Ladies & Gentlemen
India to become a major player in world trade, an all
encompassing, comprehensive view needs to be taken for
the overall development of the countrys foreign
trade. While increase in exports is of vital importance,
we have also to facilitate those imports which are required
to stimulate our economy. Coherence and consistency
among trade and other economic policies is important
for maximising the contribution of such policies to
development. It was felt that the Exim Policy with its
limited focus may not be able to meet our objectives.
Thus, while incorporating the existing practice of enunciating
an annual Exim Policy, it is necessary to go much beyond
and take an integrated approach to the developmental
requirements of Indias foreign trade. This is
the context of the new Foreign Trade Policy.
Trade is not an end in itself, but a means to economic
growth and national development. The primary purpose is
not the mere earning of foreign exchange, but the stimulation
of greater economic activity. The Foreign Trade Policy
is rooted in this belief and built around two major objectives.
double our percentage share of global merchandise trade
within the next five years; and
act as an effective instrument of economic growth by
giving a thrust to employment generation.
A multi-pronged strategy is needed to achieve these
ambitious objectives. I decided that it was meaningless
for me or my ministry to attempt to devise this in isolation,
within the four walls of Udyog Bhawan. I was very clear
from the beginning that the process should be transparent,
and that it could only happen in partnership with trade.
I began the process of consultation in the very first
week of my assuming office. I attended presentations
of all Export Promotion Councils, as well as various
Industry Associations and Business Federations. Over
3000 suggestions were received and each was carefully
considered. Regarding those which we found difficult
to accept, we decided to obtain more information in
order to develop clarity, and so we put them on the
website for comments. We interacted with exporters,
big and small, individuals and groups, in Delhi and
in other places. I called for suggestions from experts
and also from all of my ministerial colleagues and received
very valuable ones.
We decided to incorporate all the meaningful and feasible
suggestions in the drafting of this Policy. Some of these,
even though desirable, could not be incorporated at this
stage due to the financial implications, but we are still
working on them and we hope to bring about incremental
improvements as we go along.
two-fold objective of this Policy is proposed to be achieved
by adopting, among others, the following strategies:
of controls and creating an atmosphere of trust and
transparency to unleash the innate entrepreneurship
of our businessmen, industrialists and traders.
procedures and bringing down transaction costs.
incidence of all levies and duties on inputs used
in export products, based on the fundamental principle
that duties and levies should not be exported.
development of India as a global hub for manufacturing,
trading and services.
and nurturing special focus areas which would generate
additional employment opportunities, particularly in
semi-urban and rural areas, and developing a series
of Initiatives for each of these.
technological and infrastructural upgradation of all
the sectors of the Indian economy, especially through
import of capital goods and equipment, thereby increasing
value addition and productivity, while attaining internationally
accepted standards of quality.
inverted duty structures and ensuring that our domestic
sectors are not disadvantaged in the Free Trade Agreements/Regional
Trade Agreements/Preferential Trade Agreements that
we enter into in order to enhance our exports.
our infrastructural network, both physical and virtual,
related to the entire Foreign Trade chain, to international
the Board of Trade by redefining its role, giving it
due recognition and inducting experts on Trade Policy.
our Embassies as key players in our export strategy
and linking our Commercial Wings abroad through an electronic
platform for real time trade intelligence and enquiry
Sectors with significant export prospects coupled with
potential for employment generation in semi-urban and
rural areas have been identified as thrust sectors, and
specific sectoral strategies have been prepared.
the present, Special Focus Initiatives have been
prepared for Agriculture, Handicrafts, Handlooms, Gems
& Jewellery and Leather & Footwear sectors. Further
sectoral initiatives in other sectors will be announced
from time to time.
threshold limit of designated Towns of Export
Excellence is reduced from Rs.1000 crores to
Rs.250 crores in these thrust sectors.
Since agriculture has the potential to bring prosperity
to millions of our rural citizens, and also the largest
potential for enhancing employment in some of the poorest
regions of our country, we have prepared a special package
Special Focus Initiative for agriculture includes a
new scheme called Vishesh Krishi Upaj Yojana,
which has been introduced to boost exports of fruits,
vegetables, flowers, minor forest produce and their
value added products.
of these products shall qualify for duty free credit entitlement
equivalent to 5% of FOB value of exports. The entitlement
is freely transferable and can be used for import of a
variety of inputs and goods.
goods imported under EPCG for agriculture shall be duty
free, and permitted to be installed anywhere in the Agri
funds to be utilized for development for Agri Export Zones
Import of seeds, bulbs, tubers and planting material
has been liberalized to help in modernisation and improving
breeds and yields; while the export of plant portions,
derivatives and extracts has also been liberalised with
a view to promote export of medicinal plants and herbal
The gems and jewellery sector has tremendous potential
to provide employment to our artisans, while simultaneously
preserving and developing our traditional skills. Our
package for this sector includes:
free import of consumables for metals other than gold
and platinum up to 2% of FOB value of exports.
free re-import entitlement for rejected jewellery up to
2% of FOB value of exports.
free import of commercial samples of jewellery increased
to Rs.1 lakh.
of gold of 18 carat and above shall be allowed under the
Handlooms and handicrafts are the mainstay of our cottage
sector, and a significant number of workers are women.
Increased exports from these sectors take benefits down
to the grass-roots level. Our package includes:
free import of trimmings and embellishments increased
to 5% of FOB value of exports. These shall also be exempt
Handicraft Export Promotion Council shall be authorised
to import trimmings, embellishments and samples for small
manufacturers, who are unable to do this on their own,
and so get deprived of this facility.
new Handicraft Special Economic Zone shall be established.
We have a package for the leather & footwear industry
too. The new facilities include:
free entitlements of import trimmings, embellishments
and footwear components increased to 3% of FOB value of
free import of specified items for leather sector increased
to 5% of FOB value of exports.
order to enable the leather industry to meet the requirements
of pollution control, machinery and equipment for effluent
treatment Plants for leather industry shall be exempt
from customs duty.
A new scheme to accelerate growth of exports called Target
Plus has been introduced.
who have achieved a quantum growth in exports would be
entitled to duty free credit based on incremental exports
substantially higher than the annual export target fixed.
(Since the target fixed for 2004-05 is 16%, the lower
limit of performance for qualifying for rewards is pegged
at 20% for the current year).
will be granted based on a tiered approach. For incremental
growth of over 20%, 25% and 100%, the duty free credits
would be 5%, 10% and 15% of FOB value of incremental exports.
To accelerate growth in export of services so as to create
a powerful and unique Served from India
brand instantly recognized and respected the world over,
the earlier DFEC scheme for services has been revamped
and re-cast into the Served from India
service providers who earn foreign exchange of at least
Rs.5 lakhs, and other service providers who earn foreign
exchange of at least Rs.10 lakhs will be eligible for
a duty credit entitlement of 10% of total foreign exchange
earned by them.
the case of stand-alone restaurants, the entitlement shall
be 20%, whereas in the case of hotels, it shall be 5%.
and Restaurants can use their duty credit entitlement
for import of food items and alcoholic beverages.
A number of improvements have been made to the EPCG
Scheme. Among them are the following:
Additional flexibility for fulfillment of export obligation
in order to reduce difficulties of exporters of goods
Technological upgradation has been facilitated and incentivised.
Transfer of capital goods to group companies and managed
hotels now permitted under EPCG.
In case of movable capital goods in the service sector,
the requirement of installation certificate from central
excise has been done away with.
Export obligation for specified projects shall be calculated
based on concessional duty permitted to them. This would
improve the viability of such projects.
It was brought to our notice that the facility for import
of fuel under DFRC was being rendered meaningless since
individual exporters found it impractical, in fact impossible,
to import fuel on their own. To address this, the import
of fuel under DFRC entitlement shall be allowed to be
transferred to marketing agencies authorised by the
ministry of petroleum and natural gas.
We are also aware of the concern among exporters about
the proposed discontinuation of the DEPB scheme. Let me
assure you that DEPB would be continued until replaced
by a new scheme and this new scheme will be drawn
up in consultation with exporters. We look forward to
receiving constructive suggestions on how best this can
A new rationalised scheme of categorisation of status
holders as Star Export Houses has been introduced, designating
them from One Star to Five Star, depending on their
total exports during the current and previous three
years. The entry level for qualifying for status is
now Rs. 15 crores in three years. We are confident that
this will bestow status on a large number of hitherto
unrecognized small exporters.
Star export houses shall be eligible for a number
of privileges including fast-track clearance procedures,
exemption from furnishing of bank guarantee, eligibility
for consideration under Target Plus Scheme etc.
We recognize that EOUs perform the same role as SEZ units
in boosting exports, and so, as far as practicable, we
want to give them as many of the benefits that are possible
EOUs shall be exempted from Service Tax in proportion
to their exported goods and services.
EOUs shall be permitted to retain 100% of export earnings
in EEFC accounts.
Income tax benefits on plant and machinery shall be
extended to DTA units which convert to EOUs.
Import of capital goods shall be on self-certification
basis for EOUs.
For EOUs engaged in textile & garments manufacture
leftover materials and fabrics upto 2% of CIF value
or quantity of import shall be allowed to be disposed
of on payment of duty on transaction value only.
A new scheme to establish Free Trade and Warehousing Zones
has been introduced to create trade-related infrastructure
to facilitate the import and export of goods and services
with freedom to carry out trade transactions in free currency.
This is aimed at making India into a global trading-hub.
would be permitted up to 100% in the development and establishment
of the zones and their infrastructural facilities.
zone would have minimum outlay of Rs.100 crores and five
lakh sq. mts. built up area.
in the FTWZs would qualify for all other benefits as applicable
for SEZ units.
The application of biotechnology would pay rich dividends
in terms of new products and technologies. To harness
this frontier of science, we propose to establish Biotechnology
Parks in the country which would get all the facilities
of 100% Export Oriented Unit.
It is estimated that Services today constitute more
than half the total GDP of the country. .An exclusive
Services Export Promotion Council shall be set up in
order to map opportunities for key services in key markets,
and develop strategic market access programmes, including
brand building, in co-ordination with sectoral players
and recognised nodal bodies of the services industry.
Government shall promote the establishment of Common
Facility Centres for use by home-based service providers,
particularly in areas like engineering & architectural
design, multi-media operations, software developers
etc., in State and District-level towns, to draw in
a vast multitude of home-based professionals into the
services export arena.
We are committed to reducing transactional costs and
simplifying procedures. A number of rationalisation measures
have been introduced.
All exporters with minimum turnover of Rs.5 crores
and good track record shall be exempt from furnishing
bank guarantee in any of the schemes, so as to reduce
their transactional costs.
Cost effective capital goods are an important component
of industrial growth, and so import of second-hand capital
goods shall be permitted without any age restrictions.
Minimum depreciated value for plant and machinery to
be re-located into India has been reduced from Rs.50
crores to Rs.25 crores.
All goods and services exported, including those from
DTA units, shall be exempt from Service Tax.
Validity of all licences and entitlements issued under
various schemes has been increased to a uniform 24 months.
The number of returns and forms to be filed have been
reduced. This process shall be continued in consultation
with customs & excise.
Enhanced delegation of powers to Zonal and Regional
offices of DGFT for speedy and less cumbersome disposal
Time bound introduction of electronic data interface
(EDI) for export transactions. 75% of all export transactions
to be on EDI within six months.
In order to showcase our industrial and trade prowess
to its best advantage and leverage existing facilities,
Pragati Maidan will be transformed into a world-class
complex. There shall be state-of-the-art, environmentally-controlled,
visitor friendly exhibition areas and marts. A huge
convention centre to accommodate 10,000 delegates with
flexible hall spaces, auditoria and meeting rooms with
high-tech equipment, as well as multi-level car parking
for 9,000 vehicles will be developed within the envelope
of Pragati Maidan.
As you are all aware, yesterday India has entered into
a Framework Agreement for Free Trade Area with Thailand.
The importance of such arrangements both with other countries
as well as with regional grouping for boosting our foreign
trade is well recognized. We are also holding discussion
with other countries/ groupings on such framework arrangements.
These framework agreements are directed towards increased
trade with more countries/groupings.
The dynamics of a liberalised trading system sometimes
results in injury caused to domestic industry on account
of dumping. When this happens, effective measures to
redress such injury will be taken. Financial assistance
would be provided to deserving exporters, on the recommendation
of Export Promotion Councils, for meeting the costs
of legal expenses connected with trade-related matters.
The new Policy envisages merchant exporters and manufacturer
exporters, business and industry as partners of Government
in the achievement of its stated objectives and goals.
Prolonged and unnecessary litigation vitiates the premise
of partnership. In order to obviate the need for litigation
and nurture a constructive and conducive atmosphere,
a new mechanism for grievance redressal has been formulated
and put into place by a government resolution to facilitate
speedy redressal of grievances of trade and industry,
which, it is hoped, would substantially reduce litigation
and further a relationship of partnership.
The Board of Trade shall be revamped and given a clear
and dynamic role. There would be a process of continuous
interaction between the Board of Trade and government
in order to achieve the desired objective of boosting
Indias exports. An eminent person or expert on
trade policy shall be nominated as President of the
Board of Trade, which shall have a secretariat and separate
budget head, and will be serviced by the department
This Policy is essentially a roadmap for the development
of Indias foreign trade. It contains the basic principles
and points the direction in which we propose to go. By
virtue of its very dynamics, a trade policy cannot be
fully comprehensive in all its details. It would naturally
require modification from time to time. We propose to
do this through continuous updation, based on the inevitable
dynamics of international trade. It is in partnership
with business and industry that we propose to erect milestones
on this roadmap.