FOREIGN TRADE POLICY

OVERVIEW
❖ Composition & Direction of Foreign Trade

❖ Foreign Trade Policy

❖ India’s Foreign Trade Policy

❖ Foreign Trade Policy 2015 – 2020

 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.
 Export Import

Fuels Chemicals Manufactured goods

food grains Textiles
Petroleum products Iron and Gems and Jewellery
steel Fertilizers Handicraft
Edible Oil Light machinery etc.
 IMPORTS
✓ It refers to goods that we buy from other countries.
✓ At times of independence India was an agrarian economy.
✓ Partition of our country has brought food shortage because wheat growing regions
vested with Pakistan.
✓ Hence India need to import in large quantities, food , cotton jute. etc
✓ With development of economy over these years, there occurred changes in
composition of imports.
✓ Now, Capital goods like machinery, chemicals, fertilizers, metals,
minerals, petroleum products etc. are imported.
 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.
 DIRECTION OF 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.
 DIRECTION OF INDIA’S
FOREIGN TRADE
✓ 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.
Group of countries to
which india exports

EASTERN
OECD OPEC EUROPE ASEAN
 Organization for
Organization of Developing
Economic Co-operation
Petroleum Exporting Eastern
& Development Europe Nations
(OECD). Countries (OPEC)

USA Kuwait Romania China

Hong
Canada Iran
Russia Kong
South
Japan Korea
Iraq
Australia Singapore

Saudi
European Arabia Malaysia
Union (EU)
 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

The Government has set a long-term vision of making India a major player in
world trade.
Foreign Trade Policy (FTP) provides the basic policy framework of
translating this vision into specific strategies, goals and targets.
 Strategic options
for trade policy

► Free Trade Policy

ӝ It does not impose any restriction on the exchange of goods and services between
different countries.
ӝ It involves complete absence of tariffs, quotas, exchange restrictions, taxes and
subsidies on production, factor use and consumption.
► Protective Trade Policy
ӝ It is 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.
 Strategic options
for trade policy

► Inward looking trade policy(import substitution)

ӝ It 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.
ӝ An inward looking trade policy encourages the development of indigenous
technologies appropriate to a country’s resource endowment.
► Outward looking trade policy (export-led growth)
ӝ It 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.
 INDIA’S FOREIgN
trade policy
► The foreign Trade of India is guided by the Export-Import (EXIM) policy of the Government of
India and is regulated by the Foreign Trade (Development and Regulation) Act,1992.

► The Foreign Trade Policy contains various decisions taken by the government in the sphere of
Foreign Trade, i.e., with respect to imports and exports from the country and more especially
export promotion measures, policies and procedures related thereto.

► It is the set of guidelines and instructions established by DGFT (Directorate General

of Foreign Trade) in matters related to the import and export of goods in India.
 INDIA’S FOREIgN
trade policy

► The present foreign trade policy is for the period of 5 years i.e. from 2015 to 2020.
► The Union Commerce Ministry, Government of India announces the integrated Foreign Trade
Policy FTP in every five year. This policy is updated every year on the 31st of March with
some modifications and new schemes. New schemes come into effect on the first day of
financial year i.e. April 1, every year.

► The Foreign trade Policy which was announced on April 1,2015 is an integrated policy for the
period 2015-2020.
 Legal framework for
INDIA’S FOREIgN TRADE

• Foreign Trade (Development and • Customs and Central Excise Duties

Regulation) Act, 1992, Drawback Rules, 1995,

• Foreign Trade (Regulation) Rules 1993 • Foreign Exchange Management Act, 1999
• Foreign Trade (Exemption) Order 1993 • Customs and Central Excise Regulations
• Garments Export Entitlement Policy: • Export and Import Policy - now called
2000-2004, Foreign Trade Policy

• Export (Quality Control and Inspection)

Act, 1963,
 INDIA’S pRE – 1991
foreign trade policy

In eighties, Export
promotion
schemes were
In 1960’s and implemented-
70’s, imports were Export Promotion
partly liberalised Council, The trade
with several Fair Authority of
Second Year conditions. India, cash
Plan- Highly compensatory
Restrictive schemes etc.
Inward Looking Policy.
Development
Strategy- Import
Substitution
Strategy
 1991 crisis
India was paying
National Income
30,000 crores interest
growing at 0.8 %.
charges.

Inflation reached the Fiscal deficit more

height of 16.8 %. than 7.5 %.

BoP crisis to the

Deficit Financing was
extent of 10,000
3%
crores.
 ObjECTIvES OF INDIA’S
foreign trade policy
2015-20

ӝ FTP 2015-20 provides a framework for increasing exports of goods and services as well as
generation of employment and increasing value addition in the country, in line with the ‘Make
in India’programme.

ӝ The Policy aims to enable India to respond to the challenges of the external environment, keeping
in step with a rapidly evolving international trading architecture and make trade a major
contributor to the country’s economic growth and development.

ӝ Simplification of the application procedure for availing various benefits.

 ObjECTIvES OF INDIA’S
foreign trade policy
2015-20

ӝ To arrest and reverse declining trend of exports is the main aim of the policy. This aim
will be reviewed after two and half years.

ӝ To set in motion the strategies and policy measures which catalyze the growth of
exports.

ӝ To encourage exports through a mix of measures including fiscal incentives,

institutional changes, procedural rationalization and efforts for enhance market
access across the world and diversification of export markets.
 HIgHlIgHTS OF INDIA’S
foreign trade policy
2015-20
ӝ Increase exports to $900 billion by 2019-20, from $466 billion in 2013-14.

ӝ Raise India's share in world exports from 2% to 3.5%.

ӝ Merchandise Export from India Scheme (MEIS) and Service Exports from India Scheme
(SEIS) launched.

ӝ FTP to be aligned to Make in India, Digital India and Skills India initiatives.

ӝ Higher level of support for export of defence, farm Produce and eco-
friendly products.
 HIgHlIgHTS OF INDIA’S
foreign trade policy
2015-20

Ӝ Online procedure to upload digitally signed document by Chartered

Accountant/Company Secretary/Cost Accountant to be developed.

Ӝ 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).

ӝ Unlike annual reviews, FTP will be reviewed after two-and-Half years.

Policy measures to balance
unfavorable balace of
payment

Import Export Tapping

Reduction And Promotion Invisibles
Substitution

Increasing Encouragement Bilateral

Efficiency of Tourist Traffic Agreements

Exchange Effective
Inflow of Implementation
Foreign Capital of FEMA 2000
 Conclusion !!
A thorough understanding of the country’s trade policy and incentives are crucial
for the development of a successful international business strategy.

After the implementation foreign trade policy, the import and export among
foreign countries have increased and have become more secured.

Setting up of EPZ and SEZ have also increased foreign investors .

Trading Housinghave given a platformto both manufacturers and consumers to

freely and easily trade between different countries.
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