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Foreign Trade Policy

New foreign trade policy announced on Aug 31 2004 Aim doubling Indias share in global merchandise trade from .7% to 1.5% in 2009 03-04 Indias exports - $61.8 billion Growth target 10% CAGR(compounded annual growth rate) Service sector expected to contribute to export of invisibles to over $100 billion.

Foreign Trade Policy


Objectives:
To double Indias percentage share of global merchandise trade from .7% to 1.5% To act as an effective instrument of economic growth by giving a thrust to employment generation especially in semi urban & rural areas Key Strategies: 1. Unshackling of controls 2. Creating an atmosphere of trust and transparency

Foreign Trade Policy


3. Simplifying procedures and bringing down transaction costs 4. Adopting the principle that duties and levies should not be exported 5. Identifying and nurturing special focus areas to facilitate development of India as a global hub for manufacturing, trading and services. Special focus Initiatives: sectors with export potential and employment generation identified as thrust areas

Foreign Trade Policy


include areas like agriculture, handicrafts, handlooms, gems and jewellery and leather and footwear. Threshhold limit for Towns of Excellence reduced from Rs.1000 crores to Rs. 250 crores. Package for Agriculture: introduced to boost exports of fruits, vegetables, flowers, minor forest produce and their value added products. Exports will qualify for duty free credit entitlement = 5% of FOB value of export

Foreign Trade Policy


Handicrafts and Handlooms:Duty free imports 5% of FOB value of exports Gems and Jewellery:imports of 18 carat gold and above under replenishment scheme Export Promotion Scheme: Target Plus exporters with incremental growths of 20%, 25% and 100% entitled to duty free credit of 5%, 10% and 15% respectively Service Exports: individual service providers earning forex of Rs.10 lakhs - duty free credit

Foreign Trade Policy


of 10% of total forex earnings Duty free Import under Export Promotion capital goods: for agriculture could be installed in agri export zone EOU: exempted from service tax in proportion to their exported goods and services New Status Holder Categorisation: 1 star export house Rs 25 crores 2 - Rs. 100 crores

Foreign Trade Policy


3 - Rs. 500 crores 4 - Rs. 1,500 crores 5 - Rs. 5,000 crores Star export houses entitled to fast track clearance procedures, exemption from bank guarantees, and so on Free Trade and Warehousing Zone: i)Introduced to create trade related infrastructure to facilitate exports and imports with freedom to carry out trade in free

Foreign Trade Policy


currency. ii) FDI will be permitted upto 100% in development of such zones iii) Each zone minimum outlay of Rs.100 crores and 5 lakh sq. mt. built up area iv) Units of FTWZ would qualify for all benefits of SEZ. Import of II hand capital goods: permitted Bio technology parks: set up and granted all facilities of 100% EOUs

Foreign Trade Policy


Assessment: Instead of removing quantitative restrictions, thrust is more on increasing exports. Thrust areas are agri, handicrafts, handlooms, gems and jewellery, leather and footwear. Since most are in the SME sector, would help increase the growth of this sector. Rationalised star export houses give thrust to many small exports who were hitherto unrecognised

Foreign Trade Policy


reduction of threshold limit would include more towns in export promotion. Eg. Tirupur. Smaller funds sufficient to build amenities in such towns. Enlarges the spread of export centres. Services Export Promotion Council developing markets for services brand building exercise. Exemption of service tax on exports. Target Plus scheme. FTWZ 100% FDI

Emphasis on SMEs. Drawback : Bureaucracy FTP 2005-06: Not just about earning forex but also creating more jobs in line with the govts Common Minimum Program. Affirmed that export earnings will touch $150 billion in the next 4 years and add 25 lakh new jobs every year

Foreign Trade Policy

Foreign Trade Policy


2004-05 : Forex earnings $ 80 billion & 10 lakh new jobs. Focus areas: agri, dairy & poultry, marine products, pharmaceuticals, auto components, gems and jewellery. Many new incentives introduced: Export cess on agri and plantation abolished Export concessions available to agri and horticultural produce extended to dairy and poultry produce

Foreign Trade Policy


For gems and jewellery, duty free imports of samples upto Rs. 3 lakhs allowed. To ensure availability of high quality gold, STC and MMTC have been directed to provide metal for exports 2005-06: exports touched $100.66 billion , imports touched dizzying heights of $ 140.22 billion resulting in unprecedented trade deficit of $39.56 billion. Requires more efforts to curb imports.