Foreign Trade Policy of India

An Introduction

Foreign Trade Policy (FTP) document is the key document that announces the policy intent regarding international trade. It is the apex document that prescribes the broad outlines for imports and exports of goods and services, to and from India. Foreign Trade Policy is generally a five yearly document, and an annual supplement is released every year. Foreign Trade Policy of India is accompanied with  handbook of procedures in two volumes, that supplement and elaborate the details. 

In India, Foreign Trade Policy preparation is managed chiefly by Directorate General of Foreign Trade (DGFT), under Ministry of Commerce. I shall 'briefly' review the content of FTP in this blog. FTP is divided into several chapters as outlined below:

Chapter 1: This chapter has three sub-sections and covers the legal framework under which Foreign Trade Policy of India is created. It also mentions some of the special schemes which had been added recently to promote exports. The last part of the chapter talks about Board of Trade, its constitution and terms of reference. 

Chapter 2: It covers the general provisions regarding exports and imports from India. The opening sentence declares:

"Exports and Imports shall be ‘Free’, except when regulated. Such regulation would be as per FTP and/or ITC (HS). ITC (HS) contains the item wise export and import policy regimes. The ITC (HS) is aligned with international Harmonized System goods nomenclature maintained by World Customs Organization (http://www.wcoomd.org). Schedule 1 of ITC (HS) gives the Import Policy Regime and Schedule 2 of ITC (HS) gives the Export Policy Regime."

The details of product restrictions, if any, are available at the website of DGFT. Apart from products being 'free' and 'restricted' there is a third category of 'prohibited' products. Such products cannot be traded across borders in India (e.g. endangered wildlife). You can read the details of Chapter 2 here.

Chapter 3: This chapter covers the promotional measures, commonly known as incentive schemes, to promote exports from India. The details are covered in two posts, here and here.

Chapter 4: Duty exemption and remission schemes are covered in this chapter. The schemes are meant to import raw materials duty free for the export products. This is to avoid taxing those inputs that go out with the export products.

Chapter 5: Export promotion capital goods (EPCG) scheme is covered in this chapter. This scheme is meant to promote exports through helping the firms to import capital goods duty free to produce export goods.

Chapter 6: This chapter covers provisions for settings up of units that export their entire produce of goods or services under various schemes such as Export Oriented Units (EOUs), Software Technology Parks (STPs), Bio-technology parks (BTPs) etc.

Chapter 7: This chapter pertains to Special Economic Zones which are now governed by a special act called SEZ Act 2005, and rules.

Chapter 8: Deemed exports are covered in this chapter. 'Deemed' exports cover those exports that do not actually constitute direct exports, but go to someone who exports it as part of their products. The technical definition reads thus:

"Deemed Exports” refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or in free foreign exchange. Supply of goods as mentioned in paragraphs below shall be regarded as “Deemed Exports” provided goods are manufactured in India. (The paragraph below is not part of this post)

I shall outline important chapters from the above list in separate posts in this blog in coming days.