International Business and

Financial Management (FST4002)

Assignment no: 1

Anand Krishnan A
16BCL1068

India’s foreign trade and export policies

Foreign Trade is the important factor in economic development in any nation.

Foreign trade in India comprises of all imports and exports to and from India.
The Ministry of Commerce and Industry at the level of Central Government has
responsibility to manage such operations. The domestic production reveals on
exports and imports of the country. The production consecutively depends on
endowment of factor availability. This leads to relative advantage of the
financial system. Currently, International trade is a crucial part of development
strategy and it can be an effective mechanism of financial growth, job
opportunities and poverty reduction in an economy. According to Traditional
Pattern of development, resources are transferred from the agricultural to the
manufacturing sector and then into services.

8 Salient Features of Foreign Trade of India

1. Negative or Unfavourable Trade

India had to import various items like heavy machinery, agricultural
implements, mineral oil and metals on a large scale after Independence for
economic growth.
But our exports could not keep pace with our imports which left us with
negative or unfavourable trade.

2. Diversity in Exports:
Previously, India used to export its traditional commodities only which
included tea, jute, cotton textile, leather, etc. But great diversity has been
observed in India’s export commodities during the last few years. India now
exports over 7,500 commodities. Since 1991, India has emerged as a major
exporter of computer software and that too to some of the advanced countries
like the USA and Japan.

3. Worldwide Trade:
India had trade links with Britain and a few selected countries only before
Independence. But now India has trade links with almost all the regions of the
world. India exports its goods to as many as 190 countries and imports from
140 countries.

4. Change in Imports:
Earlier we used to import food-grains and manufactured goods only. But now
oil is the largest single commodity imported by India. Both the imports as well
as exports of pearls and precious stones have increased considerably during
the last few years. Our other important commodities of import are iron and
steel, fertilizers, edible oils and paper.

5. Maritime Trade:
About 95 per cent of our foreign trade is done through sea routes. Trade
through land routes is possible with neighbouring countries only. But
unfortunately, all our neighbouring countries including China, Nepal, and
Myanmar are cut off from India by lofty mountain ranges which makes trade
by land routes rather difficult. We can have easy access through land routes
with Pakistan only but the trade suffered heavily due to political differences
between the two countries.

6. Trade through a few Selected Ports Only:

We have only 12 major ports along the coast of India which handle about 90
per cent overseas trade of India. Very small amount of foreign trade is handled
by the remaining medium and small ports.

7. Insignificant Place of India in the World Overseas Trade:

Although India has about 16 per cent of the world’s population, her share in
the world overseas trade is less than one per cent. This shows the insignificant
place of India in the world’s overseas trade. This is, however, partly due to very
large internal trade, vast dimensions of the country provide a solid base for
inter-state trade within the country. Europe is divided into a large number of
smaller countries and the international trade is quite high.

8. State Trading

Most of India’s overseas trade is done in public sector by state agencies and
very little trade is done by individuals.
Trade statistics
The top 10 commodity exports in 2014 are listed:

The top 10 commodity imports in 2014 are listed:

Trading partners
India's largest trading partners in descending order of value of total trade are
the United Arab Emirates, China, United States, Saudi
Arabia, Switzerland, Singapore, Germany, Hong
Kong, Indonesia, Iraq and Japan.
 India’s Foreign Trade: June 2019

India’s overall exports (Merchandise and Services combined) in April-June2019-

20* are estimated to be USD 137.26billion, exhibiting a positive growth of 3.14per
cent over the same period last year. Overall imports in April-June 2019-20* are
estimated to be USD 164.50billion, exhibiting a positive growth of 3.57per cent
over the same period last year.
FOREIGN TRADE POLICY OF INDIA

The Foreign Trade

Policy of India is guided by the Export Import in known as in short EXIM
Policy of the Indian Government and is regulated by the Foreign Trade
Development and Regulation Act, 1992.
DGFT (Directorate General of Foreign Trade) is the main governing body in
matters related to Exim Policy. The main objective of the Foreign Trade
(Development and Regulation) Act is to provide the development
and regulation of foreign trade by facilitating imports into, and augmenting
exports from India. Foreign Trade Act has replaced the earlier law known as
the imports and Exports Act 1947.

EXIM Policy

Indian EXIM Policy contains various policy related 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. Trade
Policy is prepared and announced by the Central Government (Ministry of
Commerce). India's Export Import Policy also know as Foreign Trade Policy, in
general, aims at developing export potential, improving export performance,
encouraging foreign trade and creating favorable balance of payments
position.

Objectives Of The Exim Policy

Government control import of non-essential items through the

EXIM Policy. At the same time, all-out efforts are made to promote exports.
Thus, there are two aspects of Exim Policy; the import policy which is
concerned with regulation and management of imports and the export policy
which is concerned with exports not only promotion but also regulation. The
main objective of the Government's EXIM Policy is to promote exports to the
 maximum extent. Exports should be promoted in such a manner that the
economy of the country is not affected by unregulated exportable
items specially needed within the country. Export control is, therefore,
exercised in respect of a limited number of items whose supply position
demands that their exports should be regulated in the larger interests of the
country. In other words, the main objective of the Exim Policy is:

 To accelerate the economy from low level of economic activities to high level
of economic activities by making it a globally oriented vibrant economy and to
derive maximum benefits from expanding global market opportunities.
 To stimulate sustained economic growth by providing access to essential raw
materials, intermediates, components,' consumables and capital goods
required for augmenting production.
 To enhance the techno local strength and efficiency of Indian agriculture,
industry and services, thereby, improving their competitiveness.
 To generate new employment.
 Opportunities and encourage the attainment of internationally accepted
standards of quality.
 To provide quality consumer products at reasonable prices.

Recent Modifications in Foreign Trade policy

 In January 2019, the Government of India approved recapitalisation of the

Export Import Bank of India.
 As of December 2018, Government of India is planning to set up trade
promotion bodies in 15 countries to boost exports from Small and Medium
Enterprises in India.
 In September 2018, Government of India increased the duty incentives for
28 milk items under the Merchandise Export from India Scheme .
 All export and import-related activities are governed by the Foreign Trade
Policy , which is aimed at enhancing the country's exports and use trade
expansion as an effective instrument of economic growth and employment
generation.
 The Department of Commerce has announced increased support for export
of various products and included some additional items under the
Merchandise Exports from India Scheme in order to help exporters to
overcome the challenges faced by them.
 The Central Board of Excise and Customs has developed an 'integrated
declaration' process leading to the creation of a single window which will
provide the importers and exporters a single point interface for customs
clearance of import and export goods.
 RBI has simplified the rules for credit to exporters, through which they can
now get long-term advance from banks for up to 10 years to service their
contracts. This measure will help exporters get into long-term contracts
while aiding the overall export performance.

Road Ahead

India is presently known as one of the most important players in the global
economic landscape. Its trade policies, government reforms and inherent
economic strengths have attributed to its standing as one of the most sought
after destinations for foreign investments in the world. Also, technological and
infrastructural developments being carried out throughout the country augur
well for the trade and economic sector in the years to come.
With the Government of India striking is important deals with the governments
of Japan, Australia and China, the external sector is increasing its contribution
to the economic development of the country and growth in the global markets.
Moreover, by implementing the FTP 2015-20, by 2020, India's share in world
trade is expected to double from the present level of three per cent.