Sunday, 22 December 2019

Unit 11: International Trade Policies

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Unit 11: International Trade Policies

Till 1956, there was no clear EXIM policy in free India.

Import substitution and protection of domestic industry became the main thrust of EXIM policy for most of the period during 1950-51 to 1990-91, though various incentives were provided for exports.

In 1985, the government announced an EXIM policy for three years though there was not any major deviation from the earlier policy.

But it did represent some simplification as the number of items in the category of Open General License for capital goods import increased from nil in 1975 to over 1,100 items in the 1988.

After 1985, several incentives were introduced.

The new policy (1991) substantially eliminates licensing, quantitative restrictions, and other regulatory and discretionary controls, and introduced many trade boosting policies like Free Import and Export, Rationalization of Tariffs Structure, Decanalisation, Exchange Rate Reforms, etc.

Foreign investors are allowed to invest in Indian companies through GDR route without any lock-in period.

In December 2000, the government allowed automatic approval for FDI/NRI/OCB investment except a small negative list.

Accordingly, on April 5, 2000, RBI stated that all items excluding specific sectors would be eligible for foreign investment under automatic route up to even 100%.

Foreign Trade (Development and Regulation, 1992) Act is designed to authorize Central Government to formulate Export and Import policy and change the policy as per changing situations.

Indian government supports and promotes exports by giving many incentives like EPCG, pass book Duty draw-back system, advance license, setting up of free trade zones, etc.

The then Union Minister Kamalnath unveiled the new foreign trade policy (2004-07), which was earlier known as EXIM Policy.

All goods and services exported including those from Domestic Tariff Area have been exempted from service tax and all exporters with a minimum turnover of ` 5 crore have been exempted from furnishing bank guarantees which will reduce their transaction cost.

The new foreign trade policy is more ruraloriented as many schemes to boost the exports from rural economy were introduced.

Canalisation: Erstwhile import of certain commodities was allowed only through specific government agency.

This is called canalisation, where the import of these goods is canalised through government agency.

Decanalisation: Removal of canalisation system.

Diamond Bourse: A wholesale diamond exchange dealing mainly in polished diamonds.

Export Processing Zone: A designated area in a country in which production for export is encouraged, usually by special tax treatment and by permitting firms to import duty-free so long as the imports are used as inputs to production of export.

It means decreasing the dependability on imports i.e. is to produce goods Notes that we import.

It was a policy followed by India after independence.

Liberalized Exchange Rate Management System (LERMS): It is a system under which 40% of the foreign exchange receipts were to be exchanged through RBI at the official exchange rate and rest is allowed to be converted at market exchange rate.

OGL (Open General License): Items included in the list of OGL can be imported easily without much government restriction.

Special economic zones: Designated areas in countries that possess special economic regulations that are different from other areas in the same   

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