FTP Incentive Schemes, Import, Export Impact on India...

1. FOREIGN
TRADE POLICY

2. OVERVIEW

3.  One of the most important phenomena in post-war
economic history has been the enormous expansion of
world trade.
 Indian trade grew poorly from 1950 to 1980 as
compared with the world.
 In 1993, India ranked 33rd in top exporting countries
and 32nd in top importing countries.

4. MEANING

5.  Trade between two or more nations is called foreign trade
or international trade
 Foreign trade is also known as external trade.
 Foreign trade transactions are classified under three
categories:
 Import Trade
 Export Trade
 Net Exports

6. Deemed Exports

7. “Deemed Exports” refer to those transactions in which
goods supplied do not leave country, and payment for
such supplies is received either in Indian rupees or in
free foreign exchange.

8. Scope of
Foreign Trade

9. I. Uneven Distribution of Natural Resources
 Natural resources of the world are not evenly
divided amongst the nations of the world.
 Countries have to depend upon one another for the
exchange of their surpluses with the goods, hence
the need for foreign trade is natural.

10. II. Division of Labour and Specialization
 Due to uneven distribution of natural resources,
some countries are more suitable placed to produce
some goods more economically than other countries.
 But they are geographically at a disadvantageous
position to produce other goods.

11. III. Differences in Economic Growth Rate
 There are many differences in the economic growth
rates of different countries.
 Under- developed and Developing countries have to
depend upon developed ones for financial help, which
ultimately encourages foreign trade.

12. IV Theory of Comparative Cost
 According to the theory of comparative cost each country
should concentrate on the production of those goods for
which it is best suited.
 Each country specializes in the production of those goods
which it can produce at the lowest cost as compared to other
countries which leads to international specialization and
division of labour.
 This reduces the cost of production all over the world and
improves the standard of living of the people in various
countries

13. HISTORY

14.  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.
 The Export Import Policy (EXIM Policy) or Foreign
Trade Policy is updated every year on the 31st of March
and the modifications, improvements and new schemes
becomes effective from April month of each year.

15. Fact of Foreign
Trade Policy

16.  On a per capita income basis, India ranked 140th by
nominal GDP and 129th by GDP (PPP) in 2011.
 India is the nineteenth largest exporter and tenth
largest importer in the world.
 Economic growth rate stood at around 6.5% for the
2011–12 fiscal year.

17. How Foreign
Trade Affects
The Indian
Markets?

18.  Foreign trade affects the domestic trade and markets of a
country and India.
 India is a part of the globalization and any effect, positive or
negative, on the global trade is bound to affect the Indian
markets.
 It was until 1991 that India followed a socialist-democratic
approach which kept it uncommitted to the foreign countries.
 India, like other countries participating in globalization, has
been exporting and importing products and services to
and from other countries.

19. Steps Taken
Objectives Set

20.  The Indian Foreign Trade Policy of 2009-2014 has
added 26 new markets to its aim of achieving the
export target of US$ 200 billion and export growth
target of 15 percent for the first two years.
 Other aims of the policy are to double India‟s export of
goods and services by 2014 and to double India‟s share
in global merchandise trade by 2020.

21. REWARD /
INCENTIVE
SCHEMES IN
DGFT

22. Served From India Scheme(SFIS)
Objective is to accelerate growth in export of services so as to
create a powerful and unique „Served From India‟ brand,
instantly recognized and respected world over.
All Indian service providers, who have free foreign exchange
earning of at least Rs. 10 lakhs in preceding financial year
/current financial year shall qualify for Duty Credit Scrip.
Duty Credit scrip may be used for import of any capital
goods including spares, office equipment and professional
equipment, office furniture and consumables.

23. VISHESH KRISHI AND GRAM UDYOG YOJANA
(VKGUY) (SPECIAL AGRICULTURE AND
VILLAGE INDUSTRY SCHEME)
Objective of VKGUY is to promote exports of:
1. Agricultural products
2. Minor Forest products
3. Gram Udyog products
4. Forest Based products

24. FOCUS MARKET SCHEME (FMS)
Objective is to offset high freight cost and other externalities to
select international markets with a view to enhance India‟s export
competitiveness in these countries.
The following categories of export products / sectors shall be
ineligible for Duty Credit Scrip, under FMS scheme:
a. Supplies made to SEZ units b. Service Exports c. Diamonds and
other precious stones, d. Gold, silver, platinum and other precious
metals, e. Cereals, Sugar, Milk, f. Crude/Petroleum oil.
New Markets have been added under Focus Market Scheme. These
includes 16 new markets in Latin America and 10 in Asia-Oceania.
The incentive available under Focus Market Scheme(FMS) has been
raised from 2..5% to 3%.

25. FOCUS PRODUCT SCHEME (FPS)
Objective is to incentivise export of such products which have
high export intensity/employment potential, so as to offset
infrastructure inefficiencies and other associated costs involved in
marketing of these products.
The incentive available under Focus Product Scheme(FPS) has
been raised from 1.25% to 2%.
A large number of products from various sectors have been
included for benefits under FPS.
These includes, Engineering products, plastic, technical textiles,
project goods, vegetable textiles & certain Electronic items.

26. Market Linked Focus Products Scrip
(MLFPS)
MLFPS promotes exports of products of high export
intensity but which have a low penetration in countries.
MLPFS has been greatly expanded by inclusion of products.
Products include Pharmaceuticals, Synthetic textile fabrics,
value added rubber products, value added plastic goods,
knitted & fabrics, glass products, certain iron and steel
products, & certain articles of aluminium among others.
Also extended for certain new products like auto components,
motor cars, bicycle and its parts, and apparels among others.
Benefits to these products will be provided, if exports are
made to 13 identified markets.

27. Duty Exemption & Remission Schemes
Duty Exemption Schemes enable duty free import of inputs required
for export production.
Duty Exemption Schemes consists of
a. Advance Authorisation Scheme
It is issued to allow duty free inputs which are physically
incorporated in export product.
b. Duty Free Import Authorisation(DFIA) Scheme.
It is issued to allow duty free inputs which are required for production
of export product.
Duty Remission Schemes consists of
a. Duty Entitlement Passbook (DEPB) Scheme
DEPB holder shall have option to pay additional customs duty in cash
as well.
b. Duty Drawback (DBK) Scheme.

28. Export Promotion Capital Goods(EPCG)
Scheme
Zero duty EPCG scheme allows import of capital goods for
pre production, production, post production.
Import duty under the EPCG scheme is being reduced from
5% to 3%, in order to promote modernization of
manufacturing and services exports.
Foreign Trade Policy 2009-2014 the interest subvention
scheme of 2% will continue to be effective till March
31,2013.
For continued technological up-gradation of export sectors,
this Scheme has now been extended up to 31st March 2013.

29. Special Focus
Initiatives

30.  With a view to continuously increasing our percentage share
of global trade and expanding employment opportunities,
certain special focus initiatives have been
identified/continued for
 Market Diversification,
 Technological Upgradation,
 Support to status holders,
 Agriculture, Handlooms,
 Handicraft, Gems & Jewellery,
 Leather, Marine,
 Electronics and IT Hardware manufacturing Industries,
 Green products,
 Exports of products from North-East,
 Sports Goods and Toys sectors.

31. • 26 new countries have been
included within the ambit of
Focus Market Scheme.
• The incentives provided under
Focus Market Scheme have been
increased from 2.5% to 3%.
Market
Diversification • There has been a significant
increase in the outlay under
„Market Linked Focus Product
Scheme‟.

32. • EPGC Scheme at zero duty has
been introduced for certain
engineering products, electronic
products, etc..
• To encourage value added
manufacture export, a minimum
15% value addition on imported
inputs under Advance
Authorisation Scheme has been
Technological stipulated.
Upgradation
• A number of products including
automobiles and other engineering
products have been included for
incentives under Focus Product,
and Market Linked Focus Product
Scheme

33. • The government recognised
„Status Holders‟ contribute
approx. 60% of India‟s goods
exports.
• To incentives and encourage
the status holders, as well as to
encourage technological
upgradation of export
Support to status production, additional duty
credit scrip @ 1% of FOB
holders value.
• This duty credit scrip can be
used for import of capital
goods by these status holders.

34. • Vishesh Krishi and Gram Udyog
Yojana.
• Capital goods imported under EPCG
will be permitted to be installed
anywhere in AEZ.
• Import of restricted items, such as
panels, are allowed under various
export promotion schemes.
• Import of inputs such as pesticides
are permitted under Advance
Agriculture and Authorisation for agro exports.
Village Industry • New towns of export excellence with
a threshold limit of Rs 150 crore shall
be notified.
• Certain specified flowers, fruits, and
vegetables are entitled to a special
duty credit scrip, in addition to the
normal benefit under VKGUY.

35. • Duty free import entitlement of
specified trimmings and
embellishments is 5% of FOB value
of exports during previous financial
year..
• Duty free import entitlement of hand
knotted carpet samples is 1% of FOB
value of exports during previous
financial year.
• Duty free import of old pieces of
hand knotted carpets on consignment
Handlooms & basis for re-export after repair is
Handicrafts permitted.
• New towns of export excellence with
a threshold limit of Rs 150 crore shall
be notified.
• All handicraft exports would be
treated as special.

36. • Import of gold of 8 k and above is
allowed under replenishment scheme.
• Jewellery made out of:
• Precious metals – 2%
• Gold & Platinum – 1%
• Rhodium finished Silver – 3% Schemes
• Cut & Polished Diamonds-1%
• Duty free import entitlement of
commercial samples shall be Rs
Gems & 300,000.
Jewellery • Duty free re-import entitlement for
rejected jewellery shall be 2% of FOB
value of exports.
• Extension in number of days for re-
import of unsold items in case of
participation in an exhibition in USA
increased to 90 days.

37. • Duty free import entitlement of
specified items is 3% of FOB
value of exports of leather
garments during preceding
financial year.
• Re-export of unsuitable
Leather & imported materials such 12 as
raw hides & skins and wet blue
Footwear leather is permitted.

38. • Imports for technological
upgradation under EPCG in
fisheries sector (except fishing
trawlers, ships, boats & other
similar items).
• Marine products are
considered for VKGUY
scheme.
Marine Sector • A self removal procedure for
clearance of seafood waste is
applicable subject to
prescribed wastage norms.

39. • Expeditious clearance of
approvals required from DGFT
shall be ensured.
• Exporters/Associations would
be entitled to utilize MAI &
Electronics & IT MDA Schemes for promoting
Hardware Electronics and IT Hardware
Manufacturing industry
Manufacturing exports.
Industries

40. • Duty free import of specified
specialised inputs allowed to
the extent of 3% of FOB value
of preceding financial year‟s
export.
• Applications relating to Sports
Goods & Toys shall be
considered for fast track
clearance by DGFT.
Sports Goods &
Toys
• Sports Goods & Toys are
treated as special focus
products and entitled to higher
incentives.

41. • India aims to become a hub for
production and export of green
products and technologies.
• Focus would be on items
relating to transportation, solar
and wind power generation
and other products as may be
notified which will be
incentivized under Reward
Schemes.
Green Products
& Technologies
• FPS benefit extended for
export of “Green products”
and for exports of some
products originating from the
North East.

43. • Every Authorisation shall be valid for prescribed
period of validity and shall contain such terms and
conditions as may be specified by RA which may
include:
(a) Quantity, description and value of goods;
(b) Actual User condition;
(c) Export obligation;
(d) Value addition to be achieved; and
(e) Minimum export / import price.

44. Actual User
Condition

45. 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.

46. Second Hand
Goods

47. • Import of second hand capital goods,
including refurbished / re-conditioned spares
shall be allowed freely.
• However, second hand personal computers /
laptops, photocopier machines, air
conditioners, diesel generating sets will only
be allowed against a licence.

48. Exemption from Service Tax
on Services
For all goods and services exported
from India, services received /
rendered abroad, where ever possible,
shall be received abroad exempted
from service tax.

49. Export Import Data
Analysis

50. World trade volume growth picked up sharply to 12.7 per cent in 2010 from -10.7 per cent in
2009.
Moderating its growth projections of world output to 3.3 per cent in 2012 and 3.9 per cent in
2013.

51. The improvement in export growth of 35.1 per cent in rupee terms in 2010-11.
High growth of exports in volume terms is a positive sign and is mainly due to the growth in
machinery and transport equipment (85.1 per cent).
In 2010-11, the growth of unit value index of exports declined to - 5.1 per cent, mainly due to
decline in machinery and transport equipment (-18.2 per cent) and beverages and tobacco (-
11.1per cent).

52.  The increase in growth of imports in rupee terms in 2010-11 was due to growth in
both volume and unit value indices.
 The volume index witnessed a growth of 10.1 per cent in 2010-11, due to the high
growth of manufactured goods.
 The unit value index of imports registered a growth of 11.2 per cent mainly due to
growth in unit values

53. • Top six states in terms of allocation in 2011-12 are Maharashtra and
Gujarat followed by Tamil Nadu, Karnataka, Uttar Pradesh and
Andhra Pradesh.
• In the North East region, Assam is the only state with significant
share.

54. Impact of Foreign
Trade Policy

55. 2008-2009
• The new Foreign Trade Policy failed to cheer investors.
• Consumer durables shares, however, cheered the new trade
policy and rallied.
• Export-oriented Gitanjali Gems gained 4.65 per cent, while
Rajesh Exports was up 8.58 per cent.
• Videocon was up 8.51 per cent and Titan Ind 3.21 per cent.
• IT major Wipro was up 2.01 per cent, followed by Tata Power at
1.70 per cent, L&T at 1.56 per cent, Sterlite are 1.45 per cent,
BHEL at 1.34 per cent and Mah&Mah at 1.20 per cent.

56. • Sensex stock Bharti Airtel, India‟s largest mobile
phone company, jumped 2.74 per cent on reports.
• While select blue-chips such as Bharti Airtel and
Wipro attracted buying, Tata Steel and Tata Motors
came under selling pressure.
• Among other major losers, Tata Motor was down 2.55
per cent, Hindustan Unilever 2.32 per cent, Hero
Honda 1.77 per cent, DLF 1.68 per cent and REL
Comm 1.50 per cent.

57. Exports of India's are broadly classified into
following four categories.

58. • During 2011-12, India's overall exports grew 21%.
• Engineering goods exports have seen almost steady
rise in share from 1999-2000 to the first half of the
2010- 11 and high growth rates of 84% and 43.6 % in
2010-11 and in the first half of the 2011-12.
• With the highest growth rate among manufacturers at
58.4 % in the first half of 2011-12, gems and
jewellery, the second major export item retained its
share around 16-17 % since 2000-01.
• The share of chemicals and related products and
textiles has fallen marginally over the years.

59. • Sudden rise in the share of gold and silver imports from
9.3% in 2000-01 to 13.3% in the first half of the 2011-12
and fall in the share of the pearls.
• Precious and semi-precious stones from 9.6% in 2000-01 to
6.0% in the first half of the 2011-12.
• The share of POL imports which fell from 31.3% in 2000-01
to 28.6% in 2010-11 rose again to 31.4% in the first half of
the 2011-12 due to high prices of crude oil.
• If we look at the trade deficit of India we found that the
Indian trade deficit is widening due to huge imports of oil
and gold
• Import of oil is seen to be relatively inelastic to changes in
international prices.

60. Some reasons of rising trade deficit are
• Imports are rising at faster rate than exports
• Increase in consumption requirements
• Need for key industrial raw materials
• Poor competitiveness of India‟s exports both at the
cost as well as price front.
• The trade deficit for April, 2012 was estimated at US$
13486.32 million which was higher than the deficit of
US$ 12850.38 million during April, 2011.

61. Wal-Mart

62. • Wal-Mart is the largest importer of foreign products and
is the largest customer to China.
• As long as we buy Chinese goods, our workers will
continue to suffer job losses.
• China raises the price of that same product knowing it
will still sell.
• If NAFTA is introduced, then for every dollar Wal-Mart
sends to China, then China will have to buy the same
amount of dollars of our goods.
• Foreign Trade Policy does not in itself mean it has to be
fair. It simply means two or more countries agree to
trade goods from each country to the other.

63. Challenges

64. • Some are due to the current emerging global situation
and some are systemic and long term in nature.
• A lot more needs to be done on diversification of
India‟s export basket as its export presence is limited
in the top items of world trade.
• India requires 8 export documents to be cleared and
China 5 with good practice economies like France at 2.
• Time to export is 16 days for India, 21 for China, and
5 for Denmark.
• Numbers of import documents that need clearance are
9 in India, 5 in China, and 2 in France.
• Time to import is 20 days in India, 24 in China, and 4
in Singapore.

65. Conclusion

66. • India needs to try diversifying its exports.
• Although India has made major strides in
Diversifying its exports but a lot needs to be
done not only to diversify the export basket
but also have a perceptible share in the top
items of the world trade.
• Thus in conclusion we can say that India is
trying to be more liberal in its foreign trade
policy.