The Government of India, Ministry of Commerce and Industry announced New Foreign Trade Policy on 27th August 2009 for the period 2009-2014, earlier this policy known as Export Import (Exim) Policy. After five years foreign trade policy needs amendments in general, aims at developing export potential, improving export performance, encouraging foreign trade and creating favorable balance of payments position.
LINK : http://www.infodriveindia.com/content/exim/dgft/exim-policy/2009-2014/exim-policy-2009-2014.pdf
- the UPA government has assumed office at a challenging time when the entire world is facing an unprecedented economic slow down.
- the year 2009 is witnessing one of the most severe global recessions in the post-war period.
- countries across the world have been affected in varying degrees & all major economic indicators of industrial production, trade, capital flows, unemployment, per capita investment & consumption have taken a hit.
- the WTO estimates project a grim forecast that global trade is likely to decline of over by 9% in volume terms & the IMF estimates project a decline of over 11%.
- the recessionary trend has huge social implications .
- the world bank estimate suggests that 53 million more people would go chronically hungry.
- though India has not been affected to the same extent as other economies of the world , yet exports have suffered a decline in the last 10 months due to a contraction in demand in the traditional markets of exports.
- the protectionist measures being adopted by some of these countries have aggravated the problem.
- after 4 clear quarters of recessions there is some sign of a turn around & the emergence of 'green shoots'.
Trade Record:
- the foreign trade policy announced in 2004 had set 2 objectives namely:
* to double the % of share of global merchandise trade
* use trade expansion as an effective instrument of economic growth & employment generation.
- industry & agriculture has shown remarkable resilience & dynamics in contributing to a healthy growth in exports.
- in the last 5 years our exports witnessed robust growth to reach a level of US$ 168 billion in 2008-09 from US$ 63 billion in 2003-04.
- india's share of global merchandise trade was 0.83% in 2003; it rose to 1.45% in 2008 as per WTO estimates.
- share of global commercial services export was 1.4% in 2003; it rose to 2.5% in 2008.
- on the employment front, nearly 14 million jobs were created directly / indirectly as a result of exports in the last 5 years.
Future Plan :
-the short term objective policy is to arrest & reverse the declining trend of exports & to provide additional support especially to those sectors which have been hit badly by recession in the developing world.
- ministry set a policy objective of achieving an annual export growth of 15% with an annual export target of US$ 200 billion by march 2011.
- in the remaining 3 years of this foreign trade policy upto 2014, the country should be able to come back on the high exports growth path of around 25% p.a.
- by 2014, they expect to double India's exports of goods & services.
- the long term policy objective for the government is to double India's share in global trade by 2020.
- in order to meet these objectives , the government would follow a mix of policy measures including fiscal incentives, institutional changes, procedural rationalizations & enhanced market access across the world & diversification of exports markets.
- improvements in infrastructure related to exports.
- bringing down transaction costs .
- be the 3 pillars, which will support us to achieve this target.
- endeavor will be made to see that the goods & services tax rebates all indirect taxes & levis an exports.
Highlights :
- higher support for market & product diversification incentive schemes have been expanded by way of addition of new products & markets.
- 26 new markets have been added under focus market scheme (FMS).
- these include 16 new markets in Latin America & 10 in Asia-Oceania.
- the incentive available under focus market scheme has raised from 2.5% to 3%.
- the incentives available under focus product scheme (FPS) has been raised from 1.2%-2%
- market linked focus products scheme has been greatly expanded by inclusion of products.
Technological Upgradation :
- to aid technological up gradation of our export sector, EPCG scheme at zero duty has been introduced.
- Jaipur, Srinagar, anantnag have been recognized as 'towns of export excellence' for handicrafts.
- Kanpur, dewas, ambur have been recognized as 'towns of export excellence' for leather products.
- malihabad for horticultural products.
EPCG scheme relaxations:
- to increase the life of existing plant & machinery, export obligation on import of spares, mould etc., under EPCG scheme.
- it has been reduced to 50% of the normal specific export obligation.
Status holder :
- to accelerate exports & encourage technological up gradation , additional duty credit scrips shall be given to status holders 1% of the FOB value of past exports.
- the duty credit scrips can be used for procurement of capital goods with actual user condition.
Stability of he foreign trade policy :
- to impart stability to the policy regime , duty entitlement passbook scheme is extended beyond dec 12 2009 till dec 2010.
- interest subvention of 2% for preshipment credit for 7 specified sectors has been extended till 2010.
- income tax exemption to 100% EOUs & STPI units under section 10B & 10A of income tax act, has been extended for the financial year 2010-11.
Marine sector :
fisheries have been included in the sector which are exempted from maintenance of average EO under EPCG scheme.
Gems & Jewellary sector :
- to neutralize duty incidence on gold jewellery exports, it has now been decided to make India drawback on such exports.
- in an endeavor to make India a diamond international trading hub, it is planned to established "diamond bourse".
- to promote exports of gems & jewelery products, the value units limits of personal carriage have been increased from US$ 2 million to US$ 5 million inn case of participation in overseas exhibition.
- the limit in case of personal carriage, as samples , for export promotion tours, has also been increased from US$ 0.1 million to US$ 1 million.
Agriculture sector :
- to reduce transaction handling costs, a single window system to facilitate export of perishable agricultural produce has been introduced.
- the system will involve creation of multi-functional nodal agencies to be accredited by APEDA.
Tea :
minimum value addition under advance authorization scheme for export of tea has been reduced from the existing 100% to 50%.
- export of tea has been covered under VKVOUY scheme benefits.
EOUs :
- this have been allowed to sell products manufactured by them in DTA upto a limit of 90% instead of exisitng 75% without changing he criteria for DTA sale.
- EOUs wil now be allowed to procure finished goods for consolidation along with their manufactured goods, subjects to certain safeguards.
- EOU will now be allowed CENVAT credit facility for the component of SAD & education cess on DTA sale.
Flexibilty provided to exporters :
- payment of customs duty for export obligations shortfall under advance authorization.
- AA has been allowed by way of credit of duty credit scripts.
- earlier the payments was allowed in cash only.
- import of restricted items, as replenishment, shall now be allowed against transferred DFIAs, in line with the erstwhile DFRC scheme.
- time limit of 60 days for re-import of exported gems & jewelery items , for participation in exhibitions has been extended to 90 days in case of USA.
- transit loss claims received from private approved insurance companies in India will now be allowed for the purpose of EO fulfillment under export promotion schemes.
simplification of procedures:
- to facilitate duty free import os samples by exporters numbers of samples has been increased from the existing 15 to 50.
- to allow exemption for up to 2 staged from payment of excise duty in liew of refund, in case of supply to an advance authorization holder by the domestic intermediate manufactures.
- greater flexibility has been permitted to allow conversion of shipping bills from one export promotion scheme to other scheme.
reduction of transaction costs :
- no fee shall be charged for grant of incentives under the schemes of FTP.
- further, for all other authorization, maximum applicable fee is being reduced to rs.1,00,000 from the existing rs.1,50,000 (for manual applications) rs.50,000 from the existing rs.75,000 (for EDI applications).
- the year 2009 is witnessing one of the most severe global recessions in the post-war period.
- countries across the world have been affected in varying degrees & all major economic indicators of industrial production, trade, capital flows, unemployment, per capita investment & consumption have taken a hit.
- the WTO estimates project a grim forecast that global trade is likely to decline of over by 9% in volume terms & the IMF estimates project a decline of over 11%.
- the recessionary trend has huge social implications .
- the world bank estimate suggests that 53 million more people would go chronically hungry.
- though India has not been affected to the same extent as other economies of the world , yet exports have suffered a decline in the last 10 months due to a contraction in demand in the traditional markets of exports.
- the protectionist measures being adopted by some of these countries have aggravated the problem.
- after 4 clear quarters of recessions there is some sign of a turn around & the emergence of 'green shoots'.
Trade Record:
- the foreign trade policy announced in 2004 had set 2 objectives namely:
* to double the % of share of global merchandise trade
* use trade expansion as an effective instrument of economic growth & employment generation.
- industry & agriculture has shown remarkable resilience & dynamics in contributing to a healthy growth in exports.
- in the last 5 years our exports witnessed robust growth to reach a level of US$ 168 billion in 2008-09 from US$ 63 billion in 2003-04.
- india's share of global merchandise trade was 0.83% in 2003; it rose to 1.45% in 2008 as per WTO estimates.
- share of global commercial services export was 1.4% in 2003; it rose to 2.5% in 2008.
- on the employment front, nearly 14 million jobs were created directly / indirectly as a result of exports in the last 5 years.
Future Plan :
-the short term objective policy is to arrest & reverse the declining trend of exports & to provide additional support especially to those sectors which have been hit badly by recession in the developing world.
- ministry set a policy objective of achieving an annual export growth of 15% with an annual export target of US$ 200 billion by march 2011.
- in the remaining 3 years of this foreign trade policy upto 2014, the country should be able to come back on the high exports growth path of around 25% p.a.
- by 2014, they expect to double India's exports of goods & services.
- the long term policy objective for the government is to double India's share in global trade by 2020.
- in order to meet these objectives , the government would follow a mix of policy measures including fiscal incentives, institutional changes, procedural rationalizations & enhanced market access across the world & diversification of exports markets.
- improvements in infrastructure related to exports.
- bringing down transaction costs .
- be the 3 pillars, which will support us to achieve this target.
- endeavor will be made to see that the goods & services tax rebates all indirect taxes & levis an exports.
Highlights :
- higher support for market & product diversification incentive schemes have been expanded by way of addition of new products & markets.
- 26 new markets have been added under focus market scheme (FMS).
- these include 16 new markets in Latin America & 10 in Asia-Oceania.
- the incentive available under focus market scheme has raised from 2.5% to 3%.
- the incentives available under focus product scheme (FPS) has been raised from 1.2%-2%
- market linked focus products scheme has been greatly expanded by inclusion of products.
Technological Upgradation :
- to aid technological up gradation of our export sector, EPCG scheme at zero duty has been introduced.
- Jaipur, Srinagar, anantnag have been recognized as 'towns of export excellence' for handicrafts.
- Kanpur, dewas, ambur have been recognized as 'towns of export excellence' for leather products.
- malihabad for horticultural products.
EPCG scheme relaxations:
- to increase the life of existing plant & machinery, export obligation on import of spares, mould etc., under EPCG scheme.
- it has been reduced to 50% of the normal specific export obligation.
Status holder :
- to accelerate exports & encourage technological up gradation , additional duty credit scrips shall be given to status holders 1% of the FOB value of past exports.
- the duty credit scrips can be used for procurement of capital goods with actual user condition.
Stability of he foreign trade policy :
- to impart stability to the policy regime , duty entitlement passbook scheme is extended beyond dec 12 2009 till dec 2010.
- interest subvention of 2% for preshipment credit for 7 specified sectors has been extended till 2010.
- income tax exemption to 100% EOUs & STPI units under section 10B & 10A of income tax act, has been extended for the financial year 2010-11.
Marine sector :
fisheries have been included in the sector which are exempted from maintenance of average EO under EPCG scheme.
Gems & Jewellary sector :
- to neutralize duty incidence on gold jewellery exports, it has now been decided to make India drawback on such exports.
- in an endeavor to make India a diamond international trading hub, it is planned to established "diamond bourse".
- to promote exports of gems & jewelery products, the value units limits of personal carriage have been increased from US$ 2 million to US$ 5 million inn case of participation in overseas exhibition.
- the limit in case of personal carriage, as samples , for export promotion tours, has also been increased from US$ 0.1 million to US$ 1 million.
Agriculture sector :
- to reduce transaction handling costs, a single window system to facilitate export of perishable agricultural produce has been introduced.
- the system will involve creation of multi-functional nodal agencies to be accredited by APEDA.
Tea :
minimum value addition under advance authorization scheme for export of tea has been reduced from the existing 100% to 50%.
- export of tea has been covered under VKVOUY scheme benefits.
EOUs :
- this have been allowed to sell products manufactured by them in DTA upto a limit of 90% instead of exisitng 75% without changing he criteria for DTA sale.
- EOUs wil now be allowed to procure finished goods for consolidation along with their manufactured goods, subjects to certain safeguards.
- EOU will now be allowed CENVAT credit facility for the component of SAD & education cess on DTA sale.
Flexibilty provided to exporters :
- payment of customs duty for export obligations shortfall under advance authorization.
- AA has been allowed by way of credit of duty credit scripts.
- earlier the payments was allowed in cash only.
- import of restricted items, as replenishment, shall now be allowed against transferred DFIAs, in line with the erstwhile DFRC scheme.
- time limit of 60 days for re-import of exported gems & jewelery items , for participation in exhibitions has been extended to 90 days in case of USA.
- transit loss claims received from private approved insurance companies in India will now be allowed for the purpose of EO fulfillment under export promotion schemes.
simplification of procedures:
- to facilitate duty free import os samples by exporters numbers of samples has been increased from the existing 15 to 50.
- to allow exemption for up to 2 staged from payment of excise duty in liew of refund, in case of supply to an advance authorization holder by the domestic intermediate manufactures.
- greater flexibility has been permitted to allow conversion of shipping bills from one export promotion scheme to other scheme.
reduction of transaction costs :
- no fee shall be charged for grant of incentives under the schemes of FTP.
- further, for all other authorization, maximum applicable fee is being reduced to rs.1,00,000 from the existing rs.1,50,000 (for manual applications) rs.50,000 from the existing rs.75,000 (for EDI applications).
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