Benefits of Foreign Trade Essay

Trade is not an end in itself, but a means to economic growth and national development. The primary purpose is not the mere earning of foreign exchange, but the stimulation of greater economic activity. For India to become a major player in world trade, an all encompassing, comprehensive view needs to be taken for the overall development of the country’s foreign trade. While increase in exports is of vital importance, we have also to facilitate those imports which are required to stimulate our economy.

Coherence and consistency among trade and other economic policies is important for maximizing the contribution of such policies to development. Thus, while incorporating the existing practice of enunciating an annual Foreign Trade Policy, it is necessary to go much beyond and take an integrated approach to the developmental requirements of India’s foreign trade. [pic][pic][pic][pic]The Foreign Trade Policy is built around two major objectives.

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These are: • To double our percentage share of global merchandise trade within the next five years; and • To act as an effective instrument of economic growth by giving a thrust to employment generation. STRATEGY For achieving these objectives, the following strategies need to be adopted: • Removing government controls and creating an atmosphere of trust and transparency to promote entrepreneurship, industrialization and trades. • Simplification of commercial and legal procedures and bringing down transaction costs. Simplification of levies and duties on inputs used in export products. • Facilitating development of India as a global hub for manufacturing, trading and services. • Generating additional employment opportunities, particularly in semi-urban and rural areas, and developing a series of ‘Initiatives’ for each of these sectors. • Facilitating technological and infrastructural upgradation of all the sectors of the Indian economy, especially through imports and thereby increasing value addition and productivity, while attaining global standards of quality. Neutralizing inverted duty structures and ensuring that India’s domestic sectors are not disadvantaged in the • Free Trade Agreements / Regional Trade Agreements / Preferential Trade Agreements that India enters into in order to enhance exports. • Upgradation of infrastructural network, both physical and virtual, related to the entire Foreign Trade chain, to global standards. • Revitalizing the Board of Trade by redefining its role, giving it due recognition and inducting foreign trade experts while drafting Trade Policy. Involving Indian Embassies as an important member of export strategy and linking all commercial houses at international locations through an electronic platform for real time trade intelligence, inquiry and information dissemination. The new Exim-Policy is essentially a roadmap for the development of India’s foreign trade. It contains the basic principles and points the direction in which we propose to go. By virtue of its very dynamics, a trade policy cannot be fully comprehensive in all its details. It would naturally require modification from time to time.

We propose to do this through continuous updating, based on the inevitable changing dynamics of international trade. It is in partnership with business and industry that we propose to erect milestones on this roadmap. With a view to doubling our percentage share of global trade within 5 years and expanding employment opportunities, especially in semi urban and rural areas, certain special focus initiatives have been identified for the agriculture, handlooms, handicraft, gems & jewellery and leather sectors. The thrust sectors indicated below shall be extended the following facilities: AGRICULTURE

A new scheme called the Vishesh Krishi Upaj Yojana (Special Agricultural Produce Scheme) for promoting the export of fruits, vegetables, flowers, minor forest produce, and their value added products has been introduced (Para 3. 8). Funds shall be earmarked under ASIDE for development of Agri Export Zones (AEZ) Units in AEZ shall be exempt from Bank Guarantee under the EPCG Scheme. Import of capital goods shall be permitted duty free under the EPCG Scheme Units in AEZ shall be exempt from Bank Guarantee under the EPCG Scheme. Capital goods imported under EPCG shall be permitted to be installed anywhere in the AEZ.

Import of restricted items, such as panels, shall be allowed underNew towns of export excellence with a threshold limit of Rs 250 crore shall be notified the various export promotion schemes. Import of inputs such as pesticides shall be permitted under the Advance Licence for agro exports. HANDLOOMS Specific funds would be earmarked under MAI/ MDA Scheme for promoting handloom exports Duty free import entitlement of specified trimmings and embellishments shall be 5% of FOB value of exports during the previous financial year.

Duty free import entitlement of hand knotted carpet samples shall be 1% of FOB value of exports during the previous financial year. Duty free import of old pieces of hand knotted carpets on consignment basis for re-export after repair shall be permitted. New towns of export excellence with a threshold limit of Rs 250 crore shall be notified. HANDICRAFTS New Handicraft SEZs shall be established which would procure products from the cottage sector and do the finishing for exports Duty free import entitlement of trimmings and embellishments shall be 5% of the FOB value of exports during the previous financial year.

The entitlement is broad banded, and shall extend also to merchant exporters tied up with supporting manufacturers The Handicraft Export Promotion Council shall be authorized to import trimmings, embellishments and consumables on behalf of those exporters for whom directly importing may not be viableSpecific funds would be earmarked under MAI & MDA Schemes for promoting Handicraft exports CVD is exempted on duty free import of trimmings, embellishments and consumables. GEMS AND JEWELLERY

Import of gold of 18 carat and above shall be allowed under the replenishment scheme Duty free import entitlement of consumables for metals other than Gold, Platinum shall be 2% of FOB value of exports during the previous financial year. Duty free import entitlement of commercial samples shall be Rs 100,000. Duty free re-import entitlement for rejected jewellery shall be 2% of the FOB value of exports Cutting and polishing of gems and jewellery, shall be treated as manufacturing for the purposes of exemption under Section 10A of the Income Tax Act LEATHER AND FOOTWEAR

Duty free import entitlement of specified items shall be 5% of FOB value of exports during the preceding financial year. The duty free entitlement for the import of trimmings, embellishments and footwear components for footwear (leather as well as synthetic), gloves, travel bags and handbags shall be 3% of FOB value of exports of the previous financial year. The entitlement shall also cover packing material, such as printed and non printed shoeboxes, small cartons made of wood, tin or plastic materials for packing footwear Machinery and equipment for Effluent Treatment Plants shall be exempt from basic customs duty.

Re-export of unsuitable imported materials such as raw hides & skins and wet blue leathers is permittedCVD is exempted on lining and interlining material notified at S. No 168 of Customs Notification No 21/2002 dated 01. 03. 2002 CVD is exempted on raw, tanned and dressed fur skins falling under Chapter 43 of ITC(HS). EXPORT PROMOTION SCEHEMES A. Target plus scheme to accelerate growth of exports. B. Vishesh krishi upaj yojna for agro-exports. C. Served from India scheme D. Additional flexibility under EPCG E. Import of fuel under DFRC entitlement allowed to be transferred to marketing agencies authorized by Min of Petroleum and Natural Gas.

F. The DEFB scheme will be continued. G. EOUs shall be exempted from Service Tax in proportion to their exported goods and services. H. A scheme to establish Free Trade and Warehousing Zone is introduced to create trade-related infrastructure to facilitate import and export with freedom to carry out trade transactions in free currency. In order to showcase India’s industrial and trade prowess to its best advantage and leverage existing facilities to enhance the quantity of space and service the govt plans to transform Pragati Maidan into a world-class complex with visitor friendliness ingress and egress system.

ADVANTAGES OF INTERNATIONAL TRADE International trade allows countries to exchange good and services with the use of money as a medium of exchange. Several advantages can be identified with reference to international trade : • Greater variety of goods available for consumption – international trade brings in different varieties of a particular product from different destinations. This gives consumers a wider array of choices which will not only improve their quality of life but as a whole it will help the country grow. Efficient allocation and better utilization of resources since countries tend to produce goods in which they have a comparative advantage. When countries produce through comparative advantage, wasteful duplication of resources is prevented. It helps save the environment from harmful gases being leaked into the atmosphere and also provides countries with a better marketing power. • Promotes efficiency in production as countries will try to adopt better methods of production to keep costs down in order to remain competitive.

Countries that can produce a product at the lowest possible cost will be able to gain a larger share in the market. Therefore an incentive to produce efficiently arises. This will help standards of the product to increase and consumers will have a good quality product to consume. • More employment could be generated as the market for the countries’ goods widens through trade. International trade helps generate more employment through the establishment of newer industries to cater to the demands of various countries. This will help countries bring down their unemployment rates.

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