THE RATIONALE AND EVOLUTION OF EXPORT PROMOTION POLICIES IN INDIA


In the initial years after attaining independence, India's trade policy and programs were primarily oriented towards regulating imports, having regard to the nascent state of the domestic industry. Indian supply capabilities were far too limited to cater effectively to the needs of various export markets. Indian export capacity, if any, was limited to supplying certain primary commodities which are normally subject to numerous constraints, including low unit-value realizations. The industrial sector, in particular, had suffered years of benign neglect at the hands of our erstwhile British rulers, perhaps as a matter of deliberate policy. The accent of our policy planners immediately after independence was therefore on rapid industrialization of the country and attaining self-sufficiency in the output of various industrial goods and services.


There was, in this context, a definite need to discourage imports in general while encouraging the domestic manufactures, goods, and services through appropriate import substitution measures for a specific period. This policy was designed to enable them to build up the required strength and resilience and build domestic capacities. The concept of Export Promotion under these circumstances did not receive the importance and emphasis that it should normally receive as a component of trade policy, in the early years. Import substitution and provision of adequate protection to the domestic industry were the primary concerns of our policymakers then rather than exports and export promotion.


In due course, there was some shift in the policy emphasis when foreign trade, particularly export was recognized as an important factor for economic progress and was increasingly regarded as the engine of the economic development of the country. The process of industrialization of the country and capacity building had also necessitated large-scale imports of capital goods and services which needed to be financed through increased exports. The need to explore export avenues and build up domestic supply capabilities for the purpose, therefore, received greater stress particularly during the formulation of the successive 5-year Economic Development Plans. Several export promotion institutions and a fairly elaborate system of export incentives were set in place to further the cause of export and export promotion in India. However, the results were found to be partially satisfactory, since such export promotion policies and programs were often negated by a restrictive import licensing regime and high import tariffs. A restrictive import regime tended to stifle export promotion efforts because it restricted the scope for bringing in new technologies and processes, prevented rapid expansion and modernization of an outmoded industrial infrastructure, and creation of appropriate quality norms within the country. It was only after the wide-ranging economic reforms undertaken by the Government of India in early 1991 that there was a perceptible shift in the trade policy emphasis. The restrictive system of administrative, discretionary control over imports (and many export items) was progressively dismantled.


The high custom tariffs rates on several commodities which supplemented the restrictive import regime were substantially reduced. The elimination of all procedural hurdles in the way of exports was also regarded as an important adjunct of an effective export promotion effort. In sum, there was a realization that export promotion policies cannot coexist with a protectionist regime which only stifled healthy competition, created inefficient and high-cost industries, and caused distortions in the exchange rate system. Export Promotion has now virtually become an article of faith with the Government of India and an essential component of an integrated trade promotion strategy.It needs to be mentioned that creation of appropriate institutions and a liberalised export promotion environment alone cannot automatically guarantee greater exports. It is also important to draw up optimal programme by way of product and market promotion strategies.



INVOLVED ORGANISATIONS IN EXPORT PROMOTION

The Department of Commerce, which is part of the Ministry of Commerce, is in charge of all policy decisions relating to infrastructure and export promotion in India, as well as India's external trade and related matters such as state trading, export promotion measures, and the development and regulation of certain export-oriented industries and commodities. It is also responsible for preserving and promoting trade contacts with other countries across the world. The Department has also the principal responsibility for the formulation and monitoring of the foreign trade policy of India including policies for export promotion.


The numerous Governmental organizations' efforts in export promotion are reinforced by the country's many Chambers of Commerce and Trade Associations, which send out trade delegations abroad, organize seminars and conferences on export-related matters, and host Buyer-Seller meetings. Apart from their traditional duty of political diplomacy, Indian embassies abroad have been compelled in recent years to play a more active role in promoting the country's commercial interests. The Indian foreign missions assist potential exporters in discovering overseas clients and, when possible, resolving buyer-seller disputes by sending out reasonably complete market reports to various Export Promotion Councils and Commodity Boards.


Export Inspection Councils, India Trade Promotion Organisation, Commodity Boards, Agricultural and Processed Food Products, Export Development Authority, Export Promotion Councils, Export Credit and Guarantee Corporation, and others work as autonomous bodies or under the direct administrative control of the department to accomplish this.

It's worth noting that the various state governments have been urged to work as equal partners and facilitators with the federal government in increasing the country's exports. This is due to the fact that many of the nation's human and material resources are concentrated in the hands of individual states. If such resources are to be properly tapped for exports, their cooperation and active participation are obviously critically necessary. Some states, such as Gujarat and Punjab, have already established Export Corporations to boost export activity. Many others have begun to organise export development training programmes, utilising the expertise of specialist organisations such as the Indian Institute of Foreign Trade, in order to foster an export climate at the state level.Most of the State Governments have also established Export Promotion Industrial Parks (EPIP) in an attempt to create the required infrastructural facilities for export oriented production. At the suggestion of the Ministry of Commerce many of the State Governments have set up Apex level Organisations under the chairmanship of the Chief Minister or Chief Secretary to consider and sort out problems faced by the exporters/ importers in the respective States. They have also created Cells in the State Secretariat for looking after export work. The State Governments have also appointed Nodal (Niryat Bandhus) for export promotion work. Eight nodal officers have been nominated in the Commerce Ministry for maintaining liaison with the state geoverment in export promotion matters.Thus, export promotion in the country has become a total national effort in which the Central Government, trade and industry and the individual State Governments, all have an important role to play.

EXPORT PROMOTION REGULATORY MECHANISMS


An essential aspect of the export promotion effort is the Export Inspection Council, which has been involved in instilling quality consciousness and self-discipline among the exporting community. To achieve this goal, the Indian government established the "Export Inspection Council" under Section 3 of the Export (Quality Control and Inspection) Act, 1963, to ensure the smooth development of the country's export commerce. The major function of the Export Inspection Council (EIC), as stated, is to oversee quality control and pre-shipment inspection of commodities destined for export.

To have a more effective control over exporting activities in various parts of the country, the Government of India has established five Export Inspection Agencies (EIAS), one each in Kolkata, Chennai, Delhi, Mumbai, and Cochin, all of which are under the technical and administrative control of the Export Inspection Council (EIC). In addition to these five offices, the ElAs has a network of 61 sub-offices located in major industrial hubs and shipping ports. These ElAs have well-equipped laboratories for testing a variety of export products. The EIAS also conducts inspections on a voluntary basis when foreign buyers request it. In addition, the Government of India has recognised 21 private inspection agencies and 7 government inspection agencies to supplement quality certification work under the the Act. Fifteen agencies have reportedly been recognised for fumigation of export cargo.

It is important to mention that for all commodities notified under the Act, quality standards have been prescribed by the government. Although in a large number of cases buyers' requirements have been recognised as the basis for inspection, for products. involving safety or health hazards, minimum standards have been stipulated. Commodities for which minimum standards have been prescribed are not allowed to be exported unless such standards have been attained, despite the fact that the foreign buyer might have conveyed his acceptance for the product which had failed to meet such

MEASURES OF EXPORT PROMOTION IN INDIA


The Government of India has implemented a number of measures to improve the country's export performance. In the overall scope of export promotion measures, one can broadly include some of the salient export assistance measures as contained in the current Export-Import Policy, promotional and publicity campaigns undertaken in this country relating to the export effort, and the support facilities being created by the Government in the form of infrastructural development and improving market capabilities to boost exports.

A number of schemes that have been in place for some time have been strengthened and improved, while some new ones have been introduced, with the goal of making exports an effective tool for promoting greater economic activity and employment. A brief description of some of the important export promotion measures initiated by Government over the years are as follows:


Export Processing Zones (EPZ) (EPZS)


This concept, a relatively new institutional innovation, has gained worldwide traction. However, the goal of establishing EPZs varies by country, depending on economic compulsions and requirements. The primary goals of establishing EPZs are to attract heavy industries; to develop small and light industries requiring modest capital investment in sectors such as household appliances, electronics, textiles, and so on; and to invite foreign capital and technology. Because of the rapid advancement of communications and information technology, the concept of EPZs has been extended to the service sector as well.

The establishment of the Export Promotion Council of India was the government of India's first attempt to promote exports.

Export processing zones, also known as free trade zones. The first EPZ was established in 1965 at Kandla (Gujarat) which was called as the Kandla free trade zone. It has the distinction of being the first multi-product export processing zone in Asia. In the following years six more EPZs were set up at the following place



The Santa Cruz Electronics Export Processing Zone (SEEPZ) is intended solely for the export of electronics goods as well as gems and jewellery, whereas all other zones are multi-product zones. These EPZs were established as special enclaves separated from the Domestic Tariff Area by fiscal barriers, with the goal of providing an internationally competitive duty-free environment for low-cost export production. Although local governments provide some facilities to EPZs, which are responsible for increasing exports from the concerned states, the overall responsibility for the establishment and management of these zones rests with the central government.

Hundred Per cent Export Oriented Units (EOUS): Next in the chain was setting up one hundred per cent Export Oriented units. The first EOU was set up by Government of India in 1980. EOUS mainly concentrated in textiles and yarn, food processing. electronics, chemicals, plastics, granites and minerals and ores.

The BOU scheme works in tandem with the EPZ scheme. It refers to an industrial unit that offers for export its entire output, excluding rejects and items that are otherwise expressly permitted to be supplied to the Domestic Tariff Area (DTA). However, unlike EPZS, 100 percent BOUS can be established in any part of India subject to locational criteria. The location is normally determined by factors such as the availability of raw materials, port of export hinterland facilities, the availability of technological skills, the presence of an industrial park, and the need for a larger area of land for the project. As of March 2004, there were 1764 units in operation under the EQU scheme.

Major Facilities to 100% EOUS/EPZA


1: Single window clearance

Proposals fulfilling certain conditions are granted automatic approvals within 15 days. In other cases, approvals are granted by Board of Approvals within 45 days. 

2: Industrial plots and standard design factories are available to EOUS and EPZ at concessional rules.

3: No import licence is required for import of Capital Goods, Raw materials, Consumables, etc. They are exempted from the payment of customs duty on capital goods, faw materials, consumables, etc.

4: Exemption is also given from payment of excise duty on capital goods, raw materials, etc. bought from the Domestic Tariff Area.

Tax Incentives

Undertakings set up in BOUs are eligible to reduction of 100% on the profits derived there from upto 31 March, 2009, Besides, 100% foreign equity is welcome in EOUS and EPZs

Permissible Sales in DTA


Depending upon the fulfilment of minimum value addition norms, 25% of the total production can be sold in the Domestic Tariff Area (DTA) at concessional duty rates A higher DTA access of 35% and 50% is allowed for electronics and agro-industries respectively, again subject to the fulfilment of minimum value addition norms, but no DTA sales of rice, jewellery, diamonds, precious and semi-precious stones and gems, motor cars, liquor, silver bullion and some other items are permitted.

Export Promotion Industrial Park Scheme (EPIP): 

A centrally sponsored "Expon Promotion Industrial Park" (EPIP) Scheme has been introduced with a view to involving the State Governments in the creation of infrastructural facilities for export oriented production.


Software Technology Parks (STPs) & Electronics Hardware Technology Parks (EHTPs) Scheme:


 Software Technology Parks (STPs) are 100% Export Oriented Projects catering to the needs of software development 100 per cent exports. No export licence is required for import of equipment into Technology Park. All the imports into the Technology park are duty free. Under the Hardware Technology Park Scheme, and Electronic Hardware Technology Park may be set up by the Central Government, State Government, public or private sector undertakings. An EHTP unit may import free of duty all types of goods including all capital goods required by it for its production operations.

Special Economic Zones (SEZ):


 The SEZ was launched by the Government of India re in the year 2000 with a view to promoting internationally competitive and hassle free a environment inducive for exports. SEZ operating units broadly fall under the product X groups of engineering items, chemicals and allied products, electronics, gems and jewellery, garments and rubber.


SEZS are duty free enclaves that are deemed to be outside the territory of customs of India for the purpose of carrying out exports activities. There are 171 operational SEZ in India as on March, 2004. Besides, over 24 SEZs have already been approved. Many State Governments are now vying with each other to establish SEZ units in their States because the Central Government gives a number of incentives for this scheme. The salient features of the scheme w.e.f. 01.04.2003 are as under:



• Sales from Domestic Tariff Area (DTA) to SEZs are to be treated as export.entitles domestic suppliers to Drawback/Duty Entitlement Passbook (DEPB)benefits, Service Tax and CST exemption.


More to be continue...........