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Unit 31 : India’s Trade Policy : Recent Developments

III. Growth-Oriented Notes
(a) Strategic package for status holders : The status holders would be eligible for the following
facilities :
(i) 100 per cent retention of foreign exchange in exchange earners foreign currency
(EEFC) account.
(b) Neutralising high fuel cost : Fuel costs to be rebated for all export products. This would
enhance the cost competitiveness of our export products.
(c) Diversification of markets : The following initiatives have been taken :
Focus LAC (Latin American Countries) was launched in November 1997 in order to
accelerate trade with these countries. Our exports to these countries have increased by 40
per cent. To consolidate the gains of these programmes, this was extended upto March
2003.
Focus Africa was launched in April 2002. There is a tremendous potential for trade with
sub-Saharan African region. During 2000-01, Indian exports to this region accounted for
US $1.8 billion and imports were $1.5 billion.
IV. Duty Neutralisation Instruments
(a) Advance licence : Duty Exemption Entitlement Certificate (DEEC) book was abolished.
Redemption on the basis of shipping bills and band realisation certificates.
Withdrawal of advance licence for annual requirement (AAL) as problems were
encountered in closure of AAL. The exporters could avail of advance licence for any value.
(b) Duty entitlement pass book (DEPB) : value cap exemption granted on 429 items to
continue.
(c) Export promotion capital goods (EPCG) : licences of ` 100 crore or more to have 12 year
export obligation period with 5 year moratorium period.
Assessment of EXIM Policy (2002-07)
Mr. Murasoli Maran, the then Minister for Commerce and Industry took a number of initiatives by
providing tax concessions, streamlining certain procedures and removing quantitative restrictions.
Another positive feature of the policy was have ‘Focus Africa’ so that Indian exports to African
countries can be developed. This initiative would help Indian exporters to explore this fast growing
market which has been neglected earlier.
A big initiative to permit offshore banking units (OBUs) would help to develop foreign branches of
Indian banks. The move was intended to provide international finance at international rates. This
would lower the cost of credit to our exporters and thus make them more competitive. This initiative,
specially directed at Special Economic Zones was another healthy feature of the Exim Policy.
However, critics raised several issues which need consideration. EXIM policy intended to boost the
export of agriculture. In this effort, it intended to export wheat and thus reduce the mounting
bufferstocks of foodgrains reaching the astonishingly high figure of 58 million tonnes in on January
1, 2002. There are two options before the government—(i) to export these foodgrains and earn foreign
exchange and (ii) to use these foodgrains in ‘food for work’ programme and thus create employment
in public works programme. It is really very disappointing that the Food Corporation of India is
selling wheat in the international market as cattle feed at throw away prices. The question arises :
Why is the quality of wheat procured by FCI poor when the Government continues to raise the
support price of wheat for the farmers year after year ? It only speaks volumes about rampant
corruption in FCI. The failure of the Central Government to persuade state governments to lift
foodgrains from FCI is evident from the fact that as against an allocation of 28.55 million tonnes in
2000-01 in case of rice and wheat, the offtake was merely 11.72 million tonnes which is only 41 per
cent of the allocation. This was mainly the consequence of an irrational policy fixing the issue price of
foodgrains quite high. The result was that the public preferred to buy foodgrains from the open
market. The Government, if it wants to increase the exports of agricultural products, should pay

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