Page 144 - DMGT401Business Environment

Unit 6: Fiscal Policy

provide an internationally competitive duty free environment for export production at Notes
low cost. Units in these areas also enjoy tax holidays and duty free imports.

6.2.3 Foreign Trade Policy 2002-2007

Foreign Trade Policy is built around two major objectives namely, to double India's percentage
share of global merchandise trade by 2009, and to act as an effective instrument of economic
growth by providing a thrust to employment generation, especially in semi urban and rural
areas.
The Union Minister Mr. Kamal Nath unveiled the new Foreign Trade Policy (2004 -07), which
was earlier known as the EXIM Policy (Export and Import Policy). This policy unshackles the
controls earlier levied. All goods and services exported, including those from Domestic Tariff
Area, have been exempted from service tax and all exporters with minimum turnover of 5
crore have been exempted from furnishing bank guarantees. This will reduce their transaction
cost.
1. Target Plus: This scheme has been introduced to achieve growth in exports. Exporters who
will achieve a substantial higher growth than that of general export target will get duty
free credit based on their performance.

Example: For a growth of over 20%, duty free credit will be 5%, for 25% it will be 10%
and for 100% it will be 15% respectively, of FOB value of incremental exports.
To give impetus to trading in India a scheme was introduced to establish Free Trade and
Warehousing Zones. These zones will have infrastructure to support import and export of
goods and services. Foreign direct investment would be permitted up to 100% in the
development and establishment of the zones and their infrastructure facilities.
Foreign Trade Policy 2004-2009 gave special emphasis to agriculture, handicraft, handlooms,
gems and jewellery, and footwear. To promote this, it liberalised the import of seeds,
bulbs, tubers, and planting material and also export of plant portion, derivatives, and
extracts. Exports of medical plant and herbal products are likely to get a boost in the
process. For the same purpose it also allowed import of restricted items. Export-oriented
units engaged in production or processing of agro, horticulture and aquaculture products
are allowed to move inputs and equipments to farms located in domestic tariff area.
To promote handloom and handicraft, duty-free import of trimmings and embellishments
in these sectors have been increased to 5% of FOB value of exports. It will be also exempted
from countervailing duty. A provision was made for the establishment of new Handicraft
Special Zones.
2. Vishesh Krishi Upaj Yojna: The objective of this yojna is to provide boost to the exports of
fruits, vegetables, flowers, minor forest produce, and their value-added products. Exporters
of these products will get duty free credit.
3. Town of Export Excellence: The limit to become the town of export excellence has been
reduced to 250 crore from 1000 crore. FTP gave several benefits including exemption
from service tax in proportion to their exported goods and services and permission to
retain 100 % earnings in the exchange earner foreign currency account.
4. Served From India: The Served From India scheme as a brand was instantly recognised the
world over, under which individual service providers who earn foreign exchange of at
least 10 lakh would be eligible for a duty credit entitlement of 10 % of total foreign
exchange earned by them. In the case of stand-alone restaurants, the entitlement would be
20%, whereas in the case of hotels, it would be 5%.

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