This slides gives us a brief perspectives about how the Trade Policy can Improves SMEs competitiveness in India.

1. India Foreign Trade Policy,
2009-14
Mohammad Thoriq Bahri
Indonesia
1

2.  India’s Foreign Trade
 Current Economic Crisis
 Foreign Trade Policy – Components and
Schemes
 Foreign Trade Policy – New Initiatives
 Role of CAs in trade facilitation as in FTP
2

3. In the last five years, robust growth in merchandise
exports
From US$ 63 billion in 2003-04 to US $ 185 billion in
2008-09.
Share of global trade (WTO estimates):
2003 2008
Merchandise trade 0.83% 1.45%
Commercial Services
exports
1.4% 2.8%
Goods & Services Trade 0.92% 1.64%
3

4. Year Export
Target
Actual
Export
%
Growth
Imports %
Growth
2004-05 75 83.53 30.8 111.52 42.7
2005-06 100 103.09 23.4 149.17 33.8
2006-07 125 126.26 22.5 185.60 24.4
2007-08 160 162.90 29.0 235.9 27.0
2008-09 175
(Revised)
185.29 13.6 287.76 14.3
2009-10
(April-Oct’09)*
91.05 146.77
4

5. Period 2007-08* (US $
Billion)
2008-09**(US $ Billion) Increase(+) / Decrease (-)
April- Sept. 73.558 108.907 + 48.1
October 14.675 14.131 -3.7
November 12.909 11.163 -13.5
December 14.625 13..368 -8.6
January 2009 14.889 12.869 -13.6
February 15.221 11..941 -21.5
March 17.254 12..916 -25.1
April’ 08 to March’ 09 163.13 185.295 +13.6
Month 2008-09@ 2009-10 Increase(+) / Decrease (-)
April 2009 18.460 11.909 -35.5
May 18.687 11.368 -39.2
June 19.181 13.059 -31.9
July 19.030 13.623 -28.4
August 17.759 14.289 -19.5
September 15.789 13.608 -13.8
5

6. 6
Impact on Indian exports:
•Suffered a decline in the last 11 months since October 2008.
•April - September 2009 exports show a decline of 28.5% (in $ terms)
and 18.6% (in Rupee terms) vis-à-vis last year.
Employment intensive sectors have been severely affected.
Tea (-37.2%), Spices (-27.8%), Cashew (-27.5%), Oil-meals (- 42.9%)
Iron-ore (-29.5%), Leather and Leather Manf. (-26.6%),
Gems & Jewellery (-28%), Basic Chemicals (-26.9%),
Engineering Goods (-32.1%), Electronic Goods (-32.2%).
Cotton Yarn /Fabrics /Made-ups (-31.5%), Jute Mfg. incl. Floor Covering
(-39.8%), Carpets (-29.8%), Handicrafts (-29.8%),
Petroleum Products (-43.1%), Plastics & Linoleum (-23.2%).

7. Major Hurdles faced by Indian Exporters:
 Unprecedented Rupee Appreciation by about 12% in the year 2007-
08;
 Global Economic Slowdown and Recession in Developed
Economies during 2008-09 and its impact.
 High Interest Rates
 Non-availability of trade credit
 Withdrawal of GSP Benefits by US on certain products such as
Gems and Jewellery items, certain leather products etc.
 Ban on exports of certain food products since 2007.
 High Incentives provided by some of the countries like China,
Bangladesh etc.
7

8. Apprehension of severe downturn in
November 2008
 Series of stimulus measures announced
o Fiscal incentives
o Monetary liberalization
8

9.  Measures taken by the Government:
 Interest subvention of 2% extended till 31.3.2010, to labour
intensive sectors for exports:- Textiles (including Handlooms),
Handicrafts, Carpet, Leather, Gems & Jewellery, Marine
Products and SMEs;
 Continuation of Duty Entitlement Passbook (DEPB) Scheme
upto 31st December, 2010;
 Restoration of DEPB rates for all items where they were
reduced in November, 2008 and increase in Duty Drawback
rates on certain items effective from 1st September, 2008;
 DEPB and Freely transferable Incentive Schemes allowed
without the initial requirement of BRC;
9

10.  CENVAT reduced from 14 per cent to 8 per cent
 Service tax reduced from 12 percent to 10 per cent
 Additional Plan expenditure for critical rural & infrastructure
schemes
 Monetary policy measures
 Repo rate reduced from 9 percent to 8 per cent
 Reverse repo rate reduced from 6 per cent to 7 percent
 CRR reduced from 9 percent to 4.75 percent
 Large program for construction of affordable housing announced
 Assistance under the JNNURM for the purchase of buses for their
urban transport systems.
 Accelerated depreciation of 50 percent for commercial vehicles
 Removal of ban on Government departments for replacement of
vehicles
10

11.  Back-up guarantee of Rs.350 crores made available to ECGC
to provide guarantees for exports to difficult markets / products;
 Additional funds of Rs 350 crore provided to cover handicraft
items etc. in Vishesh Krishi and Gram Udyog Yojana (VKGUY);
 Market Linked Focus Product Scheme extended for bicycle
parts, Motor Cars and Motor Cycles, Apparels and Clothing
accessories, Auto Components etc.
 Additional Rs 1100 crore provided to ensure full refund of
claims of CST / Terminal Excise duty /Duty drawback.
 Additional funds of Rs 1400 crore provided for textile sector to
clear the backlog claims of TUF;
 Export duty on iron ore fines eliminated, and for lumps, reduced
to 5%;
 Some pending issues relating to Service Tax refund on exports
resolved.
11

12.  A Committee constituted under the Chairmanship of
Finance Secretary to fast track resolution of procedural
issues. Secretaries of Department of Revenue and
Commerce other Members of the Committee;
 Measures taken by RBI:
 Increase in Liquidity to the banks for improving credit flow
by reduction of CRR from 9% to 5%, SLR reduced from 25% to
24%; Repo rate from 7.5% to 4.75% and Reverse Repo rate from
6% to 3.25%.
 Refinance facility to the EXIM Bank for Rs. 5000 crores for
providing pre-shipment and post-shipment credit.
 Increase in FOREX Liquidity
 Easing of Credit Terms by Enhancing the period of pre-
shipment and post-shipment Rupee Export Credit by 90 days
each, Increasing the time period of export realization for non-
status holder exporters to 12 months etc.
12

13. Country 2008-09
($ bn) % share in Total
1 USA 19.7 12%
2 United Arab Emirates 17.8 11%
3 China 8.5 5%
4 Singapore 7.6 5%
5 Hong Kong 6.4 4%
6 United Kingdom 6.2 4%
7 Germany 5.9 4%
8 Netherlands 5.9 4%
9 Saudi Arabia 4.8 3%
10 Belgium 4.3 3%
13

14. Commodity 2008-09
($ bn)
% share in Total
1 Petroleum, Crude and products 93.1 32.36%
2 Machinery, Electrical and non-electrical 24.3 8.44%
3 Electronic goods 21.5 7.48%
4 Gold and silver 19.5 6.76%
5 Fertilizer, crude and manufactured 13.6 4.72%
6 Pearls, precious and semi-precious 12.8 4.44%
7 Organic and inorganic chemicals 12.8 4.43%
8 Coal, coke and briquettes 10.5 3.64%
9 Iron & Steel 9.5 3.30%
10 Metaliferrous ores and metal scrap 8.3 2.89%
14

15. Short Term Objectives:
 To arrest and reverse the declining trend of exports; and
 To provide additional support to those sectors which have been hit badly
by recession in the Developed World.
Medium term Policy Objectives :
 To achieve an Annual Export growth of 15% with an Annual Export Target
of US$ 200 billion by March 2011.
 To achieve an Annual Export growth of around 25% by 2014.
 To double India’s exports of goods and services by 2014.
Long Term Objective :
 To double India’s share in Global Trade by 2020.
15

16. Strategies
 Stable Policy environment
 Fiscal incentives
 Diversification of export markets
 Procedural rationalization
 Institutional changes
16

17.  Import / Exports controls
 Schemes for Duty Exemption/Remission
 Promotional Measures/ Incentive Schemes
 Technological Upgradation
 Deemed Exports
 Export Oriented Units (EOUS), Electronics Hardware Technology
Parks (EHTPS), Software Technology Parks (STPS) and Bio-
Technology Parks (BTPS)
 Special Economic Zones
17

18. Import:
 Around 5% Tariff Lines are under Import Controls.
 11600 Tariff Lines are free for import.
 Almost total control on imports in 1991,
 Restrictions removed over the next 10 years, removing
almost all the Quantitative Restrictions.
 Presently:
 Prohibited items - 53 Lines
 Restricted items - 485 Lines
 State Trading Items - 33 Lines.
18

19. Exports
 Controls primarily on account of security, public health, public morals,
exhaustible resources and environment grounds.
 Prohibited items - 59
 Restricted items - 155
 State Trading Items - 12.
 Restrictions fall under two Categories
 Dual Use Items (SCOMET items) – Special provision for these items
under Weapons of Mass Destruction Act, 2005.
General Trading Items - Export Facilitation Committee looks into
applications for license for these items.
19

20. 20
CENTRAL DUTIES:
CUSTOMS DUTY—Basic, Addl customs (CVD
including 4% Addl. duty, Education Cess, Anti-
dumping, Safeguard duties etc.
EXCISE DUTY--- Basic, Addl Excise duty etc.
CENTRAL SALES TAX (CST)
SERVICE TAX
EXPORT CESS
INCOME TAX [Exemption for SEZs ;EOUs (upto 31.3.2011)
FBT (Withdrawn)
OTHERS:
ELECTRICITY DUTY, SALES TAX, OCTROI, etc.
GST-- Implications

21. Principle - Goods and Services are to be exported and not the Taxes
and
Levies.
Purpose: Procure inputs and capital goods without the component of
Central Indirect Taxes & Levies
Pre Export Schemes :
1. For Inputs: Advance Authorisation Scheme
Duty Free Import Authorisation (DFIA) Scheme
Schemes for Gems & Jewellery Sector
2. For Capital Goods: Export Promotion Capital Goods (EPCG) Scheme
Post Export Schemes : Duty Entitlement Pass Book (DEPB)
Duty Drawback Scheme
Terminal Excise Duty (TED) Refund
21

22. Advance Authorization Scheme
 For making available duty free Inputs required to manufacture the export
product.
 Inputs allowed as per Standard Input Output Norms and with Actual User
condition
 Facility available for Physical exports (including supplies to SEZ units & SEZ
Developers), deemed exports and Intermediate supplies.
 Minimum 15% V.A.
 Time period for import & export
 Penalty clauses
 2008-09 – 19,146 authorizations issued for CIF value of Rs. 1,04,333 crores
22

23. Duty Free Import Authorisation (DFIA)
Scheme made operational from 1.5.06.
 This was introduced to facilitate transfer of the
authorisation or the inputs imported, once export is
completed
 Minimum 20% value addition stipulated.
 Based on SION
 22 sensitive items
 Validity – similar to advance authorisation
 Sectors availing
 2008-09 – 3,815 authorizations issued for CIF value of
Rs. 8,779 crores
23

24. Duty Entitlement Passbook Scheme (DEPB)
 Post Exports scheme to neutralize the Basic customs duty on
inputs.
 Post export Freely transferable Duty Credit Scrips issued at notified
percentage of FOB value of Exports.
 Duty Credit Scrips used for payment of customs duty on imports
 DEPB rates notified for 2137 items
 Most popular scheme
 DEPB on pre realisation and post realisation
 Validity
 Usability
 Sectors availing
 2008-09 – 1,12,764 DEPB scrips issued for duty credit worth
Rs.7,713 crores.
24

25. Gems & Jewellery Scheme
 Duty Free Procurement of precious metal
(Gold / Silver / Platinum) from the nominated
agencies either in advance or as replenishment.
 Duty Drawback scheme notified
 Duty Free Import of Consumables for export
production upto a specified percentage of FOB
value of previous years’ export.
25

26.  Vishesh Krishi and Gram Udyog Yojana
(VKGUY)
 Focus Market Scheme (FMS)
 Focus Product Scheme (FPS)
 Market Linked Focus Product Scheme
(MLFPS)
 Served From India Scheme (SFIS)
26

27. Vishesh Krishi & Gram Udyog Yojana
(VKGUY)
 To promote exports of :
(i) Agricultural Produce and their value added products;
(ii) Minor Forest Produce and their value added variants;
(iii) Gram Udyog Products;
(iv) Forest Based Products; and
(v) Other Products, as notified from time to time.
 VKGUY benefits are granted with an aim to compensate high transport
costs, and to offset other disadvantages.
 Duty Credit Scrip benefits, at 5% of FOB value of exports; Lower rate of
3% when specific DEPB/ Drawback more than 1% /Advance
Authorisation benefit availed; Additional 2% provided for a few items.
 2008-09 - Duty credit scrips issued under VKGUY Rs.2676 crores
27

28.  Objective is to offset high freight cost and other externalities to
select international markets with a view to diversify the markets and
to enhance India’s export competitiveness in these countries.
 Currently 109 markets have been notified;
 Exports of all products (except some in-eligible items / categories)
to notified countries entitled for Duty Credit Scrips equivalent to 3 %
of FOB value of exports.
 Pre realisation & post realisation
 Validity
 Utility
 2008-09 - Duty credit scrips issued under FMSRs.347 crores
28

29.  Objective is to incentivise export of such products which have high
export intensity / employment potential, so as to offset infrastructure
inefficiencies and other associated costs involved in marketing of
these products.
 Exports of notified products to all countries entitled for Duty Credit
scrip equivalent to 2 % of FOB value of exports.
 Currently over 1000 Products (at 8 digit level) covered under FPS.
 Validity
 Utility
 2008-09 - Duty credit scrips issued under FPS Rs 215 crores.
29

30.  To promote exports of products of high export intensity but
which have a low penetration in countries;
 Export of Products/Sectors of high export intensity /
employment potential (which are not covered under present
FPS List) would be incentivized at 2 % of FOB value of
exports.
 Validity
 Utility
 Currently over 1550 products (at 8 digit level) covered
under MLFPS.
30

31.  To accelerate growth in export of Services to create a
powerful and unique “Served from India” Brand;
 All service providers (except a few ineligible sectors /
services) entitled to duty credit scrips equivalent to 10 %
of free foreign exchange earned during the year;
 Validity
 Utility
 Actual User
 2008-09 – 785 SFIS scrips issued for duty credit worth
Rs.736 crores.
31

32.  Export Promotion Capital goods
Scheme (EPCG)
 Status Holders Incentive Scrip (SHIS)
32

33.  Import of capital goods for modernization and technological upgradation at a
concessional import duty of 3% and at Zero duty for certain export sectors (against
normal basic customs duty of 5% to 7.5%)
 Zero Duty Scheme valid for specified sectors and till 31.3.2011.
 Export obligation:
Block-wise E.O. monitoring;
Specific E.O.:- Subject to export obligation of 8 times duty saved over 8 years (3%
duty scheme) and 6 times duty saved over 6 years (zero duty scheme); Exceptions for
Small scale, tiny industries, agri sector etc.
Average E.O.:- Exemption to certain sectors.
E.O. extension: EPCG committee
Physical, deemed and Third party exports
 Penalty clauses
 2008-09 - 19,931 authorisations issued for duty saved amount Rs.17,038 crores
33

34.  With an objective to promote investment for
upgradation of technology of specified sectors
Status Holders shall be entitled to incentive scrip
@1% of FOB value of exports in those sectors
made during 2009-10 and during 2010-11, in the
form of duty credit scrip.
 Mutually exclusive with EPCG
34

35.  EOUs are permitted for manufacture of goods including
repair, remaking, reconditioning, re-engineering and
rendering of services. Trading activity is not permitted.
 Duty free imports of all inputs.
 Exemption from Income Tax under Section 10 B
(presently extended till 31.3.2011.)
 Refund of Central Sales Tax (CST) paid on supply of
goods from Domestic Tariff Area (DTA) to EOU.
 50% of FOB value of exports allowed to be sold in the
DTA on payment of concessional duty (50%).
 EOUs have to be a positive net foreign exchange earner.
NFE is to be achieved cumulatively in a block of 5 years.
35

36.  Supply of goods manufactured by Domestic Units to
certain authorisation holders / recognised projects which
are otherwise entitled for Duty Free Imports.
 Purpose is:
• Import Substitution.
 Benefits available in the form of:
• Advance Authorisation / DFIA;
• Deemed Export Duty Drawback and TED Refund.
36

37. 37

38. 38
PROHIBITED SUBSIDIES:
(Exceptions)

39. 39
ASCM and DISCIPLINE ON EXPORT SUBSIDIES
-Export subsidies generally prohibited

40.  One of the first Government Departments to
enable online processing of applications.
 DGFT website updated on daily basis.
 All DGFT Offices computerised and networked
to the DGFT – NIC Server.
 Applications for Export / Import are made online
with digital signature and Electronic Fund
Transfer Facility.
40

41. 41
(return to Next slide in the Main Presentation)

42. Higher Support for Market and Product
Diversification
 26 new markets added under FMS
(16 in Latin America, 10 in Asia-Oceania)
 Incentive under FMS raised from
2.5% to 3%.
 Incentive under FPS raised from
1.25% to 2%.
42

43. Higher Support for Market and Product Diversification
(contd.)
 New products under FPS - Engineering products Plastic (value added
products), Jute and Sisal products, Technical Textiles, Green Technology
products Project goods, vegetable textiles and certain Electronic items.
 New products/markets under MLFPS - Pharmaceuticals, Synthetic textile
fabrics, value added rubber products, value added plastic goods, textile
madeups, knitted and crocheted fabrics, glass products, certain iron and steel
products and certain articles of aluminium among others. Benefits to these
products will be provided, if exports are made to 13 identified markets (Algeria,
Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico, Ukraine,
Vietnam, Cambodia, Australia and New Zealand).
 The above markets also included for existing products i.e. Auto Components,
Motor cars, Bicycles & Parts, Apparels.
43

44. Stability/ continuity of the Foreign Trade
Policy
 DEPB Scheme extended beyond 31-12-2009 till 31.12.2010.
 Interest subvention of 2% for pre-shipment credit for 7 specified
sectors has been extended till 31.3.2010 in the Budget 2009-10.
 Income Tax exemption to 100% EOUs and to STPI units under
Section 10B and 10A of Income Tax Act, has been extended for the
financial year 2010-11 in the Budget 2009-10.
 The adjustment assistance scheme initiated in December, 2008 to
provide enhanced ECGC cover at 95%, to the adversely affected
sectors, is continued till March, 2010.
44

45. Gems & Jewellery Sector
 To neutralize duty incidence on gold Jewellery exports,
Duty Drawback to be allowed.
 A new facility for import on consignment basis of cut &
polished diamonds for the purpose of grading/ certification
purposes has been introduced [Branch of Gemological
Institute of America (GIA) at Mumbai has been notified for
the purpose].
 In an endeavour to make India a diamond international
trading hub, plans are to establish “Diamond Bourse (s)”.
45

46. Pharmaceutical Sector
 Pharma sector extensively covered under MLFPS
for countries in Africa and Latin America; some
countries in Oceania and Far East.
 Export Obligation Period for advance
authorizations issued with 6-APA as input
increased from the existing 6 months to 36
months.
46

47. Agriculture Sector
 To reduce transaction and handling costs, a single
window system to facilitate export of perishable
agricultural produce has been introduced. The
system will involve creation of multi-functional
nodal agencies to be accredited by APEDA.
47

48. Thrust to Value Added Manufacturing
 Coverage of Project Exports and a large number
of manufactured goods under FPS and MLFPS.
 To encourage Value Added Manufactured
export, a minimum 15% value addition on
imported inputs under Advance Authorization
Scheme has now been prescribed.
48

49. Flexibility provided to exporters
 Payment of customs duty for Export Obligation (EO) shortfall allowed
through debit of Duty Credit scrips. Earlier the payment was allowed in cash
only.
 Import of restricted items, as replenishment, shall now be allowed against
transferred DFIAs.
 Time limit of 60 days for re-import of exported gems and jewellery items, for
participation in exhibitions extended to 90 days in case of USA.
 Transit loss claims received from private approved insurance companies in
India allowed for the purpose of EO fulfillment, as against only public sector
general insurance companies earlier.
49

50. Waiver of Incentives Recovery, On RBI
Specific Write off
In cases, where RBI specifically writes off the
export proceeds realization, the incentives
under the FTP shall now not be recovered from
the exporters subject to certification by the
Indian missions abroad and the RBI.
50

51. Simplification of Procedures
 Exemption from payment of excise duty up to two stages rather than refund,
for supply against advance authorisation. Earlier, exemption was allowed upto
one stage only.
 Greater flexibility for conversion of Shipping Bills from one Export Promotion
scheme to other scheme. Customs shall now permit this conversion within
three months, instead of one month stipulated earlier.
 Regional Authorities authorised to issue licences for import of sports weapons
by ‘renowned shooters’, on the basis of NOC from the Ministry of Sports &
Youth Affairs.
 The procedure for issue of Free Sale Certificate has been simplified and the
validity of the Certificate has been increased from 1 year to 2 years.
 Automobile industry, having their own R&D establishment, would be allowed
free import of reference fuels (petrol and diesel), upto a maximum of 5 KL per
annum.
51

52.  IEC Number
 Authorisations under Duty Neutralization Schemes and Export
Promotion Schemes (Incentive Schemes)
 Import licences for Restricted Items
 Export Licences including SCOMET licences
 Status Certificates
 Preferential (GSP) & Non-preferential certificates of origin
 Tariff rate quota allocation
 Authorisations for Imports at concessional duty for R& D
purpose for Pharmaceuticals and Bio-technology Sectors
 Authorisation for Duty Free import of consumables by Gems
& Jewellery Sector
 Terminal Excise Duty (TED) refund and Duty Drawback on
deemed exports
52

53. Status Category Export Performance
FOB/FOR Value
(Rupees in Crores)
Export House (EH) 20
Star Export House (SEH) 100
Trading House (TH) 500
Star Trading House (STH) 2500
Premier Trading House (PTH) 7500
About 4000 Status Holders, including about a dozen PTH.
(return to Next slide in the Main Presentation)
53

54. 54
Major contributions from CAs:

55. 55
 Relatively lower share of exports to GDP
 Strong demand stimulus
◦ Farm Loan waiver
◦ Higher food procurement prices
◦ Sixth Pay Commission
◦ Increased Infrastructure spending
55
Country Share of exports to GDP
(Percent)
OECD 58
CHINA 35
INDIA 22

56.  GDP growth figures for India for 2008 is 5.4%; and it has
been projected at a higher level of 6.5% for the Year 2009,
with due credit to Stimulus Measures announced by the
Government of India and the RBI.
 IIP figures for May, 2009 onwards show that certain industrial
sectors like steel, commercial vehicles, cement, two
wheelers, intermediate goods etc have started looking up.
 Rate of decline in export growth is somewhat reducing, which
indicates that while the impact of global recession is still
continuing on our exports, the stimulus packages have
started showing their impact in arresting the steep decline in
exports.
56

57. 57