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Underlining the importance of taking an all-encompassing and comprehensive view for the overall development of India’s foreign trade, the Minister said that while incorporating the existing practice of enunciating an annual exim policy, it was necessary to go much beyond and take an integrated approach to the developmental requirements of India’s foreign trade.
Within this context, the policy is built around two major objectives, namely (a) to double India’s percentage share of global merchandise trade by 2009; and (b) to act as an effective instrument of economic growth by giving a thrust to employment generation, especially in semi-urban and rural areas.
To achieve the objectives of the policy of giving a massive push to exports while generating employment, Mr Nath indicated the following 10 key strategies: (i) Unshackling of controls and creating an atmosphere of trust and transparency; (ii) Simplifying procedures and bringing down transaction costs; (iii) Neutralising incidence of all levies and duties on inputs used in export products, based on the fundamental principle that duties and levies should not be exported; (iv) Facilitating the development of India as a global hub for manufacturing, trading and services; (v) Identifying and nurturing special focus areas which would generate additional employment opportunities, particularly in semi - urban and rural areas; (vi) Facilitating technological and infrastructural upgradation of all the sectors of the Indian economy, especially through import of capital goods and equipment, thereby increasing value addition and productivity, while attaining internationally accepted standards of quality; (vii) Avoiding inverted duty structures and ensuring that our domestic sectors are not disadvantaged in the free trade agreements, regional trade agreements, preferential trade agreements entered into in order to enhance our exports; (viii) Upgrading the infrastructural network related to the entire foreign trade chain, to international standards; (ix) Revitalising the Board of Trade by redefining its role; and (x) Activating Indian embassies as key players in the export strategy and linking the commercial wings abroad through an electronic platform for real time trade intelligence.
All goods and services exported, including those from domestic tariff area (DTA), have been exempt from service tax and all exporters with minimum turnover of Rs 5 crore (CAD 1,403,525) and a good track record have been exempted from furnishing bank guarantees in any of the schemes so as to reduce their transaction costs.
Announcing a special package for agriculture, Mr Nath said a new scheme called ‘Vishesh Krishi Upaj Yojana was being introduced to boost exports of flowers, fruits, vegetables, minor forest produce and their value-added products.
A new scheme called Target Plus’ to achieve a quantum growth in exports has been introduced. A number of improvements to the EPCG scheme were announced by the Minister including additional flexibility for fulfillment of export obligation in order to ease difficulties of exports of goods and services and facilitation and incentivisation of technological upgradation. The Minister said that the DEPB (Duty Entitlement Pass Book) Scheme would be continued till it is replaced by a new scheme. A new scheme to establish Free Trade and Warehousing Zones (FTWZs) has also been introduced to make India a global trading hub. The aim is to create trade- related infrastructure to facilitate the import and export of goods and services with freedom to carry out trade transactions in free currency’, the Minister said. Foreign Direct Investment (FDI) would be permitted up to 100 percent in the development and establishment of the zones and their infrastructure facilities.
Stating that handlooms and handicrafts were the main pillars of India’s cottage sector and increased exports from these sectors would take the benefit of trade down to the grassroots levels, Mr Kamal Nath announced the following important steps for the handloom and Handicraft sectors: increase in duty-free import of trimmings and embellishments in these sectors to 5 percent of FOB value of exports, which would also be exempt from Countervailing Duty (CVD); authorisation to the handicraft Export Promotion Council to import trimmings, embellishment samples for small manufacturers, who were unable to do this on their own: and establishment of a new Handicraft Special Economic Zone.
The threshold limit of designated ‘towns of export excellence’ is reduced from Rs 1000 crore to Rs 250 crore (CAD 280.7 to 71.1 million) in these thrust sectors.
Recognising the role of EOUs, the policy extends several benefits to EOUs including exemption of EOUs from service tax in proportion to their exported goods and services; and permission to retain 100 percent of export earnings in EEFC (Exchange Earners Foreign Currency) Account.
Mr Nath said that Biotechnology Parks would be established in the country which would get all facilities of 100 percent Export Oriented Units (EOUs).
In order to boost export of services from India, the
Minister announced three major initiatives: (a) introduction of a ‘served from India’ scheme as a brand instantly recognised the world over, under which individual service providers who earn foreign exchange of at least Rs 10 lakh (CAD 28,070) would be eligible for a duty credit entitlement of 10 percent of total foreign exchange earned by them. In the case of stand-alone restaurants, the entitlement would be 20 percent, whereas in the case of hotels, it would be 5 percent; (b) an exclusive Services Export Promotion Council would be set up in order to map opportunities in key services in key markets and develop strategic market access programmes, including brand building in coordination with sectoral players and recognised nodal bodies of the services industry; and (c) government would promote establishment of common facility centres for use by home-based service providers, particularly in areas like engineering and architectural design, multi-media operations, software developers, etc, in state- and district-level towns, to draw in a vast multitude of home-based professionals into the services export arena.
Mr Nath also announced a new rationalised scheme of categorisation of status holder as ‘star export houses’, designating them from one star to five star depending on their total exports during the current and previous three years.
Further, as part of the drive to simplify procedures and reduce transaction costs, Mr Nath announced several important measures, including increasing the validity of all licences and entitlements issued under various schemes to a uniform 24 months; reduction in the number of returns and forms to be filed; permission to import second-hand capital goods without any age restriction as cost effective capital goods were an important component of industrial growth; delegation of powers to zonal and regional offices of DGFT to speed up disposal and time-bound introduction of Electronic Data Interchange (EDI), with 7.1 percent of all export transactions to be on EDI within six months.
A new mechanism for grievance redressal has also been put in place to facilitate speedy redressal of grievances of trade and industry.
The Minister also announced that the Board of Trade would be revamped and given a clear and dynamic role. Referring to the framework agreement for a free trade area -with Thailand, the Minister said that these framework agreements were directed towards increased trade with those countries and groupings.
Mr Nath said that India’s foreign trade policy was essentially a roadmap for the development of India’s foreign trade. By virtue of its very dynamics, the trade policy could not be comprehensive and exhaustive in all its details. It would naturally require modifications from time to time. This would be done through continuous updating based on changing dynamics of international trade and in partnership with business and industry.
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