Page 246 - DMGT401Business Environment

Unit 11: EXIM Policy

11.1 EXIM Policy Notes

11.1.1 Earlier EXIM Policy (Pre Reform Period)

Up to the First Plan Approach towards imports was liberal. During Second Plan and aftermath
policy of import restriction was adopted. Given the acute shortage of foreign exchange most of
the time government opted for direct allocation of foreign exchange among different users and
uses through import licences.

On the side of imports, the principal policy measure taken with devaluation was the
announcement of a liberal import policy for 59 priority industries under which arrangements
were made to meet their requirements for raw materials, components and spares in full (initially
for six months). The import policy for small-scale industrial units making the same products as
the priority industries was also substantially liberalised. The import policy introduced in 1966-
67 was continued in its basic essentials in the following two years. The policy for 1967-68 was
made need-based and production- oriented and provided for the continuation of the preferential
treatment for the 59 priority industries. The policy for 1968-69 placed 260 items or groups of
items on the banned list since these commodities could be supplied in sufficient quantity from
domestic production. Imports of another 197 items were allowed to actual users on a restricted
basis as the domestic production of these items had increased substantially.

!
Caution The policy of import restriction was pursued up to 1977-78. Since 1978 and up to
early 1980s policy of import substitution was followed. From 1985 onwards liberalization
policy was initiated.
According to Rajesh Mehta ("Trade Policy Reforms, 1991-92 to 1995-96", EPW, April 12, 1997),
"While the objectives of self-reliance and self-sufficiency influenced the trade policy formulation
in the 1950s and 1960s, the factors like export led growth, improving efficiency and
competitiveness of Indian industries prevailed upon the trade policy-making during the late
1970s and the early 1980s."

The period of first three Five Year Plans was characterized by an essentially passive export
policy, though some steps to increase exports were undertaken in the Third Plan. To increase
exports, the Government devalued rupee in June 1965. The post devaluation period was
accompanied by a substantial elimination of export subsidies. During the period of 1973 to early
1980s, exports were accorded a high priority. Since late 1980s export promotion policy was
initiated. Incentives for export production were enhanced.
In order to bring domestic prices in line with external prices, to restore and enhance the
competitive power of exports, and to provide a solution to the country's trade and payments
problems, the per value of the rupee was reduced by 36.5 per cent on June 6, 1966, involving a
rise of 57.5 per cent in the price of foreign exchange in terms of Indian rupees. Along with
devaluation, the existing special export promotion schemes providing import entitlements
against exports and the scheme for tax credit certificates were abolished. Moreover, in order to
protect the unit values of exports in terms of foreign exchange, export duties were levied on a
number of commodities, mostly agricultural commodities and agriculture-based manufactures.
A variety of additional measures were taken to promote exports. A liberal import policy was
announced for 59 priority industries, including a number of export-oriented industries. A new
import replenishment scheme enabled registered exporters to obtain raw materials, components
and spares against export of specified products. It was decided to provide cash assistance for
exports of selected products with a good export potential. A scheme for the supply of steel at

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