Implication of foreign trade policy
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The document discusses India's foreign trade policies and performance. It summarizes that while India's share of global exports is only 0.8%, the government has implemented various policies and institutions to promote trade. These include liberalizing trade procedures, focusing on export orientation, and providing lines of credit and financing through institutions like Exim Bank. The document also analyzes sectors like agriculture, textiles and services that have potential for growth in exports. It recommends further reducing transaction costs and simplifying trade processes to achieve the goal of doubling India's share of global trade by 2009.
Implication of foreign trade policy
- 1. Implications of Foreign Trade Policy and Facilitation of Foreign Trade A Presentation S.R.Rao Chief General Manager Export-Import Bank of India www.StudsPlanet.com
- 2. 2 Exim India Where Does India Stand Globally? International Trade of Select Countries in 2003 Country Exports Imports GDP Trade as % of GDP (US$ bn.) (US$ bn.) (US$ bn.) Korea 197.6 175.5 605.0 61.7 China 438.3 393.6 1446.9 57.5 Mexico 165.4 171.0 626.1 53.7 Russia 135.9 75.4 433.5 48.7 South Africa 38.7 35.0 160.1 46.0 Argentina 29.4 13.1 129.7 32.8 Brazil 73.1 48.3 492.1 24.7 India 57.0 74.3 588.8 22.3 Source: Economist Intelligence Unit India’s share in global merchandise exports: 0.8% (2003) www.StudsPlanet.com
- 3. 3 Exim India India’s Export Performance Source: DGCIS, MOC&I India's Export Performance (1999-2000 to 2003-04) 63623 47742 52856 4397644147 36760 29751 0 10000 20000 30000 40000 50000 60000 70000 1999-2000 2000-01 2001-02 2002-03 2003-04 Years US$million All Commodities Agricultural & allied products Ores & minerals Manufactured goods Petroleum & crude products www.StudsPlanet.com
- 4. 4 Exim India India’s Import Performance Source: DGCIS, MOC&I India's Import Performance (1999-2000 to 2003-04) 77237 566135158850056 61572 49799 37172 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 1999-2000 2000-01 2001-02 2002-03 2003-04 Years US$million All Commodities Petroleum crude & products Non-POL items www.StudsPlanet.com
- 5. 5 Exim India Trade Policies in India Exim Policies Streamlined trade procedures Liberalised import regime Thrust on export orientation Medium Term Export Strategy, 2002 1% share in global exports by 2007 Foreign Trade Policy 2004-2009 To double India’s share in global merchandise trade by 2009 www.StudsPlanet.com
- 6. 6 Exim India Role of Institutions Institutions dedicated for promoting foreign trade have played an important role towards enhancing the process of internationalisation of Indian companies, viz. Export-Import Bank of India, Export Credit Guarantee Corporation, Indian Institute of Foreign Trade www.StudsPlanet.com
- 7. 7 Exim India Exim Bank Set up by an act of parliament in September, 1981 Wholly owned by Government of India Commenced operations in march, 1982 Established “for providing financial assistance to exporters and importers, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the country’s international trade…” www.StudsPlanet.com
- 8. 8 Exim India Foreign Trade Policy 2004-09 Quantum Jump in Merchandise Exports Required: Enhance exports of major export commodities Identify potential export commodities Diversify export destinations www.StudsPlanet.com
- 9. 9 Exim India Foreign Trade Policy 2004-09 Exim Bank Study “Strategy for Quantum Jump in Exports: Focus on Africa, Latin America and China” India could aim to achieve: US$ 18 billion in Africa’s Imports by 2007 from US$ 3.8 bn in 2003-04 US$ 4 bn in China’s imports by 2007 (in 64 identified groups) from US$ 0.86 bn in 2000 US$ 1.8 bn in LAC’s imports by 2007 (in 100 identified groups) from US$ 0.6 bn in 2000 Share in India’s Exports in 2003-04: Africa (6%); Latin America (1.8%); China (4.7) www.StudsPlanet.com
- 10. 10 Exim India Lines of Credit Overseas Governments Parastatal Organisations/ Govt. Agencies Commercial Banks Regional Financial Institutions Particularly relevant for SMEs Eligible items – all items permissible under Exim Policy Engineering Goods Consumer Durables Commodities www.StudsPlanet.com
- 11. 11 Exim India AFRICA ASIA EUROPE ALGERIA PTA BANK covering BANGLADESH GHANA BURUNDI INDONESIA KAZAKHSTAN KENYA COMOROS IRAN , IRAQ BULGARIA MALAWI DJIBOUTI SRI LANKA RUSSIA MAURITIUS ERITREA, EGYPT KOREA ROMANIA NAMIBIA ETHIOPIA MALAYSIA HUNGARY SEYCHELLES KENYA THAILAND POLAND SOUTH AFRICA MALAWI VIETNAM SUDAN MAURITIUS PHILIPPINES TANZANIA RWANDA TUNISIA SOMALIA UGANDA SUDAN LATIN AMERICA & CARIB. ZAMBIA TANZANIA UGANDA BRAZIL MEXICO COLOMBIA BOAD covering ZAMBIA JAMAICA VENEZUELA BENIN ZIMBABWE BURKINA FASO CAF covering BCIE covering COTE D’IVOIRE BOLIVIA COSTA RICA MALI EADB covering COLOMBIA EL SALVADOR NIGER KENYA ECUADOR GUATEMALA SENEGAL TANZANIA PERU HONDURAS TOGO UGANDA VENEZUELA NICARAGUA LOCs Extended by Exim Bank www.StudsPlanet.com
- 12. 12 Exim India Foreign Trade Policy 2004-09 Simplifying procedures and bringing down transaction costs Transaction costs are incurred at the pre and post- production stages, and arise out from several procedural complexities associated with administrative processes, availability of finance and transportation problems. For enhancing the growth of exports it is important to reduce the transaction costs involved. Exim Bank Study on Transaction Costs of Indian Exports www.StudsPlanet.com
- 13. 13 Exim India Foreign Trade Policy 2004-09 Sector No. of Firms Transaction costs as % of export revenue (2003 Survey) Transaction costs as % of export revenue (1998 Survey) Textile/Garments 23 3-10 15 Engineering goods 18 < 5 10 Pharmaceuticals 9 ≤ 8 10 Chemicals 7 < 5 14 Computer software 9 1-5 10 Agro-Industries 2 1-2 7-8.5 Electronic & Electrical machinery 3 5 - Plastic components 2 5-10 - Paper Industry 2 5-7 - Others 7 1-2 Findings of Exim Bank’s Study www.StudsPlanet.com
- 14. 14 Exim India Foreign Trade Policy 2004-09 Transaction Costs: International Experience Simplified and less stringent bureaucratic procedures like single window clearance and business friendly approach Better technology due to higher levels of foreign investment, faster loading/unloading methods Flexible labour laws Cheap availability of power and raw materials, Freight incentives by the Government, Lower ocean freight rates due to greater availability of vessels www.StudsPlanet.com
- 15. 15 Exim India Foreign Trade Policy 2004-09 Special package for agriculture Duty free imports of capital goods Will lower production cost and hence improve profitability Exports of medicinal plants & herbal products facilitated Global imports of medicinal plants: US$ 1 bn (2001) India second largest exporter after China Potential to increase export to Rs. 1750 crore by 2006-07 and more than Rs. 2500 crore by 2009- 10. Global market for Herbal products: US$ 80 bn India’s exports of Herbal products: US$ 280 mn (2002-03) www.StudsPlanet.com
- 16. 16 Exim India Foreign Trade Policy 2004-09 Textile sector incentives Duty free entitlement for garments & handicrafts increased from 3% to 5% Will help exporters to move up the value chain However, further incentives required to consolidate India’s position in the post- MFA era Handicraft Special Economic Zone to be established Will contribute to strong growth in handicraft exports Will generate employment opportunities www.StudsPlanet.com
- 17. 17 Exim India Foreign Trade Policy 2004-09 Export Promotion Schemes Target Plus scheme introduced Will further boost exports from the successful exporters Vishesh Krishi Upaj Yojana to boost horticulture exports Global trade in horticulture: US$ 79 bn (1999) India’s exports: US$ Rs. 1830 cr (1999-2000) Success of AEZs for horticulture depend on “the ability of the states to overcome existing shortcomings in infrastructure, institutional mechanism and policy and programme support to achieve desired export orientation” www.StudsPlanet.com
- 18. 18 Exim India Foreign Trade Policy 2004-09 Export Promotion Schemes “Services Export Promotion Council” to be set up “Served from India” scheme: Service providers who earn forex of at least Rs. 5 lakhs will be eligible for duty credit entitlement Will help small scale service providers Will enhance India’s share in global exports of services (1.4% in 2003) www.StudsPlanet.com
- 19. 19 Exim India Feasibility study for establishment of an export credit and guarantee facility for Gulf Cooperation Council countries Regional cooperation in export finance and export credit guarantees for ESCAP Study on promotion of international competitiveness and exports of manufactured goods for ESCAP Setting up the Afrexim Bank Designing of Export Financing Programmes - Turkey Exim Bank as a Consultant Sharing Institutional Building Capabilities World wide www.StudsPlanet.com
- 20. 20 Exim India Setting up an Exim Bank in Malaysia Design of Export Marketing Seminars for SMEs in Vietnam Export Development Project : Ukraine Enterprise Support Fund : Armenia Establishing an Export Credit Guarantee Company in Zimbabwe Advisory services to Industrial Development Corporation of South Africa for international finance products Mauritius – Study on Projecting Mauritius as an Investment Hub for Indian Firms Sharing Institutional Building Capabilities World wide Exim Bank as a Consultant www.StudsPlanet.com
- 21. 21 Exim India Tie-up with International Finance Corporation, Washington D.C. Africa Project Development Facility Africa Enterprise Fund Mekong Project Development Facility South-East Europe Enterprise Development Facility Private Enterprise Partnership (CIS Countries) China Project Development Facility South Asia Enterprise Development Facility Eastern & Southern African Trade & Development Bank (PTA Bank) African Management Services Company (AMSCO) Exim sponsors consultants under GoI-AfDB cooperation Agreement Promoting Indian Consultancy www.StudsPlanet.com
- 22. 22 Exim India Advisory Services Multilateral Agencies Funded Projects Overseas (MFPO) Information and support services to Indian companies to help improve their prospects for securing business in multilateral agencies funded projects. Dissemination of business opportunities in funded projects Providing detailed information on projects of interest Information on Procurement Guidelines, Policies, Practices of Multilateral Agencies Assistance for Registration with Multilateral Agencies Advising Indian companies on preparation of Expression of Interest, Capability Profile Bid Intervention www.StudsPlanet.com
- 23. 23 Exim India Foreign Trade Policy 2004-09 Export Oriented Units Exemption from service tax EOUs permitted to retain 100% of export earnings in EEFC accounts Income tax benefits to DTA units which convert to EOUs All these should considerably increase export growth from the EOUs www.StudsPlanet.com
- 24. 24 Exim India Software Training Institutes Minor Ports Technology Parks EOU Projects & TUFS Exim Bank: Financing of Export-Oriented Companies Term Loans Project Finance Equipment Finance Working Capital Overseas Investment Finance Long Term upto 5 years Term Loans for 1-2 years Loans to Indian companies for Equity Investment in their ventures overseas Loans to Indian companies to olden to their overseas ventures Other Programmes Export Marketing Finance Export Product Development Finance for R&D Short Term < 1 year Direct Equity stake www.StudsPlanet.com
- 25. 25 Exim India Multilateral Agencies World Bank Asian Development Bank African Development Bank European Bank for Reconstruction & Development Multilateral Investment Guarantee Agency (MIGA) International Finance Corporation (IFC) UNIDO - Industrial Promotion Offices Afrexim Bank Eastern & Southern African Trade & Development Bank (PTA Bank) Institutional Linkages www.StudsPlanet.com
- 26. 26 Exim India Board of Investment of Sri Lanka Hatton National Bank, Sri Lanka China National Technical Import & Export Corporation Polish Agency for Foreign Investment (PAIZ). Hungarian Investment and Trade Development Agency UNIDO Industrial Cooperation & Investment Promotion Service, Poland Economic Development Board, Bahrain Investment & Trade Promotion Centre, Vietnam Centero Estero Vineto, Italy Institutional Linkages Trade & Investment Promotion Agencies www.StudsPlanet.com
- 27. 27 Exim India Export Credit Agencies The Export-Import Bank of China. Croatian Bank for Reconstruction and Development. Czech Export Bank. Hungarian Export-Import Bank Ltd. Uzbekinvest – National Export-Import Insurance Company. Exim Bank of Romania. Institutional Linkages www.StudsPlanet.com
- 28. 28 Exim India Board of Investment of Sri Lanka Hatton National Bank, Sri Lanka China National Technical Import & Export Corporation Polish Agency for Foreign Investment (PAIZ). Hungarian Investment and Trade Development Agency UNIDO Industrial Cooperation & Investment Promotion Service, Poland Economic Development Board, Bahrain Investment & Trade Promotion Centre, Vietnam Centero Estero Vineto, Italy Institutional Linkages Trade & Investment Promotion Agencies www.StudsPlanet.com
- 29. 29 Exim India Exim Bank : Partner in Globalisation Technology Capital (Foreign Investment) Raw Materials Capital Goods Final Products Capital Goods Capital (Overseas Ventures) Product Development Production Marketing Pre shipment Post shipment VALUE ADDITION EXPORT M P O R I T www.StudsPlanet.com
- 30. 30 Exim India Foreign Trade Policy 2004-09 Final Observations Import of second hand capital goods allowed without age restrictions No outdated technology should be imported “Special Focus Initiatives” Could be extended to other sectors of high export orientation like chemicals & pharmaceuticals Export orientation of FDI should be increased www.StudsPlanet.com
- 31. 31 Exim India FDI and Exports Sector Share in FDI (%) Transportation industry 7.50 Computer software industry 6.46 Chemicals & pharmaceuticals 5.70 Textiles 1.20 Leather & leather goods 0.20 Services (incl. Hotels & Tourism) 8.37 Source: SIA, MOC&I Low share of FDI in major export sectors www.StudsPlanet.com
Editor's Notes
- #30: The Bank offers a wide range of lending and service programmes to assist Indian companies at all stages of the business cycle. Through import of technology, capital, goods and raw materials, the Bank facilitates the upgradation of technology and capabilities of Indian companies to enable them to enhance their competitiveness. The broad array of support programmes offered by the Bank for product development, production marketing, as also preshipment and postshipment ,enables Indian companies to add value resulting in exports of products, capital goods, services. The Bank has also been instrumental in promoting ventures overseas in the fields of manufacturing, assembly, marketing and trading.