time frame, there would also be need for short term response to
unforeseen situations like the slowdown in world economy witnessed from the begining of 2001
and aggravated by the September 11, 2001 event.
In the past, the export strategies had basically concentrated on existing products and existing
markets of Indias export sector. What is additionally necessary, and what has been addressed in
the present strategy document, is identification of export opportunities after examining the
import basket of major importing economies of the world and identifying potential items of
exports in which India is competitive vis--vis some of the major exporting countries of these
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products at present. The existing products and markets have also been analysed. Focus markets
have further been identified based on different criteria. Another additionality in the current
document is that some of the key strategic policy issues that have a bearing on Indias
competitive advantage in opportunity areas have been brought in one place so that policy
measures that are necessary to enhance the competitive edge of our exporting community gets
appropriate focus. Sector-wise strategies have also been examined. The strategy document
further fully takes into account the international developments and the complexities arising in the
New World Trade Order under the WTO.
SECTOR-WISE STRATEGIES
For the identified potential sectors, indicative sector-wise strategies have been given based on
the detailed strategy paper prepared by the Export Promotion Councils/Commodity Boards and
detailed discussions held with exporters. The main sectors covered are the following:
Engineering (including instruments and items of repairs), Textiles, Gems & Jewellery,
Chemicals & Allied, Agriculture, and Allied (including Marine and Plantations), Leather &
Footwear items and Other items.
These strategies need to be operationalised by Government for achieving the maximum
results.Some of the major strategies suggested for the different sectors are as follows:
Engineering/Electronic/Electrical and allied
The strategies for this sector include support for SMEs to modernise, accreditation of
testing laboratories in India by overseas agencies, R&D, other measures to effectively counter
NTBs in the form of TBT conditions, furthering joint ventures, brand promotion, support to
industry to fight anti-dumping cases, providing warehousing facilities in overseas markets,
exploring possibilities of promoting exports of Indian made economy vehicles in developing
countries and middle and low income groups in developed countries, promoting export of
automobiles with the help of FDI, MRAs with respect to recognition of testing agencies and
infrastructural and logistic support for automobiles exports, a three pronged export marketing
strategy for automobile component exports (i) export through Original Equipment
Manufacturers(OEMs) for their global sourcing requirements, (ii) export to tier 1 manufacturers
as a part of their international supply chain and (iii) direct export to after-market, focussing on
auto sector in some SEZs and automobile component centres, setting up construction equipment
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banks and adoption of consortium approach by Indian construction companies to increase project
exports, the 3 key mantras to promote electronics hardware, namely (i) hardware-software
combination, (ii) integrating local and export production and (iii) massive investments. We need
to make all out efforts to develop India as an off-shore production centre for electronic
components/equipments required for MNCs through clusterisation, low-duties, and combine all
this with an appropriate thrust on service exports.
Textiles sector
The main strategies for this sector include increased investment in key areas,
infrastructure development by setting up Apparel Parks and Textiles Centres Infrastructure
Development Schemes, restructuring EPCs, Brand Promotion and market assistance schemes,
restructuring
labour laws and smoothening existing schemes.
Gems & jewellery
The main strategies for this sector include forging strategic alliances with producers of
roughs and retailers of jewellery and efforts to make India a grading/trading centre for processed
diamonds, forward integration into gem stone jewellery, moving towards exports of jewellery,
etc.
Chemicals and allied sector
The main strategies for this sector include setting up of Comprehensive Chemicals
Estates(CCEs), enhancing awareness of Indian herbal items, focussing on branded generic
pharmaceutical products out of patent regime, promoting exports of cement by lowering input
costs like import duties, customs examination charges by railways, state levies, freight rates by
railways etc.
Agriculture & allied sector
The main strategies for this sector include establishing Agri.Export Zones, establishing a
supply chain management and export certification programme for basmati rice, setting up a nodal
SPS point in the Department of Commerce, cold chain system and innovative packaging for
floriculture exports, packhouses/value added centres for mangoes, market oriented approach for
tea and shift in focus from bulk tea exports to value-added packaged tea exports, focus on export
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of value added forms of natural rubber and export of rubber wood, judicious mix of strategy
relating to export of Arabica coffee vis--vis Robusta depending on market preference,
promoting tobacco exports by production of quality tobacco of FCV and Burley types, pursuing
with USA for higher TRQ (Tariff Rate Quota) allocations and promoting exports to Japan,
China, Russia, Tunisia, Morocco, etc. through bilateral negotiations, construction of drying yards
and promoting exports of value added kernels in consumer packs, promoting exports of value
added and organic spices and determining minimum residue level for pesticide residues in the
case of spices, promoting use of better handling techniques on fishing vessels and adoption of
food safety and quality systems in the case of marine exports, utilisation of under-exploited
commercially important varieties in the case of capture shrimps and logo schemes for marketing
marine products.

















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ANALYSIS OF FOREIGN POLICY 1997-2002
NDA REGIME
Highlights of Exim Policy
The new 5-year Export and Import policy for the period 1997-2002 aims at giving a major thrust
to acceleration of India's exports through restructuring and revamping of various export
promotion schemes and wide ranging measures for simplification of procedures with a view to
making them more transparent and easy to administer.
Gems & Jewellery Scheme To promote export of gold jewellery, it is proposed to increase the
number of nominated agencies permitted to stock gold. At present only HHEC, SBI, MMTC and
STC are doing this. This improvement will make available adequate quantity of gold to exporters
on replenishment basis or on outright purchase.
Moreover, the EOU/EPZ units are being permitted to sell 10% of their output in the DTA against
SIL on payment of duty. Duty Exemption Scheme Significant changes have been made to reduce
the multiplicity of schemes, improve their attractiveness and to make them simple and easy to
administer. The quantity based advance license has been continued.
It has restructured various export promotion schemes and has replaced Value Based Advance
License and the Passbook Scheme by a new scheme called Duty Entitlement Passbook Scheme.
Under this scheme, an exporter, on the basis of notified entitlement rates, will be granted duty
credits which will allow them to import inputs duty free. He can make use of this to import any
free importable item. The credit can be transferred to another person but the transfer will be valid
within the same port.
Under the Advance Licensing Scheme, the procedure has been further simplified. The Export
Obligation period of 12 months has now been extended to 18 months. Further extension for 6
months will be granted on payment of 1% of the value of unfulfilled exports. This will reduce
considerable paper work and harassment to the exporter.
Software Software units can undertake exports using a data communication link or in the form of
physical exports through a courier service also. They will be permitted on-line data
communication for DTA sales, use of the computer system for commercial training and import
of goods on loan from clients for a specified period.
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Agro Sector Import of equipment of Rs 5 crores and above under the Zero Duty EPCG Scheme
will be permitted for this sector.
Double weightage will be given to agro exports in calculating the eligibility of Export Houses,
Trading Houses, etc. An additional 1% Special Import License on the total value of exports will
be given for export of fruits, vegetables, floriculture and horticulture products.
EOU/EPZ units will be permitted to sell 50% of their output in the DTA on payment of duty
without insistence on value addition.
Special Incentives for Export of SSI product/Products from North Eastern States/New Markets
An additional Special Import Licence of 1% on total value of exports has been given to EH/TH,
etc., where such exports of products from North Eastern States constitute 10% or more of the
total exports made. Double weightage on such exports has been given for recognition as
EH/TH/STH/SSTH. Additional SIL has also been given for exploration of new markets. SIL on
export of SSI products has been increased from 1% to 2%.
In case of small scale exporters holding ISO 9000 series or IS/ISO 9000 series quality
certification, the FOB value of export will now be Rs. 1 crores and above during the preceding
three licensing years instead of the limit of Rs. 5 crore and Rs. 2 crore respectively prescribed for
others.
Export /Trading /Star Trading /Super Star Trading Houses
Earlier eligibility criterion for recognition of Export House/Trading House/Star Trading
House/Super Star Trading House based on the average annual export performance of the
preceding 3 licensing years was Rs 10 crores, 50 crores, 250 crores and 750 crores respectively.
Keeping in mind the export target growth to be reached by the turn of the century and the fact
that such status holders contribute between 60-70% of the country's total exports this has now
been revised to Rs 20 crores, 100 crores, 500 crores and 1500 crores respectively.
Incentives to improve Quality of Export Products The SIL entitlement of exporters holding
IS/ISO 9000 series has been increased from 2% of FOB to 5% of FOB.



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PERFORMANCE OF EXPORTS AND IMPORTS

Year
Exports as percentage
of Imports
1998-99
78.36617538
1999-00
74.13330412
2000-01
88.17445579
2001-02
85.24348616
2002-03
85.84529075

During the last decade of reforms, Indias exports have performed well. Positive policy measures
combined with robust growth of world trade have led to this improved performance. Compared
to pre-liberalization period, Indias export to GDP ratio has increased from 5.8% in 1991-92 to
10.1% in 2000-01 and the export growth rate has increased from -1.5% in 1991-92 to 21% in
2000-01. The export growth rate, however, has not been steady during this decade; the rate was
high during 1993-94, 1994-95 and 1995-96 at 20%, 18.4% and 20.8% respectively, but declined
sharply in 1996-97 to 5.3% and became negative in 1998-99 on account of South East Asian
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
1998-99 1999-00 2000-01 2001-02 2002-03
Exports
Imports
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crisis and worldwide recession. It again recovered to 10.8% in 1999-00 and reached the highest
growth for the decade at 21% in 2000-01. However, the global economic slowdown and the
events of September 11 have led to a steep fall in the rate of growth of exports during 2001-02.
Liberalisation & trade reforms have also led to a compositional change in Indias export basket.
Analysis of our export basket indicates an increase in the share of manufactured goods along
with an overall widening and diversification of exports.
Indias export performance has been commendable and exports have risen from USD 18 billion
in 1991-92 to a leval of USD 44.56 billion in 2000-01. The trend starts from a negative export
growth in 1991-92, the year when liberalisation efforts started in full swing and can be divided
into 3 distinct time periods (refer Annexure table 2.1)
In the first five years i.e. 1991-92 to 1995-96, the export growth rate averaged around 12.28%
with the highest of 20.8% achieved in 1995-96. The good performance could be attributed to
the favorable international economic situation and domestic reforms. In the next three years,
however, export growth rate sharply declined with growth rate at 5.3% in 1996-97 and becoming
negative in 1998-99 on account of the South East Asian crisis.

Indias Exports as a percentage of World Exports
Export Growth Rate of India and World
Year Worlds Export Indias Export Growth
Growth Rate Rate
1995 19.67 22.41
1996 5.28 8.10
1997 3.55 5.75
1998 (-)1.63 (-)4.48
1999 3.95 8.61
2000 12.4 16.46
Source: WTO International trade statistics 2001
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Source: Indiastat

PERFORMANCE OF IMPORTS

Source: Indiastat



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MAJORT COMMODITIES IN IMPORTS
Percentage share to total imports
1994-95 2000-01
Petroleum crude & products 20.69 31.53
Pearls precious & semi 5.72 9.69
Machinery 15.03 8.24
Organic & Inorganic chemicals 7.46 4.91
Electronic Goods 4.29 7.06
Gold & Silver 2.49 8.92
It is seen that during the second half of the 1990s, there has been a shift in the commodity
composition of major items of imports. The proportion of imports of items that are related to
export production has increased. The rise in the percentage of imports of Pearls, Precious &
semi-precious stones, and Electronic goods to the total imports are pointers in this case. It is also
important to note that the share of the value of import of Petroleum crude to the total imports has
gone up by nearly 10% mostly on account of the rise in oil prices.
Structural Changes in Indian Exports
As already noted earlier, there has been a compositional change in the export basket of India.
The share of manufactured goods in the total exports of India have increased from 75% in
1991-92 to 79% in 2000-01. If we include Petroleum products being exported from the country,
the share of manufactured goods has risen from a level of 76% in 1991-92 to 83% in 2000-01.
On the contrary, the share of Agricultural and allied products has declined from 18% in 1991-92
to 13% in 2000-01. Similarly, the share of exports of Ores and Minerals has declined from 5.2%
in 1991-92 to 2.60% in 2000-01. This is an evidence of Indias exports moving away from
Resource based products to Technology based products in the post-liberalisation period.
A study(1) reveals that during 1980-96 the growth of Indian export earnings turned out to be
above the world average for all the broad categories of Extended-Manufacturing (E-Mfg) exports
including double digit growth rates in labour and scale intensive products. However, Indonesia,
Malaysia and Thailand posted much higher and more stable growth rates than India. A better
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export performance than India in technologically more sophisticated products by South Korea
and Taiwan requires to be underlined. During the period 1980-96, the highest growth has been
achieved in the export of labour-intensive exports at 12% by India which is higher than the world
export of labour-intensive products at 9%. As far as changes in the commodity composition of
country specific export basket is concerned, India improved the share of Extended-
Manufacturing significantly from 56% (1980-86) to 71% (1987-90) in total exports but only
marginally further to 75% during 1993-96. The first period 1980-1990 was marked by the rise in
the share of scale intensive exports. Share of labour intensive exports remained constant at
around 41%.The scale intensive product exports improved their average share from 26% in
1980-86 to 36% in 1993-96. On the other hand, the Resource Intensive export items witnessed a
decline in their share to the total exports from 11% during 1980-86 to about 6% in 1993-96. The
other early trade liberalising and rapidly growing economies changed their export basket
increasingly towards differentiated and science based products. This diversification achieved by
them helped in reducing their vulnerability to volatile world trading environment in resource
intensive exports and slower growing world exports of labour intensive products.
The critical factor in these countries has been not the state of the international trading
environment but the functioning of the domestic main springs of the growth process such as the
incentive structure for innovations, reliable and cost effective transport and communication
facility and stable macroeconomic management - all this has been driven by a proactive
approach. India had a headlong start in industrialisation in the 1950s well ahead of these
countries, but the persistently inward looking character of Indian industrialisation not only made
it internationally non-competitive but led to wastage of scarce capital and foreign exchange,
thereby slowing down the rate of economic growth. Possibly realising the limited size of their
domestic markets at lower levels of per capita incomes, these East Asian countries had switched
from import substitution to export-orientation fairly early in their development process. India
was the first in initiating industrialisation but the last in trade liberalisation.
Region and country-wise trends
Analysis of trends in the share of Indias major export destinations during 1990 shows certain
trends (refer table 2.3 in annexure):Asia and Oceania region has improved its share significantly
over the decade from 30% in1990-01 to 37.5% in 2000-01.The West European region has
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slipped from its top position as Indias main export destination to the 2nd position with its share
falling from 33.6% to 25.35% over the same period. Americas share increased substantially
from 16% to 25% mainly due to increase in share of North America (USA & Canada) from
15.6% to 22.41%. Exports to Africa have displayed a 17% growth rate and share increased from
2.6% to 5.3% over the decade. Nigeria and South Africa have shown an increase from 0.35% to
0.86% and 0% to 0.7% respectively. However, one of the important trading partners, East
European regions share has fallen substantially from 17.87% in 1992 to just 2.95% in 2000.

Major Export Destinations
Trend
In the West Europe region, Belgium, France, Italy and Netherlands have more or less maintained
their respective shares while there is a marginal fall in the share of Germany and UK.
In the Asia & Oceania region, among the major partners, Hong Kongs share improved from
3.3% to 6%, while that of Japan fell to 4.04% from 9.3%. The share of UAE has increased from
2.42% in 1990-91 to 5.8% in 2000-01. In the American region, USAs share of Indias exports
has increased substantially, from 14.7% in 1990-91 to 20.94% in 2000-01. In the case of South
American countries, Brazils share has increased from 0.08% to 0.5% in 2000-01. CIS a major
trading partner of India having a share of 16% in 1990-91, lost its share drastically to a mere
2.38% in 2000-01.








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EXIM POLICY 2004-2009
UPA REGIME
The policy contains special focus initiatives for agriculture, handicrafts & handlooms,
gems & jewellery, and leather and footwear sectors. The special attention to agriculture is
particularly noteworthy because export promotion policies so far have focussed mainly on the
manufacturing sector. The agricultural sector had not received the attention it deserves in a
country where the vast majority of population is engaged in agriculture related activities. India
has taken big strides in increasing agricultural productivity and has achieved food security. A
concerted boost is now required to be given to promotion of agricultural exports, especially high
value commercial items and value added agricultural products.
The new policy contains a number of initiatives for achieving a quantum jump in export
of agricultural products. The Vishesh Krishi Upaj Yojana will boost exports of fruits, vegetables,
flowers, minor forest produce, and other value added products. The special package for
agriculture also includes policy measures like duty free import of capital goods, liberalized
import of seeds, planting materials, etc and liberalized export of medicinal and herbal products.
The focus on agricultural sector in the new foreign trade policy will, among other things,
enhance employment in some of the poorest regions of the country.

While policies for promoting exports of above mentioned agricultural products are a step
in the right direction, I would request the Hon'ble Minister to also come out with a proactive
policy on grain exports. It is an area with tremendous potential and a long-term policy would
help Indian grain exporters capture larger market share.

A significant percentage of agricultural production in India is damaged or lost due to poor
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storage, deterioration during transit, rodent infestation, etc. Many of India's perishable agro
products often run into quality problems which create buyer resistance in foreign markets. There
is an urgent need to strengthen the storage and transportation infrastructure for such products.
The new policy addresses this issue to a great extent. There is a scheme to establish Free Trade
& Warehousing Zones to create trade related infrastructure to facilitate import and export of
goods and services. Foreign Direct Investment would be permitted upto 100 per cent in the
development and establishment of the zones and their infrastructural facilities. The central aim of
this scheme is to make India a global trading hub. The world class warehousing and other
infrastructure will also meet the special needs of agricultural products.

While announcing the new policy, a very important observation was made that while
increase in exports is of vital importance, we have also to facilitate those imports which are
required to stimulate our economy. This central thread runs throughout the new policy. In all the
export thrust sectors there is a policy of allowing several duty free imports for neutralizing the
incidence of levies and duties on inputs used in export products. This will make export inputs
available at international rates and will enhance the competitiveness of Indian products in world
markets.
There are several other features in the new policy like setting-up of an exclusive Services
Export Promotion Council and setting-up of Bio Technology Parks which are path breaking
policy initiatives and will have long term impact in strengthening the country's foreign trade.
In conclusion I would like to reiterate the suggestion towards urgent need for improving
our export related infrastructure like transportation, port facilities etc so that the concept of total
export chain focus mooted by our dynamic Minister can be implemented speedily.
FOREIGN TRADE POLICY 2004-2009
HIGHLIGHTS
1. Strategy:
(a) It is for the first time that a comprehensive Foreign Trade Policy is being notified. The
Foreign Trade Policy takes an integrated view of the overall development of Indias foreign
trade.
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(b) The objective of the Foreign Trade Policy is two-fold:
i. To double Indias percentage share of global merchandise trade by 2009; and
ii. To act as an effective instrument of economic growth by giving a thrust to employment
generation, especially in semi-urban and rural areas.
(c) The key strategies are:
i. Unshackling of controls;
ii. Creating an atmosphere of trust and transparency;
1. Simplifying procedures and bringing down transaction costs;
2. Adopting the fundamental principle that duties and levies should not be exported;
3. Identifying and nurturing different special focus areas to facilitate development of
India as a global hub for manufacturing, trading and services.
2. Special Focus Initiatives:
(a) Sectors with significant export prospects coupled with potential for employment generation in
semi-urban and rural areas have been identified as thrust sectors, and specific sectoral strategies
have been prepared.
(b) Further sectoral initiatives in other sectors will be announced from time to time. For the
present, Special Focus Initiatives have been prepared for Agriculture, Handicrafts, Handlooms,
Gems & Jewellery and Leather & Footwear sectors.
(c) The threshold limit of designated Towns of Export Excellence is reduced from Rs.1000
crores to Rs.250 crores in these thrust sectors.
3. Package for Agriculture:
The Special Focus Initiative for Agriculture includes:
(a) A new scheme called Vishesh Krishi Upaj Yojana has been introduced to boost exports of
fruits, vegetables, flowers, minor forest produce and their value added products.
(b) Duty free import of capital goods under EPCG scheme.
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(c) Capital goods imported under EPCG for agriculture permitted to be installed anywhere in the
Agri Export Zone.
(d) ASIDE funds to be utilized for development for Agri Export Zones also.
(e) Import of seeds, bulbs, tubers and planting material has been liberalized.
(f) Export of plant portions, derivatives and extracts has been liberalized with a view to promote
export of medicinal plants and herbal products.

4. Gems & Jewellery:
(a) Duty free import of consumables for metals other than gold and platinum allowed up to 2%
of FOB value of exports.
(b) Duty free re-import entitlement for rejected jewellery allowed up to 2% of FOB value of
exports.
(c) Duty free import of commercial samples of jewellery increased to Rs.1 lakh.
(d) Import of gold of 18 carat and above shall be allowed under the replenishment scheme.
5. Handlooms & Handicrafts:
(a) Duty free import of trimmings and embellishments for Handlooms & Handicrafts sectors
increased to 5% of FOB value of exports.
(b) Import of trimmings and embellishments and samples shall be exempt from CVD.
(c) Handicraft Export Promotion Council authorised to import trimmings, embellishments and
samples for small manufacturers.
(d) A new Handicraft Special Economic Zone shall be established.
6. Leather & Footwear:
(a) Duty free entitlements of import trimmings, embellishments and footwear components for
leather industry increased to 3% of FOB value of exports.
(b) Duty free import of specified items for leather sector increased to 5% of FOB value of
exports.
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(c) Machinery and equipment for Effluent Treatment Plants for leather industry shall be exempt
from Customs Duty.
7. Export Promotion Schemes:
(a) Target Plus:
A new scheme to accelerate growth of exports called Target Plus has been introduced.
Exporters who have achieved a quantum growth in exports would be entitled to duty free credit
based on incremental exports substantially higher than the general actual export target fixed.
(Since the target fixed for 2004-05 is 16%, the lower limit of performance for qualifying for
rewards is pegged at 20% for the current year).
Rewards will be granted based on a tiered approach. For incremental growth of over 20%, 25%
and 100%, the duty free credits would be 5%, 10% and 15% of FOB value of incremental
exports.
(b) Vishesh Krishi Upaj Yojana:
Another new scheme called Vishesh Krishi Upaj Yojana (Special Agricultural Produce Scheme)
has been introduced to boost exports of fruits, vegetables, flowers, minor forest produce and their
value added products.
Export of these products shall qualify for duty free credit entitlement equivalent to 5% of FOB
value of exports.
The entitlement is freely transferable and can be used for import of a variety of inputs and goods.
(c) Served from India Scheme:
To accelerate growth in export of services so as to create a powerful and unique Served from
India brand instantly recognized and respected the world over, the earlier DFEC scheme for
services has been revamped and re-cast into the Served from India scheme.
Individual service providers who earn foreign exchange of at least Rs.5 lakhs, and other service
providers who earn foreign exchange of at least Rs.10 lakhs will be eligible for a duty credit
entitlement of 10% of total foreign exchange earned by them.
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In the case of stand-alone restaurants, the entitlement shall be 20%, whereas in the case of hotels,
it shall be 5%.
Hotels and Restaurants can use their duty credit entitlement for import of food items and
alcoholic beverages.
(d) EPCG:
(i) Additional flexibility for fulfillment of export obligation under EPCG scheme in order to
reduce difficulties of exporters of goods and services.
(ii) Technological upgradation under EPCG scheme has been facilitated and incentivised.
(iii) Transfer of capital goods to group companies and managed hotels now permitted under
EPCG.
(iv) In case of movable capital goods in the service sector, the requirement of installation
certificate from Central Excise has been done away with.
(v) Export obligation for specified projects shall be calculated based on concessional duty
permitted to them. This would improve the viability of such projects.
(e) DFRC:
Import of fuel under DFRC entitlement shall be allowed to be transferred to marketing agencies
authorized by the Ministry of Petroleum and Natural Gas.
(f) DEPB:
The DEPB scheme would be continued until replaced by a new scheme to be drawn up in
consultation with exporters.
8. New Status Holder Categorization:
(a) A new rationalized scheme of categorization of status holders as Star Export Houses has been
introduced as under:
Category Total performance over three years
One Star Export House 15 crores
Two Star Export House 100 crores
Three Star Export House 500 crores
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Four Star Export House 1500 crores
Five Star Export House 5000 crores
(b) Star Export Houses shall be eligible for a number of privileges including fast-track clearance
procedures, exemption from furnishing of Bank Guarantee, eligibility for consideration under
Target Plus Scheme etc.
9. EOUs:
(a) EOUs shall be exempted from Service Tax in proportion to their exported goods and services.
(b) EOUs shall be permitted to retain 100% of export earnings in EEFC accounts.
(c) Income Tax benefits on plant and machinery shall be extended to DTA units which convert to
EOUs.
(d) Import of capital goods shall be on self-certification basis for EOUs.
(e) For EOUs engaged in Textile & Garments manufacture leftover materials and fabrics upto
2% of CIF value or quantity of import shall be allowed to be disposed of on payment of duty on
transaction value only.
(f) Minimum investment criteria shall not apply to Brass Hardware and Hand-made Jewellery
EOUs (this facility already exists for Handicrafts, Agriculture, Floriculture, Aquaculture, Animal
Husbandry, IT and Services).
10. Free Trade and Warehousing Zone:
(i) A new scheme to establish Free Trade and Warehousing Zone has been introduced to create
trade-related infrastructure to facilitate the import and export of goods and services with freedom
to carry out trade transactions in free currency. This is aimed at making India into a global
trading-hub.
(ii) FDI would be permitted up to 100% in the development and establishment of the zones and
their infrastructural facilities.
(iii) Each zone would have minimum outlay of Rs.100 crores and Five Lakh sq. mts. built up
area
(iv) Units in the FTWZs would qualify for all other benefits as applicable for SEZ units.
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11. Import of Second Hand Capital Goods:
a. Import of second-hand capital goods shall be permitted without any age restrictions.
b. Minimum depreciated value for plant and machinery to be re-located into India has been
reduced from Rs.50 crores to Rs.25 crores.
12. Services Export Promotion Council:
An exclusive Services Export Promotion Council shall be set up in order to map opportunities
for key services in key markets, and develop strategic market access programmes, including
brand building, in co-ordination with sectoral players and recognized nodal bodies of the services
industry.



Further Analysis
Exports

Textiles
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The textile has been among the major exports of India since independence but as we have seen
that in the recent years the percentage share of Textile in the total export has decreased
considerably from 28.30 to 16.60%. The major reasons which can be attributed to this downfall
is that we have not considerably invested into this sector where as our competitors have
surpassed us in both labour cost and technology.
Leather
Leather again as evident from the graph has shown constant increment in the past few years but
still the measures that are done in terms of providing leather products manufacturing SEZ and
other EOUs are not fully harnessed. The industry is in a going good but can be improved by
addressing the labour issues as it is a labour intensive industry.
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Agriculture

Agriculture which is the major occupation of people in India has not seen any technological
developenment since the last green revolution. Still old practices of farming are used and the
farm productivity is very low as compared to the developed countries. In 1991 agriculture was
contributing to about 17 % to the exports which has come down to around 12% in 2007-08. So it
shows that the steps that were taken to increase the productiviity of this sector has not
successfully frutified. The various agro export zones that were set are yet to show results and
private initiatives of the kind of E-chaupal are playing important role in educating and creating
awareness among the farmers which may also help in inceasing the productivity in long run.

Recent Dvelopements
The tarde equation of India has taken a bad hit in the last few months owing to the global turmoil
situation prevailing in the world. As USA the biggest consumer of the world is worst hit by this
recession the effect is seen through out the world and we are facing the heat slowlyin some of the
sectors as we are highly dependent on US for our exports.
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Exports in the last few months are a bit on down side as major export sectors Textile, Gems and
Jewellery and a few other labour intensive sectors like Leather are worst hit.
According to ASSOCHAM analysis
Indian exports are likely to witness a shortfall of about 20%.
Projected US$ 200 billion, Expected shortfall US$ 40 billion.
Fluctuation in rupee dollar exchange rate.
Improve in Pharma and chemicals, heavy engineering, metal and marine products.
The composition of the export basket has changed and now new sectors like engineering goods
and petroleum products are also playing important roles where as sectors like Leather and
manufacturing has taken a beating.

0 10000 20000 30000 40000 50000 60000 70000 80000 90000
USA
UAE
CHINA
SINGAPORE
UK
HONGKONG
GERMANY
BELGIUM
ITALY
Exports in 07-08
Rs. In crore
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Export Basket of India: 2008
Source: DOC, Govt. of India.
Sectors like Gems and Jewellery and Leather have been badly hit in this recession.
Growth rate of sectors in October
Textile : -13%
Chemical : -20%
Gems & Jewellery : -21%
Handicraft & Handloom : -64%
Major Exports to:
Hongkong (27%), USA (22%), UAE (20%)
Reasons:
High commodity prices
Global economic slowdown
Rupee appreciation
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Rise in the crude and food prices last year have increased our import budget which has raised our
fiscal deficit to around 10% of GDP.

Crude Oil (in Rs. Billion) and GDP Growth Rate

Exports post September 2008

Current Scenario in India
Slow Down in US, Europe & Western World
Export Restrictions in Domestic Markets
Credit Crunch
Surge in Ocean Freight Rate
0
1000
2000
3000
2000-01 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Rs in billion
Rs in billion
8.52
%
7.45
%
9.2%
9.62
%
9.03
%
3.84
%
35
27.00%
10.4
-12.1
-9.1
-1.6
-20
-10
0
10
20
30
40
April-Aug August September October November December
% Growth 2008
28 | P a g e

Slackness in construction Industry
Labour intensive firms worst hit























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References

Exim policy 2002-07
Exim policy 2004-09
www.Indiastat.com
www.commerce.nic.in
www.textile.nic.in
http://commerce.nic.in/medium_term/contents.htm
CMIE
SPEECH BY COMMERCE & INDUSTRY MINISTER ON
RELEASE OF ANNUAL SUPPLEMENT TO FOREIGN TRADE
POLICY 2004-09
International Business & Economics Research Journal March 2006,
Volume 5, Number 3
ANNUAL SUPPLEMENT 2008 TO FOREIGN TRADE POLICY
2004-09
Economic Times
Business Line