EXIM Policy & Capital Account Convertibility

Presented by: (Group 7) Meenakshi Nigam (19) Smriti Krishna (43) Ratika Aggarwal (91) Kanupriya Madan (117) Ashish (153)

Flow of the presentation

EXIM Policy Objectives of EXIM policy EXIM policy

1997-2002 2004-2009 2009-2014

Capital Account Convertibility

EXIM Policy
Set of guidelines and instructions established by the DGFT in matters related to the import and export of goods in India.

Also known as Foreign Trade Policy ,aims at developing export potential, improving export performance and encouraging foreign trade.

OBJECTIVES
Establish framework for globalization. Encourage the attainment of high and internationally accepted standards of quality. To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components,' consumables and capital goods required for augmenting production. To enhance the techno local strength and efficiency of Indian agriculture, industry and services, thereby, improving their competitiveness. To generate new employment. To provide quality consumer products at reasonable prices.

Exim Policy 1997 -2002

Globalization of Indian Economy. Impact on the Indian Industry. Impact on Agriculture. Impact on Self-Reliance.

EXIM Policy 2004-2009

Hon. Shri Kamal Nath minister for Commerce and Industry announced this policy on 31st August, 2004. the duration of the policy was from 1st September, 2004 to 31st March, 2009. Major aim of the policy was to double the global merchandise trade within the policy time period of 5 years.

Highlights of FTP 2004-2009

Semi-urban
Special Focus Initiatives Rural Area

Agriculture: Vishesh Krishi Upaj Yojana and Agri Export Zones Handlooms and Handicrafts: Mark under Market Access Initiatives Scheme and Proposed to Start new SEZ. Gems and Jewellery: Import of gold of 18 carat and above has been permitted under the replenishment scheme

Leather and Footwear : Duty free import entitlement of specified items shall be 5% of FOB value of exports during the preceding year
Export Promotion Scheme:
MAI MDA

Implications of The Foreign Trade 2004-09

Implications on Indian Economy: Implications on Agriculture:
This policy propose to simplify procedures and develop technology and infrastructure. Special Agricultural Produce Scheme has been introduced for promoting the export of fruits, vegetables, flowers, and their value added products. Establishment of Handicraft SEZ and Handicraft Export Promotion Council would promote development of Handloom and Handicraft Industry. This is special thrust area in this policy. Duty free imports of other inputs would give a further boost to this sector
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Implications on Handlooms and Handicraft:

Implications on Gem and Jewellery Sector :

 Implications on Leather and Footwear Industry :

Duty free import as a specified percentage of exports. Exemption on customs duty on equipment for effluent treatment plants would help promoting export form this sector.

Implications on Service Industry :

An exclusive service promotion council has been set up in order to map the opportunities for key services in key market. Develop strategic market access programmes like brand building in co-ordination with sectoral players and recognize nodal bodies of the service industry.

EXIM Policy 2009-2014

Foreign trade policy 2009-2014 incorporates provisions relating to export and import of goods and services, shall come into force with effect from 27th August, 2009 and shall remain up to 31st March, 2014 unless otherwise specified.

It includes
Special focus Initiatives Board of Trade Duty Free Import Authorization(DFIA) Scheme Export Promotional Capital Goods (EPCG) Scheme Special Economic Zone & Free Trade and Warehousing Zones Deemed Exports

Export from North Eastern Region

Market diversification Technological upgradation

Green pruducts

Agriculture

Special Focus Initiatives

Electronics and IT hardware
Handlooms and Handicraft

Marine
Leather and footwear

Gems and Jewellery

Duty Free Import Authorization (DFIA)

Allow duty free imports of inputs, fuel, oil, energy sources which are required for production of export products.

Export Promotion Capital Goods (EPCG)

Zero duty EPCG scheme allows imports of capital goods for pre-production, production and post-production at zero custom duty.

Special Economic Zones/ Trading & Warehousing Zones

Policies related to SEZ & Free trade & warehousing zones is governed by SEZ Act, 2005 & the rules framed there under.

Deemed Export
Those transactions in which the goods supplied do not leave the country and the suppliers in India receives the payment of the goods.

Capital Account Convertibility

Refers to abolishing of all limitations wrt movement of capital from India to different countries across the globe and vice-versa. It also allows the people and companies not only to convert one currency to the other, but also free cross-border movement of those currencies, without the interventions of the law of the country concerned.

WHAT WILL FULL CAC DO?

No restriction for foreigners seeking to buy Indian assets and vice versa. CAC is desirable because of
Reduction in cost of capital Diversify portfolios internationally Induces competition against Indian finance Reduce size of black economy

Pre-requisites for Capital Account Convertibility in India:

the Reserve Bank of India (RBI) recommended methods of converting the Indian Rupee completely. The report submitted by this Committee in the year 1997 proposed a three-year time period (1999-2000) for total conversion of Rupee. However few conditions should be satisfied:
The average rate of inflation should vary between 3% to 5% during the debt-servicing time. Decreasing the gross fiscal deficit to the GDP ratio by 3.5% in 19992000How is CAC different from current account convertibility? Fully dereguleted interest rate structure. Reduction of non-performing assets.

Indian Scenario
Tarapore committee appointment. How open is India's capital account today? What will CAC mean for Indian households and companies?

Reasons for the introduction of CAC in India

To ensure total financial mobility in the country. Helps in the efficient appropriation or distribution of international capital in India. Such allocation of foreign funds in the country helps in equalizing the capital return rates not only across different borders, but also escalates the production levels. Moreover, it brings about a fair allocation of the income level in India as well.

Current Restrictions on Capital Account in India

Limits to Indian companies borrowing abroad Restrictions on foreigners investing in India Restrictions on amount that an FII can hold Purchasing a company is allowed but limits exist on the amount that can be sent.

Benefits of CAC
Increased diversification Lower cost of capital Reduce black economy Higher competition for Indian finance

Dangers of CAC to Indian Economy Huge Inflow and Extreme Outflow Misallocation of Capital Inflows Export of domestic savings Creation of an unequal playing field

Thank you