International trade policy

BACKGROUD OF INTERNATIONAL
TRADE
INTERNATIONAL TRADE AND COMMERCE IS AS OLD AS
CIVILIZATION FROM THE ANCIENT GREEK TO THE PRESENT
GOVERNMENT OFFICALS, INTELLECUALS , ECOMNMIST HAVE
PONDERED THE DETERMINENT OF TRADE BETWEEN THE NATIONS
AND HAVE ANALYSED WHETHER TRADE BENEFITS OR HARMS THE
NATION AND HAVE TRIED TO DETERIOAT WHAT TRADE POLICY IS
BEST FOR ANY PARTICULAR COUNTRY.
IN 1947 AS MANY 23 NATIONS GIVE THEIR CONSENT TO THE
IMPLEMENTAION OF GATT(GENERAL AGREEMENT OF TARIFF AND
TRADE)
DUE TO CEERTAIN LIMITATION GATT COULD NOT BE SUCCESSFUL
AND HENCE WTO WAS ESTABLISED ON APRIL 15 1994

 ASSOCIATION OF SOUTH EAST ASIAN NATION(ASEAN)
 EURPOEAN COMMUNITIES/ EUROPEAN UNION(EU)
 NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)
SOUTH ASIAN ASSOCIATION FO REGIONAL COOPERATION
(SAARC)
SOUTH ASIAN PREFERNTIAL TRADING AREAS (SAPTA)
REGIONAL TRADING BLOCKS OF
WTO

INTERNATIONAL TRADE IS THE
EXCHANGE OF CAPITAL,GOODS,
AND SERVICES ACROSS
INTERATIONAL BORDERS OF
TERRITORIES.

• OBJECTIVE OF INTERNATIONAL TRADE
• To promote World Trade in a manner that
benefits every country
• To enhance competitiveness among all
trading partners so as to benefit consumers
and help in global integration

MEANING OF FOREIGN TRADE POLICY
FOREIGN TRADE POLICY
FOREIGN TRADE POLICY
EXCHANGE OF GOODS &
SERVICES BETWEEN THE
NATIONS.
IT INCLUDES-
 FINISHED GOODS,
 INTERMEDIATE GOODS,
 AGRICULTURAL PRODUCTS,
 FOOD STUFFS.
SET OF RULES AND
PROCEDURE.

Composition Of Foreign Trade
Composition of foreign trade means major
commodity or sectors in which India is doing
export and import. India is a very old participant
in world trade. Its participation have been
promoted by the opening of Suez Canal and
speedy development of the ship building industry
supplemented by the spread of industrial
revolution in Europe and fast expansion of
Indian railways.

Composition
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Export Import
Fuels, capital goods,
chemicals, food grains,
Petroleum products, Capital
goods ,Pearls and precious
gems, Iron and steel
Fertilizers ,edible oil
Manufactured goods
textiles , Gems and
Jewellery, Handicraft,
Light machinery etc.

EXPORTS
 Exports means that we are selling commodities to other
countries.
At the time of independence our exports comprise of
agricultural products like tobacco, spices, raw materials
of cotton and jute etc.
Due to industrialization the proportion of raw materials
in our exports declined.

INDIA’S TRADING
PARTNERS
OECD OPEC
EASTERN
EUROPE
ASEAN

TRADE POLICY :
TRADE POLICY REFERS TO THE COMPLETE
FRAMEWORK OF LAWS ,REGULATIONS
,INTERNATIONAL AGREEMENTS, AND,
NEGOTIATING STANCES ADOPTED BY A
GOVERNMENT TO ACHIEVE LEGALLY
BINDING MARKET ACCESS FOR DOMESTIC
FIRMS.
WALTER GOODE-

A GLIMPSE OF HISTORY
Import export Act was introduced by govt. during second world
war and it lasted for around 45 yrs.
In June 1992 the Act was superseded by FOREIGN TRADE
(DEVELOPMENT & REGULATION ACT), 1992.
BASIC OBJECTIVE: TO GIVE EFFECT TO THE NEW LIBERALISED
EXPORT-IMPORT POLICY OF GOVT.
Till 1985- annual policies were made.
 From 1985-92- 3 yrs policy was made
 Later 5yr policy came in existence in consistency with 5 yr policy
of govt.
FTP WAS EARLIER KNOWN AS EXIM
POLICY

CURRENT STATUS
THE UNION COMMERCE MINISTRY, GOVERNMENT OF
INDIA, ANNOUNCES THE FOREIGN TRADE POLICY IN EVERY
5 YEAR.
THIS POLICY UPDATED ANNUALLY ON 31ST MARCH WITH
FEW MODIFICATIONS AND SCHEMES. NEW SCHEMES COME
TO EFFECT ON 1ST APRIL, EVERY YEAR,
THE FOREIGN TRADE POLICY ANNOUNCED ON APRIL,2015
IS AN INTEGRATED POLICY FOR THE PERIOD 2015-2020,
WHICH IS RELEVANT TO OUR STUDY,

Foreign Trade (Development and Regulation) Act, 1992,
 Foreign Trade (Regulation) Rules 1993
 Foreign Trade (Exemption) Order 1993
Garments Export Entitlement Policy: 2000-2004,
Export (Quality Control and Inspection) Act, 1963,
Customs and Central Excise Duties Drawback Rules,
1995,
Foreign Exchange Management Act, 1999

Increase exports to $900 billion by 2019-20, from $466
billion in 2013-14.
Raise India's share in world exports from 2% to 3.5%.
Merchandise Export from India Scheme (MEIS) and
Service Exports from India Scheme (SEIS) launched.
Served From India Scheme (SFIS) will be replaced with
Service Export from India Scheme (SEIS).
For grant of rewards under MEIS, the countries have
been categorized into 3 Groups, whereas the rates of
rewards under MEIS range from 2 per cent to 5 per cent.
Under SEIS the selected Services would be rewarded at the
rates of 3 per cent and 5 per cent.
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Highlights of Foreign Trade policy
2015 - 2020

FTP to be aligned to Make in India, Digital India and Skills
India initiatives.
Duty credit scrips made freely transferable and usable For
payment of custom duty, excise duty and service tax.
Export promotion mission to take on board state Governments
Unlike annual reviews, FTP will be reviewed after two-and-
Half years.
Higher level of support for export of defence, farm Produce
and eco-friendly products.
Nomenclature of Export House, Star Export House, Trading
House, Premier Trading House certificate changed to 1,2,3,4,5
Star Export House. The criteria for export performance for
recognition of status holder have been changed from Rupees to
US dollar earnings.
2/27/2018 20

2/27/2018 21
Online procedure to upload digitally signed document by
Chartered Accountant/Company Secretary/Cost Accountant to
be developed.
Validity period of SCOMET export authorisation extended
from present 12 months to 24 months.
Chapter-3 incentives extended to units located in SEZs.
Export obligation under EPCG scheme reduced to 75%
to Promote domestic capital goods manufacturing.
E-Commerce exports of handloom products,
books/periodicals, leather footwear, toys and customised
fashion garments through courier or foreign post office would
also be able to get benefit of MEIS (for values up to INR
25,000).
Inter-ministerial consultations to be held online for issue of
various licences.

2/27/2018 22
No need to repeatedly submit physical copies of documents
available on Exporter Importer Profile.
 108 MSME clusters have been identified for focused
interventions to boost exports. Accordingly, ‘Niryat Bandhu
Scheme’ has been galvanised and repositioned to achieve the
objectives of ‘Skill India’.
 Trade facilitation and enhancing the ease of doing business are
the other major focus areas in this new FTP. One of the major
objective of new FTP is to move towards paperless working in
24x7 environment.
 Manufacturers, who are also status holders, will now be able
to self-certify their manufactured goods in phases, as originating
from India with a view to qualifying for preferential treatment
under various forms of bilateral and regional trade agreements.
This ‘Approved Exporter System’ will help manufacturer
exporters considerably in getting fast access to international
markets.

OBJECTIVES
Whether it has provided a stable and sustainable policy environment
To provide a mechanism for regular appraisal in order to rationalize imports and
reduce the trade imbalance
Whether “Make in India” “Digital India” and “Skills India” has created an Export
Promotion Mission for India
Whether Indian economy has achieved global competitiveness
Increase exports to $900 billion by 2019-20, from $466 billion in 2013-14
Raise India's share in world exports from 2% to 3.5%.

DIRECTION FOR INDIA’S FOREIGN TRADE
Direction means countries to which India exports its goods
and countries from which it imports.
Direction of trade also helps to understand the diplomatic
relationship maintained by India with other countries of
trade.
West Europe (28.1 per cent), America (25.4 per cent), Africa
(6.3 per cent) and East Europe (3.1 per cent).

 Direction of foreign trade consists of destination of
exports and sources of our imports.
 Prior to our Independence when India was under British
rule, much of our trade was done with Britain. Therefore,
UK used to hold the first position in India’s foreign trade.
 However, after Independence, new trade relationships
were established. Now USA has emerged as the most
important trading partner followed by Germany, Japan
and UK. India is also making efforts to increase the
exports to other countries also the direction of India’s
exports and imports.

STRATEGIC OPTIONS
FOR
TRADE POLICY
• A Free trade policy is one which does not impose any
restriction on the exchange of goods and services between
different countries. A free trade policy involves complete absence
of tariffs, quotas, exchange restrictions, taxes and subsidies on
production, factor use and consumption.
• A Protective trade policy pursued by a country seeks to
maintain a system of trade restrictions with the objective of
protecting the domestic economy from the competition of foreign
products

•An Inward looking trade policy(import substitution) stresses
the need for a country to evolve its own style of development
and to be the master of its own fate, with restrictions on the
movement of goods, services and people in and out of the
country. An inward looking trade policy encourages the
development of indigenous technologies appropriate to a
country’s resource endowment.
• An Outward looking trade policy (export-led
growth)encourages not only free trade but also the free
movement of capital, workers, enterprises and students, a
welcome to the multinational enterprise, and an open system of
communications.

TYPES OF
FOREIGN TRADE
ENTREPORT
EXPORT
IMPORT
IMPORTED GOODS
RE-EXPORTED
WITH OR WITHOUT
ADDITIONAL
PROCESSING
SENDING TO
ANOTHER
COUNTRY FOR
SALE
BRING INTO
COUNTRY
FROM ABROAD
FOR SALE

STRATEGY OF FOREIGN TRADE POLICY
REMOVING
GOVERNME
NT
CONTROL
FACILITATIN
G INDIA AS A
GLOBAL
HUB FOR
MANUFACT
URING,
TRADING
AND
SERVICES
GENERATIN
G
ADDITIONAL
EMPLOYME
NT
OPPORTUNI
TIES.
TECHNOLO
GICAL AND
INFRASTRU
CTURAL
UPGRATION
SIMPLIFICAT
ION OF
LEGAL
PROCEDUR
ES AND
BRINGING
DOWN
TRANSACTI
ON COST

Merchandise Exports From India Scheme
(MEIS)
OBJECTIVES
 Announced in the foreign trade policy 2015-2020, with effect from 1.04.2015.
 It replaces the 5 similar incentive schemes (focus product scheme, market linked
focus product scheme, focus market scheme, agri. Infrastructure incentive scrip,
VKGUY) UNDER POLICY 2009-2014.
 The scheme is also applicable to exports made by sez units.
OFFSET INFRASTRUCTURAL INEFFICIENCIES AND ASSOCIATED COSTS INVOLVED IN
EXPORT OF GOODS/ PRODUCTS, WHICH ARE PRODUCED/ MANUFACTURED IN INDIA,
ESPECIALLY THOSE HAVING HIGH EXPORT INTENSITY, EMPLOYMENT POTENTIAL .
 ENCHANCE INDIA’S EXPORT COMPETITIVENESS.

IMPORTANT DETAILS OF MEIS
Products supported under MEIS Level of Support:
Higher rewards have been granted for the following category of products:
•Agricultural and Village industry products, presently covered under VKGUY.
•Value added and packaged products.
•Eco-friendly and green products that create wealth out of waste from agricultural and other
waste products that generate additional income for the farmers, while improving the
environment.
•Labour intensive Products with large employment potential and Products with large number of
producers and /or exporters.
•Industrial Products from potential winning sectors.
•Hi-tech products with high export earning potential.
High potential products not supported earlier:
Support to 852 Tariff lines that fit in the product criteria but not provided support in the earlier
FTP. Includes lines from Fruits, Vegetables, Dairy products, Oils meals, Ayush & Herbal
Products, Paper, Paper Board Products.
Women Centric Products supported under MEIS
Other sectors supported under MEIS
Defence related Product, Pharmaceutical products of Bulk Drugs & Drug Intermediates, Drug
Formulations Biologicals, Herbal, Surgical, and Vaccines, Environment related Goods,
Machinery, Equipment’s, Technical Textiles.

SERVICE EXPORT FROM INDIA SCHEME
(SEIS)

OBJECTIVES OF THE POLICY
ENCOURAGE EXPORT OF NOTIFIES SERVICES FROM INDIA BY PROVIDING REWARDS
TO ALL SERVICE PROVIDERS OF NOTIFIED SERVICES WHO ARE PROVIDNG SERVICES
FROM INDIA, REGARDLESS OF PROFILE OR CONSTITUTION OF THE SERVICE
PROVIDER.
THE PRESENT RATES OF REWARD VARIES BETWEEN 3% AND 5% OF NET FOREIGN
EXCHANGE EARNING.
SL NO SECTORS ADMISSIBLE RATES
1. BUSINESS SERVICES (Professional, R&D, Rental/Leasing)
Other business services (Advertising services, Market research )
5%
3%
2. COMMUNICATION SERVICES 5%
3. CONSTRUCTION AND RELATED ENGINEERING SERVICES 5%
4. EDUCATIONAL SERVICES 5%
5. ENVIRONMENTAL SERVICES 5%
6. HEALTH-RELATED AND SOCIAL SERVICES 5%
7. TOURISM AND TRAVEL-RELATED SERVICES- Hotels and Restaurants
Travel agencies and tour operators services
3%; 5%
8. RECREATIONAL, CULTURAL AND SPORTING SERVICES 5%
9. TRANSPORT SERVICES 5%

STATUS HOLDER
Business leaders who have excelled in international trade and have
successfully contributed to country’s foreign trade are proposed to be
recognized as Status Holders and given special treatment and privileges to
facilitate their trade transactions, in order to reduce their transaction costs
and time.
The criteria for export performance for recognition of status holder have
been changed from Rupees to US dollar earnings. The new criteria is as
under:
Status category Export Performance FOB / FOR (as converted)
Value (in US $ million) during current and
previous two years
One Star Export House 3
Two Star Export House 25
Three Star Export House 100
Four Star Export House 500
Five Star Export House 2000

Merchandise Export from India Scheme (MEIS) and Service Exports from
India Scheme (SEIS) launched.
Higher level of rewards under MEIS for export items with High domestic
content and value addition.
Export obligation under EPCG scheme reduced to 75% to Promote
domestic capital goods manufacturing.
FTP to be aligned to Make in India, Digital India and Skills India initiatives.
Duty credit scrips made freely transferable and usable for payment of
custom duty, excise duty and service tax.
Export promotion mission to take on board state Governments
Unlike annual reviews, FTP will be reviewed after two-and-Half years.
Higher level of support for export of defence, farm Produce and eco-
friendly products.

New initiatives for EOUs, EHTPs and STPs
•EOUs, EHTPs, STPs have been allowed to share infrastructural facilities among
themselves.
•Inter unit transfer of goods and services have been allowed among EOUs, EHTPs,
STPs, and BTPs
•EOUs have been allowed facility to set up Warehouses near the port of export.
•STP units, EHTP units, software EOUs have been allowed the facility to use all duty
free equipment/goods for training purposes.
•At present, in a period of 5 years EOU units have to achieve Positive Net Foreign
Exchange Earning (NEE) cumulatively. Now such period of 5 years for NFE completion
can be extended by one year.
Facilitating & Encouraging Export of dual use items (SCOMET-Special
Chemicals, Organisms, Materials, Equipment and Technologies ).
•Validity of SCOMET export authorization has been extended from the present 12
months to 24 months.
•Authorization for repeat orders will be considered on automatic basis subject to certain
conditions.
Facilitating & Encouraging Export of Defence Exports
Authorization has been extended from the present 12 months to 24 months.

e-Commerce Exports
Goods having FOB value up to Rs.25000 per consignment (finalized using e-commerce
platform) shall be eligible for benefits under FTP.
Duty Exemption
Imports against Advance Authorization shall also be eligible for exemption from
Transitional Product Specific Safeguard Duty.
Additional Ports allowed for Export and import
Calicut Airport, Kerala and Arakonam ICD, Tamil Nadu have been notified as registered
ports for import and export.
Duty Free Tariff Preference (DFTP) Scheme
India has already extended duty free tariff preference to 33 Least Developed Countries
(LDCs) across the globe.
Quality complaints and Trade Disputes
In an endeavor to resolve quality complaints and trade disputes, between exporters and
importers, a new chapter, namely, Chapter on Quality Complaints and Trade Disputes has
been incorporated in the Foreign Trade Policy.
Vishakhapatnam and Bhimavaram added as Towns of Export Excellence
(Product Category– Seafood)

VALUE-ADDED MANUFACTURING
LOW LABOUR COST
EASE OF DOING BUSINESS
HUGE MANPOWER
EASY TAXATION SYSTEM
STATE EMPOWERMENT
FOREIGN DIRECT INVESTMENT

DISADVANTAGES OF MAKE-IN-INDIA
Poor Road & Railway
Infrastructure
Non-Availability of cheap
Electricity
Class Differences among citizens
Unskilled Labour
Slow Judicial System
Non Availability of Technology
Obsolete Labour Laws

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