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AMITY SCHOOL OF BUSINESSBBA, II SemBusiness EnvironmentModule-5Foreign Trade Policy 2009-14- India’s merchandise exports in 2008-09 US $ 185 billion.- India’s Share in global trade (WTO estimates):20032008Merchandise trade0.83%1.45%Commercial Services exports1.4%2.8%Goods & Services Trade0.92%1.64%- India’s Foreign Trade (Exports & Imports), US$ billion:YearExports%GrowthImports% Growth2004-0583.5330.8111.5242.72005-06103.0923.4149.1733.82006-07126.2622.5185.6024.42007-08162.9029.0235.927.02008-09185.2913.6287.7614.3Foreign Trade policy (FTP) 2009-14Announced in Sept. 2009.Short term objective: to arrest and reverse the declining trend of exports and to provide additional support especially to those sectors which have been hit badly by recession in the developed world.Other Objectives of the FTP 2009-14To 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.The long term policy objective is to double India’s share in global trade by 2020.A special thrust needs to be provided to employment intensive sectors which have witnessed job losses in the wake of this recession, especially in the fields of textile, leather, handicrafts, etc.Three pillars of FTP 2009-14Improvement in infrastructure related to exports.Bringing down transaction costs.Full refund of all indirect taxes.Broad areas of Policy measuresFiscal incentivesProcedural rationalizationEnhanced market access across the worldDiversification of export marketsSpecific Policy measures of FTP 2009-14To continue with the DEPB Scheme upto December 2010income tax benefits under Section 10(A) for IT industry till 31st march 2011.income tax benefits under section 10(B) for 100% export oriented units till 31st March 2011.Enhanced insurance coverage and exposure for exports through ECGC Schemes has been ensured till 31st March 2010.India’s Look East PolicyComprehensive Economic Partnership Agreement with South Korea which will give enhanced market access to Indian exports.Trade in Goods Agreement with ASEAN which will come in force from January 01, 2010Mercosur Preferential Trade AgreementBrand India through six or more ‘Made in India’ shows to be organized across the world every year.promoting imports of capital goods for certain sectors under EPCG at zero percent duty. ‘Status holders’ recognition to exporters having good export performance.‘status holders’ will be permitted to import capital goods duty free.Encourage production and export of ‘green products’Additional ports/locations would be enabled on the Electronic Data Interchange over the next few years to reduce the transaction cost and institutional bottlenecks.Special Focus Initiative: Market Diversification 26 new countries have been included within the ambit of Focus Market Scheme.The incentives provided under Focus Market Scheme have been increased from 2.5% to 3%.There has been a significant increase in the outlay under ‘Market Linked Focus Product Scheme’ by inclusion of more markets (Africa, Latin America, Oceania and CIS) and products. Technological UpgradationEPCG (Export Processing Capital Goods) Scheme at zero duty has been introduced for certain engineering products, electronic products, basic chemicals and pharmaceuticals, apparel and textiles, plastics, handicrafts, chemicals and allied products and leather and leather products.Agriculture and Village IndustryVishesh Krishi and Gram Udyog Yojana.Capital goods imported under EPCG will be permitted to be installed anywhere in AEZ.Import of inputs such as pesticides are permitted under Advance Authorization for agro exports.Handlooms & HandicraftsSpecific funds are earmarked under MAI / MDA Scheme for promoting handloom exports.Duty free import entitlement of specified trimmings and embellishments upto 5 % of FOB value of exports during previous financial year.Gems & JewelleryDuty Free Import Entitlement (based on FOB value of exports during previous financial year) for consumables, & tools, for Jewellery made out of: (a) Precious metals (other than Gold & Platinum)– 2%(b) Gold and Platinum – 1%(c ) Rhodium finished Silver – 3%d) Cut and Polished Diamonds – 1%Leather and FootwearDuty free import entitlement of specified items upto 3% of FOB value of exports of leather garments during preceding financial year.Machinery and equipment for Effluent Treatment Plants shall be exempt from basic customs duty.Marine SectorImports for technological upgradation under EPCG in fisheries sector.Duty free import of specified specialised inputs / chemicals and flavouring oils allowed upto 1% of FOB value of preceding financial year’s export.Marine products are considered for VKGUY scheme.Electronics and IT Hardware Manufacturing IndustriesExpeditious clearance of approvals required from DGFT shall be ensured.Exporters /Associations would be entitled to utilize MAI & MDA Schemes for promoting Electronics and IT Hardware Manufacturing industry exports.Sports Goods and ToysDuty free import of specified specialised inputs allowed to the extent of 3 % of FOB value of preceding financial year’s export.Sports goods and toys shall be treated as a Priority sector under MDA / MAI Scheme. Specific funds would be earmarked under MAI /MDA Scheme for promoting exports from this sector.Applications relating to Sports Goods and Toys shall be considered for fast track clearance by DGFT.Green RevolutionBackgroundThe world's worst recorded food disaster happened in 1943 in British-ruled India. Known as the Bengal Famine, an estimated four million people died of hunger that year alone in eastern India (that included today's Bangladesh).With the partition of India in 1947 and a consequent influx of refugees, the demand for food increased. Also, this rise in demand could be attributed to population growth. At the same time, the domestic food production was not sufficient to cover this surge in food demand. Therefore, at that time there was a pressing need to make India self-sufficient in food. This led to the Green Revolution in? India. The term "Green Revolution" is applied to the period 1967 -1978. Between 1947 to 1967, efforts at achieving food self-sufficiency were not much successful and were largely concentrated on expanding farming areas.However, Green Revolution focused on increasing yield. Therefore, in India’s context, the introduction of high-yielding varieties (HYV) of seeds, increased use of fertilizers, mechanized farming, and irrigation after 1965 are collectively known as Green Revolution. This resulted in increase in production of foodgrains, especially wheat and rice, thereby making India self-sufficient in food grains. The program in India, was started with the help of the United States-based Rockefeller Foundation and was based on high-yielding varieties of wheat, rice, and other grains that had been developed in Mexico and in the Philippines. Dr. Norman Burling was the father of green revolution (witnessed in 1943) in Mexico. He was also the guiding force behind India’s green revolution (1960’s). Of the high-yielding seeds, wheat produced the best results. Production of coarse grains- maize, bajra, jowar, millets and ragi, as well as pulses did not benefit from the green revolution. Three basic elements of Green Revolution (1) Continued expansion of farming areas;(2) Double-cropping (having two crops per year);(3) Use of High Yielding Variety (HYV) seedsAdvantages of Green RevolutionThe Green Revolution resulted in a record foodgrain output of 131 million tons in 1978-79. This established India as one of the world's largest agricultural producers. India also started exporting food grains. Yield per unit of farmland improved by more than 30 per cent between 1947 to 1979, when the Green Revolution was considered to have delivered its goods. Crop area under HYV varieties grew from seven per cent to 22 per cent of the total cultivated area during the 10 years of the Green Revolution. Industrial growth in fertilizer, pesticides, fungicides and other chemicals created new jobs and contributed to the country's GDP. 5) India paid back all loans it had taken from the World Bank and its affiliates for the purpose of the Green Revolution. This improved India's creditworthiness in the eyes of the lending agencies. 6) Good crops as a result of green revolution lead to economic prosperity of the farmer. Some statistics on Indian AgricultureAgriculture - a backbone of Indian economyProvides employment to around 60 % workforce of the countryShare of Agriculture in National Income (GDP), 1999-00 prices:YearAgriculture (% of GDP)1950-5156.51970-71461990-91342000-0124.72007-0817.8Note: Agriculture includes agriculture, forestry, and fishing.Source: Economic Survey 2007-08India’s Agricultural production1950-511964-651990-912008-09Foodgrains (m. tonnes)5189176230Rice (m. tonnes) 21397499Wheat (m. tonnes)6125578Oilseeds (m. tonnes)591928Sugarcane (m. tonnes)57122241289Cotton (m. bales)36723Source: Economic Survey 2007-08This increase in agricultural production in India after 1967-68 is mainly a result of green revolution. Limitations of Green revolution in IndiaThe fruits of Green revolution were mainly witnessed in Punjab, Haryana, Western U.P. and some select districts of Andhra Pradesh, Maharashtra and Tamil Nadu. Further, its success has been limited to wheat, rice, and maize. India has failed to extend the concept of green revolution to all crops or to all regions. Indian agriculture – still a gamble of monsoons;Use of HYV seeds and higher agricultural output requires heavy investment in seeds, fertilizers, pesticides, and water (tube wells), and farm equipment (tractors, harvesters etc.). These investments are beyond the capacity of small and medium farmer. Therefore, the green revolution has mainly benefited large capitalist farmers.White revolution in IndiaIn India, Gujarat and Rajasthan had excess production as compared to local consumption of milk. In 1970, the National Dairy Development Board initiated activities like milk collection from villages and towns, milk chilling centres, processing plants, veterinary centres, and strengthened the milk cooperative movement based on Anand Milk Union Limited (AMUL). This was done through Operation Flood, with aid from the Food and Agriculture Organisation. This ushered White Revolution in India, making it the world's largest milk producing country. Dr Verghese Kurien was the Father of the White Revolution in India. Dr. Kurien set up GCMMF (Gujarat Cooperative Milk Marketing Federation) in 1973 to sell milk & milk products produced by the dairies. Today GCMMF sells AMUL brand products not only in India but also overseasExport Processing Zones (EPZ)The concept of Export Processing Zones (EPZ) was introduced to enhance exports in India with the help of tax holidays and lucrative incentive packages to India’s exporters.The concept of Export Processing Zones in India has gone through four significant stages of development. The initial stage witnessed the establishment of the Kandla Free Trade Zone in the State of Gujarat in the year 1965 and the subsequent establishment of the Santacruz Electronics Export Processing Zone.The second stage witnessed during 1985-90, and it led to the establishment of a number of Export Processing Zones to boost the export sector. Thus, Export Processing Zones were set up in West Bengal, Tamil Nadu, Kerala, Uttar Pradesh and in Andhra PradeshThe third stage was witnessed post 1991, during economic reforms period. The objective being to broadbase and encourage India’s exports. Following measures were undertaken: -Fiscal Incentives Simplification of Policy ProvisionsIncorporation of more industries like horticulture, re-engineering, agriculture, aqua cultureThe fourth stage witnessed the introduction of the concept of Special Economic Zones (SEZs) in the EXIM policy of 1997-2002. Presently, most of the export-processing zones have been transformed into SEZs. SEZs were permitted to be set up by both government and private parties;Special Economic Zones (SEZs) Policy was announced in April 2000.This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations.Further the Government of India passed the SEZ Act, 2005 to strengthen the concept of SEZ. Objectives of SEZ in Indiageneration of additional economic activity promotion of exports of goods and services promotion of investment from domestic and foreign sources creation of employment opportunities development of infrastructure facilities Major incentives offered to firms under SEZ: Duty free import / domestic procurement of goods for development, operation and maintenance of SEZ units 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years. Exemption from Central / State Sales Taxes and other levies. Exemption from Service Tax. Single window clearance for Central and State level approvals. Export Oriented Units (EOI)By EOU we mean Export Oriented Units, i.e. those units which are established mainly/solely for the purpose of exporting their output. The government of India, for the purpose of encouraging India’s exports brought out Export Oriented Units (EOUs) scheme in 1981. This scheme is complementary to the SEZ scheme. It accords same incentives to EOUs as those granted to export units located in SEZs. The main objectives of the EOU scheme is to increase exports, earn foreign exchange for the country, transfer latest technology to the country, stimulate direct foreign investment and to generate additional employment.EOUs Obligations: The EOUs are required to achieve minimum EP (Export Performance) as per the provisions of EXIM Policy which vary from time to time, and sector to sector. Status Holders/ Trading HousesThe classification of status holders among exporters in India is as follows: -Export houseStar export houseTrading houseStar trading housePremier trading houseSuch status is granted on achieving aggregate exports of Rs.20 crore, Rs.100 crore, Rs.500 crore, Rs.2500 crore and Rs.10000 crore respectively over a period of four years. Status holders are entitled to privileges such as, fast track clearances, exemption from furnishing bank guarantees, consideration under target plus scheme etc. ................
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