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Economics: Export-Import policy of India

This article explains about the difference between export and import, it comprehend the features that make Exim policy stand distinguished from other trade boosting policies, and the main features of export and import policy.


Every country has to import goods and to pay for imports it has to export goods to other countries. Ideally every country should specialize in accordance with its comparative cost. In the past. To protect domestic industries, many countries had imposed heavy traffics to restrict imports. However in recent years, the world opinion has become in favor of free trade so that different countries by specializing according to their comparative costs are able to accelerate their economic growth and raise living standard of their people.

The requirement of economic development compelled us to import large quantities of capital goods. Therefore, over the 50 years of planning period our imports grew rapidly and exceeded our exports with the result that there has been deficit in our trade balance.

Export and Import: Meaning

An export or Import is any good or commodity, transported from one country to another or bought into one country from another country in a legitimate fashion, typically for use in trade. Export and import of commercial quantities of goods normally requires involvement of the customs authorities in both the country of export and the country of import.

Indian export – import performance (2002-2007)

The last few decades a faster growth in the Indian export as compared to the GDP growth, thanks to the Foreign Direct Investment (FDI), which has played a significant role in this phenomenon. With India crossing the US$ 50-billion-mark in merchandise exports in the F.Y. 2002-2003, the Indian federal government has chalked out a board export & import (EXIM) policy 2003 with in the wide parameters of the five year export-import policy (2002-07). The Indian export control system, being transparent, efficient, and credible, has attracted a huge amount of foreign direct investment. However, despite a significant inflow of FDI in the country in the recent years, not much effort has been made to evaluate its involvement in India's export-import performance.


Export and import policy is announces by Govt. of India in every five years, and every year on 31st of March the export and import policy got updated and modification, improvements and new schemes are effective from 1st April of every year. The current policy covers the period 2002-2007. it aims at pushing up export to 12% a year as compared to about 1.56% achieved during the financial year 2001-2002. With export nose-diving during FY02, the country had been looking for an Exim policy that would provide the right impetus to exporters and put them back on the growth track. The Commerce Minister has tried it do so by providing export incentives and simplifying export procedures. The Exim policy for 2002-07 has been declared with the objective of capturing 1% of the global share of trade by 2007. To attain this target, India needs to increase its export from the present level of US$ 46 bn to more then US$80 bn over the next five years, which implies a CAGR of 11.9%. It is to be noted that India enjoy a huge share of around 25^% in Global trade till 1750. Over time the share of India in global trade kept slipping from 11% in 1900 to roughly 5% in 1920s and by 1847 it was 2.5%. Today the share stands at 0.67%

The main features of this export import policy are

  • Concession to exporters, Quantities restrictions on Exports removed

    Moving towards the regime of free trade with minimum intervention, last year, the Exim Policy removed Quantitative Restrictions (QR) on 714 import items. Except for few sensitive items, QR on all exports have been removed. Only a few items have been retained for exports through State Trading Enterprises. In a bid to enable Indian companies to compete effectively in the increasingly competitive markets and give a boost to sagging exports various concessions have been to the exporters in this new Exim Policy 2002-2007

  • Duty Entitlement Pass Book (DEPB) and Export Promotion Capital Goods (EPCG) Schemes retained

    DEPB and EPCG are important tools for promoting exports. Besides in the DEPB and EPCG schemes, new initiatives have been granted to the cottage industries, handicrafts, chemicals and pharmaceuticals, textile and leather products.

  • Strengthening special export zones (SEZ)

    The new long – term Exim policy has sought to enable Indian SEZ to come at par with international rivals. It has also given a boost to banking sector reforms by permitting Indians banks to setup overseas banking units in SEZs.

  • Soft options for computer hardware industry

    The Exim policy has put the Indian computer manufacturer at par with the manufacturers in other parts of the world and has also removed the export obligations on these manufacturers against imports being made by them. An attempt has been made by the Commerce Minister to modify the Electronic Hardware Technology Park (EHTP) scheme to enable the hardware sector face the zero duty regimes from 2005, as per the Information Technology Agreement-1 (ITA_!)

  • Measures announced for boosting agricultural exports

    Continuing on the lines of union budget 2002-03, which acknowledged the importance of agriculture to the Indian economy and declared several measures to boost the income of the sector? Around 20 Agri Export Zones (AEZ) have been notified by the government to promote export of agro and agro based products.

  • Special Focus on cottage sector and handicrafts

    It is to be noted that 50% of India's export come from the small sector. With the view to strengthen this segment, the government has embarked on a programme this year called "Special Focus on Cottage Sector and Handicrafts". Under this programme, a sum of Rs 50mn has been earmarked for promoting cottage sector exports under the Khadi & Village Industries Commission (KVIC).

  • Measures to facilitates exports from industrial cluster towns

    In India, a number of towns have emerged as dynamic industrial locations and are handsomely contributing to the countries exports. UNIDO (United Nations Development Organization) has identified 354 such clusters in India with high potential, of which 34 have a minimum annual production of Rs 10bn and some exceed even Rs 100 bn. Some such towns are Panipat for woolen blankets, Tirupur for hosiery and Ludhiana for woolen knitwear.

  • OBUs permitted to be setup in SEZs

    In order to provide easy access of funds to the Special Economic Zones (SEZs), the Exim policy has allowed setting up of Overseas Banking Units (OBUs) in these areas. These OBUs would be attempt from CRR & SLR and would give funds to SEZ units /SEZ developers at international rates. However, only Indian banks will be allowed to operate in SEZs as overseas units.

The other entitlements proposed for the units in SEZs are as follows:
1) Income Tax concessions to the units in SEZs
2) Exemption from central Sales Tax for supplies from Domestic Tariff Area(DTA) to SEZs
3) Drawback/ DEPB scheme available to DTA suppliers
4) Treating transacting from DTA to SEZ as exports under the income tax act and customs act
5) Exemption to SEZ units from external commercial borrowing restrictions, freedom to make overseas investment and carry out commodity hedging.

Though these measures will certainly help SEZs attract investments, the lack of infrastructure across the country will impede India's SEZs to reach the standard of their Chinese counterparts.

  • Focus Africa to be launched

    On lines of focus LAC (Latin American Countries), the commerce Minister has launched focus Africa. Under it, exporters will be given export house status on trade worth Rs 50mn.

  • Other sector specific measures

    The Exim Policy has declared specific measures for important sectors like gems & jewelery, textiles and leader and which contributes around 18%, respectively to the country's total exports.

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