labels: economy - general, trade
Mini Exim Policy 2004-2005news
Uday Chatterjee
29 January 2004

In 1947, India's share of the global merchandise trade was 2 per cent. Fifty five years later, in 2002, the percentage statistics of India's share had declined to a little over 0.6 per cent. The 'mini' Export Import (Exim) Policy 2002 - 2007, announced yesterday by Commerce Minister Arun Jaitley, has set the target of achieving a 1 per cent share of the global trade by 2007. A pragmatic and reasonable target - provided effective and trade-friendly facilitation measures are first put in place.

The policy is habitually reviewed every year with the intention of introducing necessary changes in tariffs and trade facilitation measures depending on the changing trends in world trade.

Indian exporters had been pretty comfortable till 2002-2003, when export growth was about 19 per cent. However, 2003-2004 appears to have been an unfriendly year for exporters mainly because of the appreciation of the rupee. Against a target of 12 per cent growth, exports grew, till November 2003, by a mere 8 per cent - a full one-third shortfall of the target.

Against this backdrop and with an eye at the impending elections, Jaitley announced a series of measures in the Exim Policy 2004 which should bring the 'shine' back on the face of exporters.

The services sector continued to be a focus area and with a view to making India an attractive tourism destination, duty-free imports by restaurants and small hotels earning foreign exchange have been allowed. Hotels can now import duty free liquor up to 5 per cent of their foreign exchange (forex) earnings. Other service providers like travel agents can import office equipment and capital goods up to 10 per cent of their forex earnings. There is, however, a ban on dairy and agricultural products and car imports.

Quantitative restrictions on gold and silver which, till now, could be imported only through notified agencies like Minerals and Metals Trading Corporation (MMTC) have now been removed. This will save exporters the transaction costs, which they otherwise would have had to incur, and at the same time enable them to make spot purchases of gold and silver from anywhere, anytime. The aim is to make India into jewellery export hub. Already, the gems and jewellery sector is the country's highest forex earner and this 'freeing' of purchases of precious metals should enable the sector to improve its earnings.

The Policy has also attempted to make the Export Promotion Capital Goods (EPCG) and the Duty Free Replenishment Certificate (DFRC) more exporter-friendly.

The export obligations of old licences have been re-fixed at eight times the duty saved instead of five times the cost-insurance-freight (CIF) value. Moreover, exporters can now fulfill their export obligation by exporting products and services of group companies, as well. They can also club EPCG licences and use rupee payments made for port handling services to meet their export commitments.

Under EPCG, the government has also eased the homologation norms for automobiles costing over $ 40,000 on CIF basis. Further, restrictions on import of prototypes have been eliminated for research and development purposes by actual users.

Under DFRC, fuel imports have been permitted by manufacturing companies for their own use. Earlier, the facility was available under the advance licence scheme. The sensitive list for DFRC has also been pruned and the scheme will now be available on achieving the minimum threshold limit in one of the three preceding years.

The benefit of deemed exports will now be extended to items with zero customs duty. The move will encourage consulting companies to render services to project imports. The deemed export facilities have also been made available to fertiliser and refinery projects that have spilled over from the 8th and the 9th plan period. In order to reduce transaction cost, fixation of drawback brand rates for deemed exports has been decentralised and delegated to the regional offices Director General of Foreign Trade (DGFT).

The equity base of Export Credit Guarantee Corporation (ECGC) has been hiked by Rs 300 crore to Rs 800 crore to help it underwrite higher risks for project exports in countries like Afghanistan, Iraq and those African nations with high political risk This will also ensure easy availability of export finance to Indian exporters at best terms and improve the competitiveness for Indian goods and services.

A National Export Insurance Account is being created for ECGC to underwrite high value projects implemented by Indian companies, the details of which will be worked out in consultation with the Ministry of Finance

Keeping in mind the swelling foreign exchange reserves, the government has raised the ceiling on export of gifts like calendars, dairies, etc from Rs 1 lakh to Rs 5 lakh.

In order to cut down red tape and also bring down transaction costs, exporters will now be allowed to use digital signatures and electronic transfer of funds. This will now allow exporters to send high value funds across international borders without having to clear them through
time-consuming paper based operations. Further, a 50 per cent reduction in fees has been introduced for filing application for licences online.

Finally, to extend affordable and cheap credit to credit-worthy exporters, the government will soon introduce a Gold Card scheme, the details of which will be notified by the Reserve Bank of India.

Justifying the measures taken in the policy, Jaitley said, "The principal reason why we have taken these steps is that ordinarily the Exim policy is to be amended on March 31 every year and it is no secret that by March 31, 2004, this time, the model code of conduct of Election Commission would be in force and it is only justified that Exim Policy is not announced."

There was more good news from the Commerce Ministry stable. It announced that in December, exports registered a whopping 42.68 per cent over the previous December. This brings the cumulative export growth up to December to 13 per cent. Normally the second half of the fiscal year is the export season and with the new export facilitation measures the growth target of 12 per cent is likely to be exceeded considerably.

There is good news for the NDA coalition too. With Jaswant Singh's mini budget and Arun Jaitley's mini Exim policy, who needs an election manifesto?


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Mini Exim Policy 2004-2005