and the WTO
and Import (Eexim) policy
stands as a vibrant and diverse country whose economy is increasingly
integrating with the world economy. The sweeping economic reforms
undertaken in the last decade have had far reaching consequences.
The large and growing market, developing infrastructure, sophisticated
financial sector, flexible regulatory environment, incentives, stable
polity and strong economic outlook make India an attractive investment
destination. The business environment here is considered conducive
for achieving high level of sustainable growth.
solidity of the Indian economy is evident from its stability in
the backdrop of a ecessive Asian market. The latest estimates of
the Central Statistical Organisation (CSO) project Gross Domestic
Product (GDP) growth of 5.2 percent during 2000-01. India has entered
the new millennium with a strong and robust financial outlook. Average
annual real GDP accelerated from 5.4 percent during the 12 year
period ending 1991-92 to 6.4 percent during 1992-1993 through 2000-2001.
The overall growth performance of the industrial sector during 2000-01
is expected to be somewhat lower than that of the previous year.
However, combined with the continued performance of the services
sector, particularly of the information technology sector, the Indian
economy is expected to achieve a healthy growth of 6 percent.
The agriculture sector, for so long the main-stay of the Indian
economy, now accounts for only about 20 percent of GDP, yet employs
over 50 percent of the population. For some years after independence,
India depended on foreign aid to meet its food needs, but in the
last 35 years, food production has risen steadily, mainly due to
the increase in irrigated areas and widespread use of high-yield
seeds, fertilizers and pesticides. The country has large grain stockpiles
(around 45 million tonnes) and is a net exporter of food grains.
Cash crops, especially tea and coffee are the major export earners.
India is the world's largest producer of tea, with annual production
of around 470 million tonnes, of which 200 million tonnes is exported.
India also holds around 30 percent of the world spice market, with
exports around 120,000 tonnes per year. Real growth rates in GDP
for agriculture and allied activities slowed down considerably to
0.9 per cent in 2000-01. With a view to strengthening the sector,
building infrastructure for handling, transportation and storage
of food grains has been granted "infrastructure status"
and will be eligible for a tax holiday. Further, processors of food
and vegetables are exempted from excise duty.
Rural areas, where nearly 70 percent of Indians live, have witnessed
rapid market growth in recent times, driven largely by agricultural
growth, income redistribution, and inroads made by audio-visual
media. The rural share of the market for durable goods has grown
steadily over the last few years, from 54.2 percent in 1989-90 to
57.9 percent in 1995-96, and in items such as bicycles, mechanical
wrist watches, radio/ transistors etc. the share of the rural market
was in excess of 75 percent.
along with 110 other countries, ratified the results of the Uruguay
Round by signing the Final Act at Marrakech on April 15, 1994. This
has far reaching implications for the country as a whole, as also
for global trade and economic growth. As a result of the Marrakech
Accord, expansion of global trade is expected to be between US$
200 billion (OECD estimates) and US$ 745 billion (GATT estimates).
The largest increases are expected in clothing (60 percent), agricultural,
forestry and fishery products (20 percent) and processed foods and
beverages (19 percent) - areas where India has a competitive advantage.
Accordingly, India is striving to increase its share in world trade
in these areas. Even at India's current share of global trade, the
Marrakech Accord offers additional export opportunities of US$ 1.5
to 3.5 billion annually over and above the normal growth. The immediate
aim for India (as per the EXIM policy announcement on 31 March 2001),
is to achieve at least 1 percent share of global trade by 2004.
The total world export volume expected by the year 2004 is US$ 7.5
trillion; hence for India to achieve its target, it would need to
export worth US$ 75 billion, up from the current level of US$ 43
billion, which roughly works out to an 18 percent growth rate.
new Export & Import Policy ("EXIM") announced by the
Government for the year 2001-2002 seeks to complete the process
of India's integration with the global economy by removal of quantitative
restrictions and seeks to provide fresh direction to exports by
setting up Agricultural Export Zones and providing special benefits
to SEZ. The new EXIM policy is outward looking and liberal and is
the logical conclusion to India's commitments under the WTO agreement.
of goods is allowed freely, except for few restricted items. Exports
are the major focus of India's trade policy, and a thrust area in
the new economic policy of the country. The export promotion package
compares favourably with incentives offered anywhere in the world.
It makes a special effort to attract foreign investors to set up
EOUs and units in SEZs. Export profits are exempt from income tax,
and are computed in the proportion of export turnover to total turnover.
However the tax exemption to be phased out over a period of 5 years
commencing financial year 2000-01.
goods are freely importable on payment of specified customs duty.
A small number of goods fall in the prohibited/restricted list of
Imports. Such restrictions are generally on grounds of national
security, health and environmental protection. There are no quantitative
restrictions on import of capital goods and intermediates. Further,
import of second hand capital goods older than 10 years is permitted
only against import licenses. Raw materials, intermediates, components
etc. meant for manufacture of goods for export, can be imported
duty free against an advance licence. Input - output norms have
been laid down to determine the amount of duty free import of inputs
allowed for specified products to be exported. Issue of duty free
licence under this scheme is subject to specified value-addition
norms and export obligations. New capital goods may be imported
under the Export Promotion Capital Goods (EPCG) scheme. These capital
goods may be imported at a concessional basic customs duty rate
of 5 percent. However, this concession is subject to an export obligation
to be fulfilled over a specified period.
current trade policy is characterised by rationalised tariff levels
and removal of quantitative restrictions. There has been a consistent
decline in the rates over the past 7 years, from peak rates of 350
percent in June 1991 to 35 percent in 2000-2001. Most capital goods
imports attract a basic customs duty at the rate of 25 percent.
Import duties on equipment are lower for projects in specific sectors.
to Promotion of Agro Exports
The government will give primacy to promotion of agricultural exports
so that India can position herself to take advantage of the expected
liberalisation of the world agricultural trade. Our farmers are
expected to have great opportunities in the context of the on-going
negotiations on agriculture at the WTO. As the third largest producer
of food in the world, India can play a significant role in the international
trade on agriculture. The government is planning to evolve an appropriate
agricultural export policy in the near future.
Agro export efforts would be reorganised on the basis of specific
products and specific geographical areas. A beginning would be made
by focussing specially on areas where there is a convergence of
these two factors and make these zones as Regional Rural Motors
of Indian export economy. The move will be initiated in respect
of apples from Himachal Pradesh and Jammu & Kashmir, the alphonso
mangoes from the Konkan areas of Maharashtra (the list is not exhaustive;
but only illustrative) and any other such zones that the State Governments
may identify and sponsor in respect of the specific cash crops.
The emphasis will be on end to end development of export specific
products. Department of Commerce will supplement the efforts of
State Governments in facilitating such agri exports. There are also
many agriculture regions which have constraints in fully participating
in international trade because of various critical gaps including
information on prices, demand, quality standards, etc. Efforts will
be made to fill these gaps and play an important role of not only
transmitting the international signals to the farmers but also encouraging
and enabling them to respond to those signals through the states.
The EXIM Policy schemes like Duty Exemption Scheme and the Export
Promotion Capital Goods Scheme are being made applicable to the
agro sector as well. 'Internationalisation' of our agriculture will
have several implications: The terms of trade, which have for long
been in favour of industry, are expected to shift in favour of agriculture.
It is estimated by some economists that every one per cent switch
will divert about Rs.8500 crore additionally in favour of agriculture
and that about US $20 billion (over Rs.60,000 crore) will be transferred
to the agriculture sector from the non-agriculture sector in the
next few years. This additional rural purchasing power will create
a phenomenal effective demand. If our farmers are equipped to rise
to the occasion, we shall be able to make a mark in the international
trade on agriculture with this farm-to-port approach.
restrictions like registration and packaging on certain agricultural
products to Russia removed.
Restrictions on export of all cultivated varieties of seed, except
jute and onion removed.
To promote export of agro and agro based products, 20 Agri Export
Zones have been
Transport subsidy for export of fruits, vegetables, floriculture,
poultry and dairy products made available.
3% special DEPB rate for primary and processed foods exported in
retail packaging of 1kg or less introduced.