India and Foreign Trade-

The trade activity with other countries on globe is known as Foreign Trade. It is directly related to
export-import of a country with other countries. The foreign trade of India was very well developed
during ancient history. The orientation of foreign trade of India totally changed with advent of British
Empire in India. Immediately after independence !I adopted inward looking foreign trade policy to
restrict global trade but picture has been changed with new economic policy of the country which
emphasi"ed on globali"ation. In #$%&' the Indian (hare in total world trade was )ust #.*+, which
further decreased to &.-, in #$$%. The foreign trade of India is going upwards and it is expected to be
., of total world trade by .&&$ /0s per figure released by 1T!2. These figures clearly shows that
India has failed to increase its share in the total world trade
Foreign Trade of India-
India is a founding-member of eneral 0greement on Tariffs and Trade 30TT4 since #$5* and its
successor' the 1T!. 1hile participating actively in its general council meetings' India has been crucial
in voicing the concerns of the developing world. For instance' India has continued its opposition to the
inclusion of such matters as labor and environment issues and other non-tariff barriers into the 1T!
policies. (ince liberali"ation India opened almost all sectors for F6I /Foreign 6irect Investment2 and
continuously signing pact with international economic organi"ations like 0(E07 and 08E9 to harness
international trade potential. :(0 is top trade partner of India followed by 9hina. These days India is
considered as one of the hottest destination for F6I. ;ecently <inistry of 9ommerce and Trade came
up with new Foreign Trade 8olicy to boost its share in total world trade
Indian Foreign Trade Policy 2009-2014
What is Foreign Trade Policy?
The :nion 9ommerce <inistry' overnment of India announces the integrated Foreign Trade 8olicy
FT8 in every five year. This is also called E=I< /Export' import2 policy. This policy is updated every
year with some modifications and new schemes. 7ew schemes come into effect on the first day of
financial year i.e. 0pril #' every year. The Foreign trade 8olicy which was announced on Thursday
0ugust .+' .&&$ is an integrated policy for the period .&&$-#5.
Objecties of Foreign Trade Policy 2009-14
#. To arrest and reverse declining trend of exports due to global recession is the main aim of the
policy. This aim will be reviewed after two years.
.. To double India>s exports of goods and services by .&#5.
3. To double India>s share in global merchandise trade by .&.& as a long term aim of this policy.
India>s share in lobal merchandise exports was1!4"# in 200$!
5. (implification of the application procedure for availing various benefits
%. To set in motion the strategies and policy measures which cataly"e the growth of exports
-. To encourage exports through a ?mix of measures including fiscal incentives' institutional
changes' procedural rationalisation and efforts for enhance market access across the world and
diversification of export markets.
%i& in 'eneral( The policy aims at developing export potential' improving export performance'
boosting foreign trade and earning valuable foreign exchange. FT8 assumes great significance this year
as India>s exports have been battered by the global recession. 0 fall in exports has led to the closure of
several small- and medium-scale export-oriented units' resulting in large-scale unemployment.
Targets(
#. Export Target @ A .&& Billion for .&#&-##
.. Export rowth Target@ #% , for next two year and .% , thereafter.
)P*' +Export 8romotion 9apital oods (cheme2 ,che&e(
#. !bligation under E89 scheme relaxed.
.. To aid technological :pgrdation of export sector' E89 (cheme at Bero 6uty has been
introduced.
C. Export obligation on import of spares' moulds etc. under E89 (cheme has been reduced by
%&,.
-efi.ation of %nn/al %erage ).0ort Obligation(
Taking into account the decline in exports' the facility of ;e-fixation of 0nnual 0verage Export
!bligation for a particular financial year in which there is decline in exports from the country' has been
extended for the % year 8olicy period .&&$-#5. (upport for reen products and products from 7orth
East extended.
%nno/nce&ents for FP, +Focus 8roduct (cheme21 F2, +Focus <arket (cheme21 23FP,
+<arket Dinked Focus 8roduct (cheme2-
#. .- new markets added in this scheme.
.. Incentives under F<( raised from ..% , to C ,
C. Incentive available under Focus 8roduct (cheme 3F8(4 rose from #..%, to .,.
5. Extra products included in the scope of benefits under F8(
5. <arket Dinked Focus 8roduct (cheme 3<DF8(4 expanded by inclusion of products like
pharmaceuticals' textile fabrics' rubber products' glass products' auto components' motor cars'
bicycle and its parts.etc. 3Eowever' benefits to these products will be provided' if exports are
made to #C identified markets 30lgeria' Egypt' Fenya' 7igeria' (outh 0frica' Tan"ania' Bra"il'
<exico' :kraine' Gietnam' 9ambodia' 0ustralia and 7ew Bealand4.
-. Focus 8roduct (cheme benefit extended for export of green products and some products from
the 7orth East.
*. 0 common simplified application form has been introduced to apply for the benefits under
F8(' F<(' <DF8( and GF:H.
24% +<arket 6evelopment (cheme2 5 2%I +<arket 0ccess Initiative2-
Eigher allocation for <arket 6evelopment 0ssistance 3<604 and <arket 0ccess Initiative 3<0I4 has
been announced.
To6ns of ).0ort ).cellence 7T))8
The following cities have been recogni"ed as towns of export excellence 3TEE4
1. 9andicrafts ( Iaipur' (rinagar and 0nantnag
2. 3eather Prod/cts ( Fanpur' 6ewas and 0mbur
3. 9ortic/lt/ral Prod/cts( <alihabad
,che&e for ,tat/s 9olders 3(tatus Eolders means star status holders4
#. 0dditional 6uty 9redit (crip>s shall be given to (tatus Eolders J #, of the F!B value of past
exports accelerate exports and encourage technological :pgrdation.
.. This facility shall be available for sectors of leather 3excluding finished leather4' textiles and
)ute' handicrafts' engineering 3excluding Iron K steel K non-ferrous metals in primary and
intermediate form' automobiles K two wheelers' nuclear reactors K parts' and ships' boats and
floating structures4' plastics and basic chemicals 3excluding 8harma products4.
C. This facility shall be available up to C# <arch' .&##.
5. Transferability for the 6uty 9redit scrip>s being issued to status holders under GF:H
/Gishesh Frishi K ram :pa) Ho)ana2 (cheme permitted only for the procurement of cold
chain e:/i0&ents!
).tension of Inco&e Ta. ).e&0tion to )O; +Export !riented :nits2and ,TPI +(oftware
Technology 8arks of India2-
Income Tax exemption to #&&, E!:s and to (T8I units under (ection #&B and #&0 of Income Tax 0ct
has been already extended for the financial year .&#&-## in the Budget .&&$-#&.
).tension of )*'* +Export 9redit uarantee 9orporation 3of India Dtd42-
The ad)ustment assistance scheme initiated in 6ecember' .&&+ to provide enhanced E99 cover at
$%,' to the adversely affected sectors' is continued till <arch' .&#&.
%nno/nce&ents for 2arine sector-
#. Fisheries exempted from maintenance of average E! under E89 (cheme 3along with *
sectors4 however Fishing Trawlers' boats' ships and other similar items shall not be allowed for
this exemption.
.. 0dditional flexibility under Target plus (cheme 3T8(4 L 6uty Free 9ertificate of Entitlement
36F9E4 (cheme for the marine sector.
%nno/nce&ents for 'e&s 5 <e6ellery ,ector(
#. 6uty 6rawback is allowed on old Iewellery exports to neutrali"e duty incidence.
.. 8lan to establish ?6iamond Bourse 3s4 with an aim to make India and International Trading
Eub announced.
C. Introduction of a new facility to allow import on consignment basis of cut K polished
diamonds for the purpose of gradingL certification.
5. #C value limits of personal carriage have been increased from A . million to :(A % million in
case of participation in overseas exhibitions.
%. The limit in case of personal carriage' as samples' for export promotion tours' has also been
increased from :(A &.# million to :(A # million.
-. Time limit of -& days for re-import of exported gems and )ewellery items' for participation in
exhibitions has been extended to $& days in case of :(0.
%nno/nce&ents for %gro ).0orts-
#. Introduction of a single window system to facilitate export of perishable agricultural produce
with an aim to reduce transaction and handling cost.
.. This system will involve creation of multi-functional nodal agencies. These agencies will be
accredited by 08E60 /0gricultural K 8rocessed Food 8roducts Export 6evelopment 0uthority2
%nno/nce&ents for 3eather ).0orts-
!n the payment of %& , applicable export duty' 3eather sector shall be allo6ed re-e.0ort of
/nsold i&0orted ra6 hides and s=ins and se&i finished leather from public bonded ware
houses.
%nno/nce&ents for Tea ).0orts-
1. The existing <inimum value addition under advance authori"ation scheme for export of tea is
#&& ,. It has been red/ced fro& the e.isting 100# to "0#!
.. 6T0 36omestic Tariff 0rea4 sale limit of instant tea by E!: units increased from C&, to %&,.
C. Export of tea has been included under GF:H (cheme benefits.
%nno/nce&ents for Phar&a ).0orts-
#. Export !bligation 8eriod for advance authori"ations issued increased from existing - months
to C- months.
.. 8harmacy sector included under <DF8( for countries in 0frica and Datin 0merica K some
countries in !ceania and Far East.
%nno/nce&ents for 9andloo& ).0orts-
The claims under Focus 8roduct (cheme' the reMuirement of ?Eandloom markN was reMuired earlier
which has been removed.
,che&e for ).0ort Oriented ;nits-
#. E!:s have been allowed to sell products manufactured by them in 6T0 36omestic Tariff
0rea4 up to a limit of $&, instead of existing *%,' without changing the criteria of Osimilar
goods>' within the overall entitlement of %&, for 6T0 sale. 3This means that instead of *%,
these units can sell up to $& , of their products in the domestic markets4
.. E!: allowed procuring finished goods for consolidation along with their manufactured goods'
sub)ect to certain safeguards.
C. Extension of block period by one year for calculation of 7et Foreign Exchange earnings of
E!:s kept under consideration.
5. E!: allowed 9E7G0T 9redit Facility.
%nno/nce&ents for >al/e %dded 2an/fact/ring 7>%28
To encourage Galue 0dded <anufactured export' a minimum #%, value addition on imported inputs
under 0dvance 0uthori"ation (cheme.
%nno/nce&ents for Project ).0orts-
8ro)ect Exports and a large number of manufactured goods covered under F8( and <DF8(.
F/el incl/ded in 4)P? ,che&e-
9ustom duty component on fuel where fuel is allowed as a consumable in (tandard Input-!utput
7orm included in factoring.
)asy I&0ort of sa&0les-
7umber of sample pieces has been increased from the existing #% to %&. This will facilitate the duty free
import of samples by exporters.
*onertibility of ,hi00ing ?ills-
reater flexibility has been permitted to allow conversion of (hipping Bills from one Export 8romotion
scheme to other scheme. 9ustoms shall now permit this conversion within three months' instead of the
present limited period of only one month.
-ed/ction in Transaction *osts-
#. 6ispatch of imported goods directly from the 8ort to the site has been allowed under 0dvance
0uthori"ation scheme for deemed supplies. 38resently the duty free imported goods could be
taken only to the manufacturing unit of the authori"ation holder or its supporting
manufacturer.
2. <aximum applicable fee for #+ 0uthori"ationsL license applications 3except those mentioned
in 9hapter C of FT84 has been reduced to ;s. #&&'&&& from the existing ;s #'%&'&&& 3for
manual applications4 and ;s. %&'&&& from the existing ;s.*%'&&& 3for E6I applications4.
C. 7o fee shall now be charged for grant of incentives under the (chemes in 9hapter C of FT8.
4is0osal of 2an/fact/ring Wastes-
6isposal of manufacturing wastes L scrap will now be allowed after payment of applicable excise duty
also before fulfillment of export obligation under 0dvance 0uthori"ation and E89 (cheme. Earlier it
was allowed after fulfillment of export obligation.
%nno/nce&ents for ,0orts Wea0on-
Dicenses for the import of sports weapon will be issued now by ;egional 0uthorities provided a 7!9
37o !b)ection 9ertificate4 is issued by <inistry of (ports K Houth 0ffairs. 3Earlier 6FT /6irectorate
eneral of Foreign Trade2 EeadMuarters had to be approached for this4
%nno/nce&ents for 2edical 4eices-
To solve the problem of medical device industry' the procedure for issue of Free (ale 9ertificate has
been simplified and the validity of the 9ertificate has been increased from # year to . years.
%nno/nce&ents for %/to&obile Ind/stry-
Those 0utomobile industries which have their ;K6 establishment will be allowed free import of
reference fuels 3petrol and diesel4' up to a maximum of % FD per annum' which are not manufactured
in India.
%nno/nce&ents for )4I Initiaties-
#. Export 8romotion 9ouncils K 9ommodity Boards have been advised to issue ;9<9 through a
web based online system.
.. It is expected that issuance of ;9<9 would become E6I enabled before the end of .&&$.
Inter 2inisterial *o&&ittee
<r. 0nand (harma announced that an Inter <inisterial 9ommittee will be formed to redressL resolve
problemsLissues of exporters.
,et /0 of 4irectorate of Trade -e&edy 2eas/res %nno/nced
0 6irectorate of Trade ;emedy <easures shall be set up' which will enable support to Indian industry
and exporters' especially the <icro (mall K medium Enterprises <(<Es in availing their rights
through trade remedy instruments'
4/ty *redit ,cri0@s
Earlier the payment of customs duty for Export !bligation 3E!4 shortfall under 0dvance
0uthori"ation' 6FI0 or E89 0uthori"ation was allowed in cash only. 7ow this payment can be done
in the way of debit of 6uty 9redit scrip>s.
I&0ort of -estricted Ite&s
;estricted Items can be imported now 3as replenishment4 against transferred 6FI0s 36uty Free
Import 0uthori"ations4 as the present 6F;9 36uty Free ;eplenishment 9ard4 scheme.
4ollar *redits
There is a provision for state-r/n ban=s to 0roide dollar credits
What is WTO and *once0t of 4oha ro/nd-?
:ruguay ;ound of <ultilateral Trade 7egotiations comprised .+ 0greements. It had two components-
#. 1T! 0greement
.. <inisterial decisions and declarations
1orld Trade !rgani"ation 31T!4 was founded to supervise and liberali"e international trade. The
organi"ation officially commenced on Ianuary #' #$$% under the 2arra=esh %gree&ent' replacing
the eneral 0greements on Tariffs and Trade 30TT4. The 1T! has #%C members which represent
more than $%, of total world trade and C& observers' most seeking membership. The 1T! is governed
by a ministerial conference' meeting every two yearsP a general council' which implements the
conference>s policy decisions and is responsible for day-to-day administrationP and a director-general'
who is appointed by the ministerial conference. The 1T!>s headMuarters is at the 9entre 1illiam
;appard' eneva' (wit"erland.
WTO deals 6ith
#. ;egulation of trade between participating countries
.. 8roviding a framework for negotiating and formali"ing trade agreements
C. 6ispute resolution process aimed at enforcing participants> adherence to 1T! agreements
which are signed by representatives of member governments and ratified by their parliaments.
What is 4oha 4eelo0&ent %genda?
1T! is currently endeavoring to persist with a trade negotiation called the 6oha 6evelopment 0genda
3or 6oha ;ound4' which was launched in .&&# to enhance eMuitable participation of poorer countries
which represent a ma)ority of the world>s population.
Eowever' the negotiation has been dogged by ?disagreement between exporters of agricultural bulk
commodities and countries with large numbers of subsistence farmers on the precise terms of a Ospecial
safeguard measure> to protect farmers from surges in imports. 0t this time' the future of the 6oha
;ound is uncertain.N
2inisterial conferences 5 b/l6ar= of disagree&ents
First &inisterial conference A ,inga0ore 199B
The inaugural ministerial conference was held in (ingapore in #$$-. 6isagreements between largely
developed and developing economies emerged during this conference over four issues initiated by this
conference' which led to them being collectively referred to as the ?(ingapore issuesN.
The (ingapore issues were@
#. Transparency in government procurement
.. Trade facilitation 3customs issues4'
C. Trade and investment
5. Trade and competition.
The developing countries opposed these issues as they were not in their favors. The European :nion'
Iapan and Forea favored these issues and pushed them in successive conferences. :( said that it could
accept some or all of them at various times' but preferring to focus on market access.
Fo/rth &inisterial conference 4oha 2001
The 6oha 6evelopment ;ound was launched at the conference. The talks are stalled even today and
impetus is on reaching a final agreement. The ma)or impediment is different interests of developed and
developing nations.
Fifth &inisterial conference1 *anc/n 2e.ico 200C
This ministerial conference was called for to reach an agreement on the 6oha round. Eowever' an
alliance of .. southern states' the .& developing nations 3led by India' 9hina and Bra"il4' demanded
agreements on (ingapore issues and called for an end to agricultural subsidies within the E: and the
:(. There was no progress made in this round too.
,i.th &inisterial conference( 9ong Dong 200"-
The sixth 1T! ministerial conference was held in Eong Fong from #C 6ecember Q #+ 6ecember .&&%
with an aim to reach an agreement on 6oha ;ound by .&&-. In this meeting' countries agreed to phase
out all their agricultural export subsidies by the end of .&#C' and terminate any cotton export subsidies
by the end of .&&-. Further concessions to developing countries included an agreement to introduce
duty free' tariff free access for goods from the Deast 6eveloped 9ountries' following the Everything But
0rms initiative of the European :nion R but with up to C, of tariff lines exempted. !ther ma)or issues
were left for further negotiation to be completed by the end of .&#&
,eenth &inisterial conference- 'enea 2009
This will held in eneva from C& 7ovemberQ6ecember .&&$.
lobal competitiveness report .&&$-#&
What is 'lobal *o&0etitieness -e0ort?
The lobal 9ompetitiveness ;eport is a report annually published by theWorld )cono&ic
For/& since #$*$. This report ?assesses the ability of countries to provide high levels of prosperity to
their citi"ens. This in turn depends on how productively a country uses available resources. Therefore'
the lobal 9ompetitiveness Index measures the set of institutions' policies' and factors that set the
sustainable current and medium-term levels of economic prosperity.
To0 10 *o/ntries 6ith '*I +2009-10E-
#. (wit"erland %.-&
.. :nited (tates %.%$
C. (ingapore %.%%
5. (weden %.%#
%. 6enmark %.5-
-. Finland %.5C
*. ermany %.C*
+. Iapan %.C*
$. 9anada %.CC
#&. 7etherlands %.C.
India has moved up one position to 5$ 39I 5.C&4 in the lobal 9ompetitiveness ;eport .&&$-.&#&.
Finance <inisters of the world>s .& most powerful countries are gathering for a two-day meet starting
to discuss reforms to tackle black money and money laundering in Dondon
4oha -o/nd-Iss/es1 I&0lications 5 *hallenges
Trade ministers from about C% countries met in 6elhi recently to give impetus to the 6oha round of
trade talks. This article covers in a condensed form the background of the stalled 6oha round of Trade
negotiations' understanding the issues of the developing countries and challenges ahead.
What 6as the Objectie of 4elhi 2eeting?
The ob)ective of the 6elhi meeting was neither to focus on negotiations on specific topics nor to reach
an agreement .The ob)ective was to concentrate on working on a ti&etable for the tal=s. India>s
foreign trade minister' 0nand (harma had invited the leaders to get some momentum into the
negotiations.
The )cho of the Iss/es-
The core issues were echoed in .& summits in 1ashington in 7ovember and Dondon in 0pril as well
as the +S summit in D>0Muila in Iuly apart from a meeting of farm exporters in Iune at Bali and again
at the !rganisation for Economic 9ooperation and 6evelopment 3!8E94 in 8aris and in Iuly at a
meeting of the 0sia-8acific 08E9 grouping.
Is %&erica ta=ing too &/ch Interest?
:nited (tates is key to any deal is expected by many other countries to start engaging in the
negotiationsP however the key focus of !bama 0dministration seems to be upon economic crisis and
health care besides to be able to point to new opportunities for :.(. business.
What is )&0hasis of 4eelo0ed *o/ntries?
4eveloped countries emphasi"e the big emerging countries like 9hina' India and Bra"il to open their
markets and not make excessive use of special arrangements for developing countries in a 6oha deal to
shield their industries from competition.
What are the Iss/es 5 *hallenges?
There are gaps and unresolved issues on agriculture and non-agriculture market access 37ama4. The
center point of talks involves efforts to open up trade in agriculture and industrial goods.
The involves rich countries to open their protected markets for agriculture produce and cutting their
heavy subsidies they provide to their farmers K agro exporters ' as they are able to wipe out the farmers
in poor L developing countries out of the market.
The richer developing countries will also cut industrial tariffs in return so that it opens up their
markets for industrial goods to do business with both rich and poor countries.
O/tco&e-
There seems to be a more of a split between the developing and the developed nations