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International Trade and Finance

Notes goods, design and drawings and technology. This is a dangerous trend from the country’s
point of view. Criticising this approach, the Economic and Political Weekly mentioned : “What
is missed in this line of reasoning is that production capacities once built on imported technologies
and imported capital goods have to be sustained by imported raw materials, spares and parts.
The so-called “inflexible imports” are, therefore, destined to grow constantly and relentlessly.”
Secondly, experience has also shown that the multinationals are hardly interested in technology
transfer. Rather they in the name of technological upgradation, carry on ‘technological dumping’
of such technologies which have been superseded in the developed countries. This, the critics
argue, is far more deleterious than dumping of goods—including capital goods.
From the foregoing analaysis, it becomes evident that opening the door of imports much wider
would result in increasing the trade gap. Such indiscriminate liberalisation would create more
dependence in terms of foreign exchange and widen the trade gap.

Export-Import Policy (2002-2007)
Union Commerce and Industry Minister Mr. Murasoli Maran announced the EXIM policy for the
5 year period (2002-07) on March 31,2002. The main thrust of the policy was to push India’s exports
aggressively by undertaking several measures aimed at augmenting exports of farm goods, the small
scale sector, textiles, gems and jewellery, electronic hardware etc. Besides these, the policy aimed to
reduce transaction cost to trade through a number of measures to bring about procedural
simplifications.
The salient features of Exim policy were as under :
I. Special Economic Zones : Indian banks were allowed to set up offshore banking units (OBUs)
in special Economic zones. These units would act as magnets to attract foreign direct investments.
These offshore banking units would be virtually foreign branches of Indian banks, but located
in India. OBUs would be exempt from cash reserve ratio (CRR), statutory liquidity ratio (SLR)
and would give access to SEZ units and SEZ developers to international finance at international
rates. This measure was aimed to make special Economic Zones internationally competitive.
II. Employment Oriented Measures : EXIM (2002-07) policy initiated a number of measures which
would help employment orientation. Among them were the following :
(a) Agriculture : Exim policy removed all quantitative restrictions on all agricultural products
except a few sensitive items like jute and onions.
(b) Cottage sector and handicrafts :
(i) An amount of ` 5 crores under market access initiative (MAI) were earmarked for
promoting cottage sector exports coming under KVIC. The units under handicrafts
could also access funds under MAI.
(ii) Under export promotion capital goods (EPCG) scheme, these units would not be
required to maintain an average level of exports, while calculating export obligation.
(iii) These units would be entitled to the benefit of Export House status on achieving
lower average export performance of ` 5 crore as against ` 15 crores for others; and
(iv) The units in handicraft sector would be entitled to duty-free imports of an enlarged
list of items up to 3 per cent of f.o.b value of their exports.
(c) Small scale industry : With a view to encouraging further development of centres of
economic and export excellence such as Tirpur for hosiery, woollen blankets in Panipat,
woollen knitwear in Ludhiana, following benefits would be available to small-scale sector.
1. Common service providers in these areas would be entitled to the facility of Export
Promotion Capital Goods (EPCG) Scheme.
2. Entitlement for Export House status at ` 5 crores instead of ` 15 crores for others.
(d) Textiles : Duty entitlement passbook (DEPB) rates for all kinds of blended fabrics permitted.
Such blended fabrics were to have lower rate as applicable to different constituent fabrics.
(e) Gems and jewellery : Rough diamonds import allowed on zero custom duty basis.

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