EXIM POLICY & CAPITAL ACCOUNT CONVERTIBILITY

(2009-2014)GROUP 4Pallavi Luthra-152Saumya Verma-138Nikhil Sharma-154Tonmoyee Goswami- 40Utsav Gupta- 82Deepika Tyagi- 08Hitesh Mahansaria- 24

FLOW OF PRESENTATION

Introduction

General Provisions of Export – Import

Promotional Measures

Schemes

Special Focus Initiatives

Capital Account Convertibility

Export – Import Policy of India ((2009-2014) - With Supplement

for Fiscal Year (2010-2011):

Objective:• To provide additional support , especially to

employee intensive sectors• To simplify procedures of Export and Import

GENERAL PROVISIONS REGARDING EXPORTS AND IMPORTS

• Compliance with the provisions, the Rules and the Orders made there, under FTP

• IEC No: Mandatory unless specifically exempted.

• Transit of Goods: Through India from / or to countries adjacent to India shall be regulated in accordance with bilateral treaties between India and those countries and will be subject to restrictions.

• Import of Second Hand Goods : All second hand goods, except second hand capital

goods, shall be restricted for imports. Second hand personal computers / laptops,

photocopier , air conditioners, etc will only be allowed against a license.

• Free Exports : All goods may be exported without any restriction

except to the extent that such exports are regulated by ITC (HS) or any other provision of FTP or any other law for the time being in force.

Import of Gifts:This shall be permitted where such goods are otherwise freely importable under FTP. In other cases, a Customs Clearance Permit (CCP) shall be required from DGFT.

Export of Gifts:Goods, of value not exceeding Rs.5,00,000 / may be exported

as a gift.However, items mentioned as restricted for exports in ITC (HS)

shallnot be exported as a gift, without any authorization.

Passenger Baggage:Bonafide household goods and personal effects may be

imported aspart of passenger baggage as per limits, terms and conditionsthereof in Baggage Rules notified.

Denomination of Contracts:All export contracts and invoices shall be denominated either

infreely convertible currency or Indian rupees but export

proceeds shallbe realised in freely convertible currency.

• Single Window System:To reduce transaction and handling costs, and to facilitate export of perishable agricultural products.

• EDI: DGFT shall move towards an automated environment for

electronic filing, retrieval and authentication of documents. With a view to promote use of Information Technology,

DGFT will provide fiscal incentives.

• Free movement of Goods: Consignments of items meant for exports shall not be

withheld/ delayed for any reason by any agency of Central /State Government. In case of any doubt, authorities concerned may ask for an undertaking from exporter.

Promotional Measures in Department of Commerce

ASIDE Formulated to provide the state governments for creating infrastructure for the development and growth of Exports. The specific purposes for which funds are allocated are as follows:1) Creation of SEZs/Agribusiness units/EPZs2) Development of complementary infrastructure such as roads connecting the production centres with the ports, setting up of inland container depots.

MAI: Financial assistance is available for export promotion. Activities funded under this can be from 25% to 100% i) Market surveys ,setting up of show rooms ii) Brand promotions ,participation in international trade iii) Publicity campaigns etc

• Brand Promotion and Quality- Its objective is to create international awareness of “Made in India” labels in the market overseas. This aims in effectively presenting India’s business perspective and leveraging business partnership in globalised market place.

• Towns of Export Excellence- Necessary to grant recognition to industrial clusters which contributes to India’s exports to maximise their potential and enabling them to tap new markets. Towns producing goods of Rs. 750 crores will be notified as TEE .

SERVED FROM INDIA SCHEME (SFIS)

• This is to accelerate growth in export of services so as to create a powerful and unique ‘Served From India’ brand, instantly recognized and respected world over

• More than 100 services like Professional Services, Computer Related services, Hotels, Restaurants, Educational Services, Research and Development, Tourism etc. are included

• All Service Providers shall be entitled to Duty Credit Scrip equivalent to 10% of free foreign exchange earned during current financial year.

Export and Trading HousesMerchant as well as Manufacturer Exporters, ServiceProviders,

Export Oriented Units (EOUs) and Units located in Special Economic Zones (SEZs), Agri Export Zones (AEZs), Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio-Technology Parks (BTPs) shall be eligible for status and avail various privileges.SPECIAL ECONOMIC

ZONES• Developed to enhance foreign investments and promote exports from the country.

• Geographic regions where economic laws related to export and import are more liberal as compared to rest parts of the country.

• No license required for import made in SEZ units.• Exemption from central sales tax on the sale or purchase

of goods and exemption from payment of service tax. • Kandla, Gujarat Multi product Mumbai, Maharashtra

Electronics and Gems and Jewellery,Noida ,Cochin Special Economic Zone Cochin, Falta Special Economic Zone ,Visakhapatnam SEZ.

• There are 114 SEZs in India.• Growth of 121.4% is achieved in 2009-10

FOCUS MARKET SCHEME

• To offset high freight cost and other externalities to enhance India’s export competitiveness in these countries.

• Entitled for Duty Credit Script equivalent to 3% of FOB value of exports

FOCUS PRODUCT SCHEME• To incentivise export of products having high

export intensity/employment potential.• Entitled for Duty Credit Script equivalent to 2% of

FOB value of exports.

DUTY EXEMPTION & REMISSION SCHEMES

1)Advance Authorization Scheme:• Allows duty free import of inputs that are

physically incorporated in export products.• A minimum of 15% value addition needed for this

authorization.(2)Duty Free Import Authorization

Scheme(DFIA)• Allows duty free import of inputs, fuel, oil, energy

sources, catalyst required for production of export products.

• A minimum of 20% value addition needed for this authorisation.

Duty Remission Schemes:• Enables post export replacement/remission on

duty on inputs used in export products.

Deemed Exports• Transactions in which goods supplied do

not leave country• Payment for such supplies received either

in Indian rupees or in free foreign exchange

• Some categories of supply of goods regarded as “Deemed Exports” under FTP:

- Supply of goods against Advance Authorisation

- Supply of goods to EOU / STP / EHTP / BTP

Export Promotion Capital Goods (EPCG) Scheme

Provisions ExplanationZero Duty

EPCG Scheme•Allows import of capital goods for preproduction,production and post production at zero Customs duty,subject to an export obligation equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue-date.•Available for exporters of engineering & electronicproducts, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, etc

Concessional 3% duty EPCG Scheme

•Allows import of capital goods for pre-production, production and post production at 3% Customs duty, subject to an export obligation equivalent to 8 times of duty saved on capital •Capital goods shall include spares (including refurbished/reconditioned spares), tools, jigs, fixtures, dies and moulds.

Provisions Explanation

EPCG forRetail Sector

To create modern infrastructure in retail sector, concessional duty benefits under EPCG scheme shall be extended for import of capital goods required by retailers having minimum area of 1000 sq. meters.Such retailer shall fulfill export obligation i.e. 8 times of duty saved, in 8 years.

Export Obligation shall be fulfilled by export of goodsmanufactured/services rendered by the applicant.

SPECIAL FOCUS INITIATIVES

SECTORS INITIATIVES

MARKET DIVERSIFICATION •27 New Countries have been included in Focus Market Scheme.

•The incentives increased from 2.5 to 3%.

TECHNOLOGICAL UPGRADATION

•EPCG scheme at zero duty have been introduced and has been simplified.

AGRICULTURE AND VILLAGE INDUSTRY

•Vishesh Krishi and Gram Udyog Yojana.

•Capital goods imported under EPCG will be permitted to be installed anywhere in AEZ.

•Import of inputs such as pesticides are permitted.

SECTORS INITIATIVES

HANDLOOMS AND HANDICRAFTS

•Duty free import of old pieces of hand knotted carpets on consignment basis for re-export after repair is permitted.

GEMS & JEWELLERY •Import of Gold of 8k and above is allowed under replenishment scheme.

• Duty free re-import entitlement for rejected jewellery shall be 2% of FOB value of exports.

•Duty free import entitlement of commercial samples shall be Rs. 300,000.

LEATHER AND FOOTWEAR •Finished Leather exports to be incentivized.

SECTORS INITIATIVES

MARINE SECTOR •Duty free import of specified specialised inputs and chemicals is allowed to the extent of 1% of FOB value of preceding financial year’s export.• Marine sector included for benefits under zero duty EPCG scheme.

ELECTRONICS AND IT HARDWARE MANUFACTURING INDUSTRIES

•Export of electronic goods to be incentivized under Focus Product Scheme.•Electronics Sector included for benefits under SHIS schemes.

GREEN PRODUCTS AND TECHNOLOGIES

•Focus would be on items relating to transportation, solar and wind power generation and other products as may be notified, which will be incentivized under Reward Schemes.

INCENTIVES FOR EXPORTS FROM THE NORTH EASTERN REGION.

•Notified products of this region would be incentivized under Reward Schemes.

CAPITAL

ACCOUNT

CONVERTIBILITY

What Is Convertibility?

Convertibility can be related as the extent to which a country's regulations allow free flow of money into

and outside the country.

In India foreign exchange transactions are in dollars, pounds or any other currency are broadly classified

into:• Current Account Transactions• Capital Account Transactions

Difference Between Current Account and Capital

Account• Current account

includes all transactions related to buying foods and services.

Rupee is convertible on Current A/C

• One is free to buy foreign exchange for the purpose of importing goods or services.

• Capital account includes all capital transactions like taking loans, purchasing foreign assets, FDI, etc.

Rupee is convertible on Capital A/C

• One is free to bring foreign exchange in India to buy assets in India and take foreign exchange outside India to buy assets in foreign countries.

• One has to surrender the foreign exchange to RBI and get it converted at a rate pre-determined by RBI. The foreign exchange is not converted at the market determined rate.

NO COVERTIBILITY

• One has to surrender a part (say 40%) of the foreign exchange to RBI and get it converted at a rate pre-determined by RBI. The remaining part (say 60%) of the foreign exchange is converted at the market determined rate.

PARTIAL COVERTIBILITY

• The foreign exchange is fully (i.e.100% of the foreign exchange) converted at the market determined rate.

FULL COVERTIBILITY

What Is Full Capital Account Convertibility?

“Full Capital Account

Convertibility means that any

individual, be it Indian or foreigner will be

allowed to bring in any amount of foreign currency into the

country and take any amount of foreign currency out of the country without any

restriction."

Before 1991• Get permission from the

Government or RBI – Be it import of

• raw material, • travel abroad, • procuring books or • paying fees for a ward

who pursues higher studies abroad.

– Be it exporter • has to surrender the

foreign exchange to RBI and get it converted at a rate pre-determined by RBI.

• Government eased the movement of foreign currency on trade account.

• Importers and Exporters need not get permission on a CASE TO CASE basis as was prevalent in the earlier regime.

• Government liberalized the flow of foreign exchange to include items like amount of foreign currency that can be procured for purposes like travel abroad, studying abroad, engaging the services of foreign consultants etc.

After 1991

Merits Of FCAC

•Reduction in Cist of Capital

•Diversify Portfolios Internationally

•Induces Competition Against Indian Finance

•Reduce Size of Black Economy

Demerits Of FCAC

Huge Outflow and Inflow

Misallocation of Capital Inflows

Export of Domestic Savings

Creation of an Unequal Playing Field