Page 248 - DMGT401Business Environment

Unit 11: EXIM Policy

11.1.3 EXIM Policy 1997-2002 Notes

The new 5-year Export and Import for the period 1997-2002 aims at giving a major thrust to
acceleration of India's exports through restructuring and revamping of various export promotion
schemes and wide ranging measures for simplification and streaming of procedures with a view
to making them more transparent and easy to administer.

The policy aims at consolidating the achievement made possible during the preceding 5-year
EXIM Policy for 1992-97, while continuing the process of trade reforms and trade liberalisation
with a view to achieving higher rate of export growth. The new EXIM Policy focused on the need
to allow exporters to concentrate on the manufacture and marketing of their products globally
in an environment unhindered by discretionary controls and procedural bottlenecks. The policy
aims at enabling the industry to enhance its competitiveness in the global markets and to
achieve its full potential in the areas of its strength.
Some of the major policy changes include (a) the threshold limit for EPCG zero duty scheme was
brought down to 10 million (for agricultural and allied sectors from 50 million and for
electricals, textiles, leather, gems and jewelry, sport goods and food processing from 200 million)
and to 1 million in case of the software sector; (b) DEPB scheme was modified to neutralise not
only the basic customs duty but also the special customs duty which was introduced as a temporary
measure in 1998; and (c) exports of oilseeds for consumption purpose and vegetables were made
free without any quantitative and licensing requirements (Ministry of Commerce). Several
modifications to the earlier schemes were done mainly to boost services trade, particularly IT
exports.

Example: The Export Promotion Capital Goods (EPCG) scheme for services sector has
been introduced.

Under this scheme, capital goods are allowed to be imported for rendering services for which
payments are received in a freely convertible currency. The scheme is applicable to professionals
and other providers of services such as architects, consultants, economists, charted accountants,
engineers and tour operators. Exemption was given to exports under all export promotion
schemes from the applicability of the special additional duty of 4 per cent introduced in the 1998-
99 budget. Promotional measures and procedural changes that were made in 1998 include facilities
such as extension of holiday for EOU/EPZ to 10 years, sub-contracting facility for Domestic
Tariff Area and permission to set up private software technology parks.
In order to promote trade among SAARC countries, India unilaterally removed all QRs on
imports of 2300 items from SAARC countries with effect from August 1, 1998. On December 28,
1998, a free trade agreement was concluded between India and Sri Lanka which would result in
zero import tariff for most commodities on both sides by 2007. Following the third round of
negotiations held under SAARC Preferential Tariff Agreement (SAPT), the Revenue Department
notified on August 11, 1999 concessional customs duties – ranging from 25 per cent to 60 per cent
for least developed countries (Bangladesh, Maldives, Nepal and Bhutan) and 10 per cent to 50 per
cent for the other three countries – covering items in 1800 tariff lines which account for 60 per
cent of imports (Ministry of Finance).
On March 31, 1999, the following new schemes to boost service exports were introduced. The
setting up of Special Economic Zones (SEZs) was announced with a view to providing
internationally competitive and hassle free environment for exports. Together with the Foreign
Direct Investment policy initiatives for SEZs, it is expected that these zones will have the potential
to act as "magnets" for investments for export production from home and abroad.

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