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TABLE OF CONTENTS GENERAL AGREEMENT ON TRADE IN SERVICES (GATS).........................................3 History................................................................................................................ 3 Purpose of the GATS........................................................................................... 4 Services.............................................................................................................. 6 Cross-border supply.............................................................................................. 6 Consumption abroad.............................................................................................. 6 Commercial presence............................................................................................. 6 Presence of natural persons...................................................................................... 6 Four modes of supply...................................................................................... 7 Basic obligations under the GATS.......................................................................8 Transparency:...................................................................................................... 8 Market Access:..................................................................................................... 9 National Treatment:............................................................................................... 9 “Built-in agenda” of the GATS...........................................................................10 Criticism........................................................................................................... 14 FOREIGN TRADE POLICY....................................................................................... 16 (2015-2020)......................................................................................................... 16 FOREIGN TRADE POLICY....................................................................................... 17 1. Introduction.................................................................................................. 17 2. The pre-reform period................................................................................... 18 2.1 Import policy trends................................................................................18 2.2 Export policy trends................................................................................19 3. THE POST REFORM-PERIOD..........................................................................20 3.1. Freer Imports and Exports......................................................................21 3.2. Rationalisation of Tariff Structure...........................................................21 3.3. Decanalisation........................................................................................ 21 3.4. Devaluation and Convertibility of Rupee on Current Account.................21 3.5. Trading Houses....................................................................................... 22 3.6. Special Economic Zones.........................................................................22 3.7. EOU Scheme........................................................................................... 23 3.8. Agriculture Export Zones........................................................................23 3.9. Market Access Initiative Scheme............................................................24 3.10. Focus on Service Exports......................................................................24

3.11. Concessions and Exemptions...............................................................24 4. FOREIGN TRADE POLICY 2015-2020.............................................................26 4.1 Highlights of the foreign trade policy 2015-2020.......................................26 Digital incentives........................................................................................... 26 Trade facilitation............................................................................................ 26 Merchandise exports from india scheme (meis)............................................26 E-Commerce:................................................................................................. 27 Service export from India scheme (seis).......................................................27 Status holder................................................................................................. 28 Advance authorisation scheme.....................................................................28 Export promotion capital goods scheme.......................................................28 Export oriented unit scheme.........................................................................29 Quality complaints and trade disputes..........................................................29 NEWSPAPER ARTICLES......................................................................................... 30 REFERENCES........................................................................................................ 38

GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade. All members of the WTO are signatories to the GATS. The basic WTO principle of most favoured nation (MFN) applies to GATS as well. However, upon accession, Members may introduce temporary exemptions to this rule. History

Before the WTO's Uruguay Round negotiations began in 1986, public services such as healthcare, postal services, education, etc. were not included in international trade agreements. Most such services have traditionally been classed as domestic activities, difficult to trade across borders, not withstanding the fact that for example educational services have been "exported" for as long as universities have been open to international students. Nevertheless, foreign participation has existed in many countries prior to the GATS.

Nonetheless, most service sectors—in particular, international finance and maritime transport—has been largely open for centuries, as necessary components of merchandise trade. Other large sectors have undergone fundamental technical and regulatory changes in recent decades, opening them to private commercial participation and reducing barriers to entry. The development of information technologies and the internet have expanded the range of internationally tradeable service

products to include a range of commercial activities such as medicine, distance learning, engineering, architecture, advertising and freight forwarding.

While the overall goal of the GATS is to remove barriers to trade, members are free to choose which sectors are to be progressively "liberalised", i.e. marketised and privatised, under which mode of supply a particular sector would be covered under, and to what extent to which liberalisation will occur over a given period of time. Members' commitments are governed by a "ratchet effect", meaning that commitments are one-way and should not be wound back once entered into. This reason for this is the creation of a stable trading climate. Article XXI allows Members to withdraw commitments and so far two members have used this option (USA and EU). In November 2008, Bolivia notified that it will withdraw its health services commitments. Some activist groups consider that the GATS risks undermining the ability and authority of governments to regulate commercial activities within their boundaries, with the effect of ceding power to business interests over the interests of citizens. In 2003 'GATS watch' network published a critical statement which was supported in 2003 by over 500 organisations in 60 countries. Purpose of the GATS

The creation of the GATS was one of the landmark achievements of the Uruguay Round, whose results entered into force in January 1995. The GATS was inspired by essentially the same objectives as its counterpart in merchandise trade, the General Agreement on Tariffs and Trade (GATT): creating a credible and reliable system of international trade rules; ensuring fair and equitable treatment of all participants

(principle of non-discrimination); stimulating economic activity through guaranteed policy bindings; and promoting trade and development through progressive liberalization. While services currently account for over 60 percent of global production and employment, they represent no more than 20 per cent of total trade (BOP basis). This — seemingly modest — share should not be underestimated, however. Many services, which have long been considered genuine domestic activities, have increasingly become internationally mobile.

This trend is likely to continue, owing to the introduction of new transmission technologies (e.g. electronic banking, tele-health or tele-education services), the opening up in many countries of long-entrenched monopolies (e.g. voice telephony and postal services), and regulatory reforms in hitherto tightly regulated sectors such as transport. Combined with changing consumer preferences, such technical and regulatory innovations have enhanced the “tradability” of services and, thus, created a need for multilateral disciplines. The creation of the GATS was one of the landmark achievements of the Uruguay Round, whose results entered into force in January 1995. The GATS was inspired by essentially the same objectives as its counterpart in merchandise trade, the General Agreement on Tariffs and Trade (GATT): creating a credible and reliable system of international trade rules; ensuring fair and equitable treatment of all participants (principle of non-discrimination); stimulating economic activity through guaranteed policy bindings; and promoting trade and development through progressive liberalization. While services currently account for over 60 percent of global production and employment, they represent no more than 20 per cent of total trade (BOP basis). This — seemingly modest — share should not be underestimated, however. Many services,

which have long been considered genuine domestic activities, have increasingly become internationally mobile. This trend is likely to continue, owing to the introduction of new transmission technologies (e.g. electronic banking, tele-health or teleeducation services), the opening up in many countries of longentrenched monopolies (e.g. voice telephony and postal services), and regulatory reforms in hitherto tightly regulated sectors such as transport. Combined with changing consumer preferences, such technical and regulatory innovations have enhanced the “tradability” of services and, thus, created a need for multilateral disciplines. All WTO Members, some 140 economies at present, are at the same time Members of the GATS and, to varying degrees, have assumed commitments in individual service sectors.

Services

The GATS applies in principle to all service sectors, with two exceptions. Article I (3) of the GATS excludes “services supplied in the exercise of governmental authority”. These are services that are supplied neither on a commercial basis nor in competition with other suppliers. Cases in point are social security schemes and any other public service, such as health or education that is provided at non-market conditions. Further, the Annex on Air Transport Services exempts from coverage measures affecting air traffic rights and services directly related to the exercise of such rights. The GATS distinguishes between four modes of supplying services: cross-border trade, consumption abroad, commercial presence, and presence of natural persons.

Cross-border supply is defined to cover services flows from the territory of one Member into the territory of another Member (e.g. banking or architectural services transmitted via telecommunications or mail); Consumption abroad refers to situations where a service consumer (e.g. tourist or patient) moves into another Member's territory to obtain a service; Commercial presence implies that a service supplier of one Member establishes a territorial presence, including through ownership or lease of premises, in another Member's territory to provide a service (e.g. domestic subsidiaries of foreign insurance companies or hotel chains); and Presence of natural persons consists of persons of one Member entering the territory of another Member to supply a service (e.g. accountants, doctors or teachers). The Annex on Movement of Natural Persons specifies, however, that Members remain free to operate measures regarding citizenship, residence or access to the employment market on a permanent basis.

Four modes of supply The GATS agreement covers four modes of supply for the delivery of services in cross-border trade: Criteria

Mode 1: Service delivered within the Cross-border territory of the Member, supply from the territory of another Member

Supplier Presence Service supplier not present within the territory of the

Service delivered outside Mode 2: the territory of the Member, Consumption in the territory of another member abroad Member, to a service consumer of the Member Service delivered within the Mode 3: territory of the Member, Commercial through the commercial presence Service supplier presence of the supplier present within the territory of Service delivered within the the Member Mode 4: territory of the Member, with Presence of a supplier present as a natural natural person person Note: From the document MTN.GNS/W/124, available on the World Trade Organization Website, posted courtesy of ISTIA

Basic obligations under the GATS

Obligations contained in the GATS may be categorized into two broad groups: General obligations, which apply directly and automatically to all Members and services sectors, as well as commitments concerning market access and national treatment in specifically designated sectors. Such commitments are laid down in individual country schedules whose scope may vary widely between Members. The relevant terms and concepts are similar, but not necessarily identical to those used in the GATT; for example, national treatment is a general obligation in goods trade and not negotiable as under the GATS

(a) General obligations MFN Treatment: Under Article II of the GATS, Members are held to extend immediately and unconditionally to services or services suppliers of all other Members “treatment no less favourable than that accorded to like services and services suppliers of any other country”. This amounts to a prohibition, in principle, of preferential arrangements among groups of Members in individual sectors or of reciprocity provisions which confine access benefits to trading partners granting similar treatment. Derogations are possible in the form of so-called Article IIExemptions. Members were allowed to seek such exemptions before the Agreement entered into force. New exemptions can only be granted to new Members at the time of accession or, in the case of current Members, by way of a waiver under Article IX:3 of the WTO Agreement. All exemptions are subject to review; they should in principle not last longer than 10 years. Further, the GATS allows groups of Members to enter into economic integration agreements or to mutually recognize regulatory standards, certificates and the like if certain conditions are met. Transparency: GATS Members are required, inter alia, to publish all measures of general application and establish national enquiry points mandated to respond to other Member's information requests. Other generally applicable obligations include the establishment of administrative review and appeals procedures and disciplines on the operation of monopolies and exclusive suppliers. (b) Specific Commitments Market Access: Market access is a negotiated commitment in specified sectors. It may be made subject to various types of

limitations that are enumerated in Article XVI(2). For example, limitations may be imposed on the number of services suppliers, service operations or employees in the sector; the value of transactions; the legal form of the service supplier; or the participation of foreign capital. National Treatment: A commitment to national treatment implies that the Member concerned does not operate discriminatory measures benefiting domestic services or service suppliers. The key requirement is not to modify, in law or in fact, the conditions of competition in favour of the Member's own service industry. Again, the extension of national treatment in any particular sector may be made subject to conditions and qualifications. Members are free to tailor the sector coverage and substantive content of such commitments as they see fit. The commitments thus tend to reflect national policy objectives and constraints, overall and in individual sectors. While some Members have scheduled less than a handful of services, others have assumed market access and national treatment disciplines in over 120 out of a total of 160-odd services. The existence of specific commitments triggers further obligations concerning, inter alia, the notification of new measures that have a significant impact on trade and the avoidance of restrictions on international payments and transfers.

“Built-in agenda” of the GATS

The GATS sets out a work programme which is normally referred to as the “built-in” agenda. The programme reflects both the fact that not all services-related negotiations could be concluded within the time frame of the Uruguay Round, and that Members have already committed themselves, in Article XIX, to successive rounds aimed at achieving a progressively higher level of liberalization (see below). In addition, various GATS Articles provide for issue-specific negotiations intended to define rules and disciplines for domestic regulation (Article VI), emergency safeguards (Article X), government procurement (Article XIII), and subsidies (Article XV). These negotiations are currently under way. At the sectoral level, negotiations on basic telecommunications were successfully concluded in February 1997 and negotiations in the area of financial services in mid-December 1997. In these negotiations, Members achieved significantly improved commitments with a broader level of participation. Why was it necessary to introduce, apart from the traditional concept of cross-border trade, three additional modes of supply? The supply of many services is possible only through the simultaneous physical presence of both producer and consumer. There are thus many instances in which, in order to be commercially meaningful, trade commitments must extend to cross-border movements of the consumer, the establishment of a commercial presence within a market, or the temporary movement of the service provider himself. Does the GATS affect a Member's ability to pursue national policy objectives? The GATS expressly recognizes the right of Members to regulate the supply of services in pursuit of their own policy objectives, and does not seek to influence these objectives. Rather, the Agreement establishes a framework of rules to ensure that

services regulations are administered in a reasonable, objective and impartial manner and do not constitute unnecessary barriers to trade. What information is contained in services “schedules”? Each WTO Member is required to have a Schedule of Specific Commitments which identifies the services for which the Member guarantees market access and national treatment and any limitations that may be attached. The Schedule may also be used to assume additional commitments regarding, for example, the implementation of specified standards or regulatory principles. Commitments are undertaken with respect to each of the four different modes of service supply. Most schedules consist of both sectoral and horizontal sections. The “Horizontal Section” contains entries that apply across all sectors subsequently listed in the schedule. Horizontal limitations often refer to a particular mode of supply, notably commercial presence and the presence of natural persons. The “Sector-Specific Sections” contain entries that apply only to the particular service.

When did Members' specific commitments enter into force? The majority of current commitments entered into force on 1 January 1995, i.e. the date of entry into force of the WTO. New commitments have since been scheduled by participants in extended negotiations (see below) and by new Members that have joined the WTO. Can specific commitments be withdrawn or modified? Pursuant to Article XXI, specific commitments may be modified subject to certain procedures. Countries which may be affected by such modifications can request the modifying Member to

negotiate compensatory adjustments; these are to be granted on an MFN basis.

Are there any specific exemptions in the GATS to cater for important national policy interests? The GATS permits Members in specified circumstances to introduce or maintain measures in contravention of their obligations under the Agreement, including the MFN requirement or specific commitments. The relevant Article provides cover, inter alia, for measures necessary to: protect public morals or maintain public order; protect human, animal or plant life or health; or secure compliance with laws or regulations not inconsistent with the -Agreement including, among others, measures necessary to prevent deceptive or fraudulent practices. Moreover, the Annex on Financial Services entitles Members, regardless of other provisions of the GATS, to take measures for prudential reasons, including for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system. Finally, in the event of serious balance-of-payments difficulties Members are allowed to temporarily restrict trade, on a non-discriminatory basis, despite the existence of specific commitments.

Are there special provisions for developing countries? Developing country interests have inspired both the general structure of the Agreement as well as individual Articles. In

particular, the objective of facilitating the increasing participation of developing countries in services trade has been enshrined in the Preamble to the Agreement and underlies the provisions of Article IV. This Article requires Members, inter alia, to negotiate specific commitments relating to the strengthening of developing countries' domestic services capacity; the improvement of developing countries' access to distribution channels and information networks; and the liberalization of market access in areas of export interest to these countries. While the notion of progressive liberalization is one of the basic tenets of the GATS, Article XIX provides that liberalization takes place with due respect for national policy objectives and Members' development levels, both overall and in individual sectors. Developing countries are thus given flexibility for opening fewer sectors, liberalizing fewer types of transactions, and progressively extending market access in line with their development situation. Other provisions ensure that developing countries have more flexibility in pursuing economic integration policies, maintaining restrictions on balance of payments grounds, and determining access to and use of their telecommunications transport networks and services. In addition, developing countries are entitled to receive technical assistance from the WTO Secretariat.

Are the results of the extended sectoral negotiations in telecommunications and financial services legally different from other sector-specific commitments? No. The results of sectoral negotiations are new specific commitments and/or MFN exemptions related to the sector concerned. Thus, they are neither legally independent from other sector-specific commitments nor constitute agreements different from the GATS. The new commitments and MFN exemptions have been incorporated into the existing Schedules and Exemption Lists by way of separate Protocols to the GATS.

Why was a new services round necessary? In services, the Uruguay Round was only a first step in a longerterm process of multilateral rule-making and trade liberalization. Observers tend to agree that, while the negotiations succeeded in setting up the principle structure of the Agreement, the liberalizing effects have been relatively modest. Barring exceptions in financial and telecommunication services, most schedules have remained confined to confirming status quo market conditions in a relatively limited number of sectors. This may be explained in part by the novelty of the Agreement and the perceived need of Members to gather experience before considering wider and deeper commitments. Moreover, many administrations needed time to develop the necessary regulation — including quality standards, licensing and qualification requirements — that ensures that external liberalization is compatible with, and conducive to, core policy objectives (quality, equity, etc.) in socially or infrastructurally important services. More than ten years have passed since the Agreement's inception, and the economic importance of services — in terms of production, income, employment and trade — has continued to rise. There thus appears ample scope for new and/or improved commitments in new negotiations. Criticism

The GATS agreement has been criticized for tending to substitute the authority of national legislation and judiciary with that of a GATS Disputes Panel conducting closed hearings. WTO member-government spokespersons are obliged to dismiss such criticism because of prior commitment to perceived benefits of prevailing commercial principles of competition and 'liberalisation'.

While national governments have the option to exclude any specific service from liberalisation under GATS, they are also under pressure from international business interests to refrain from excluding any service "provided on a commercial basis". Important public utilities such as water and electricity most commonly involve purchase by consumers and are thus demonstrably "provided on a commercial basis". The same may be said of many health and education services which are sought to be 'exported' by some countries as profitable industries. This definition defines virtually any public service as being "provided on a commercial basis" and is already extending into such areas as police, the military, prisons, the justice system, public administration, and government. Over a fairly short time perspective, this could open up for the privatisation or marketisation of large parts, and possibly all, of what today are considered public services currently available for the whole population of a country as a social entitlement, to be restructured, marketised, contracted out to for-profit providers, and eventually fully privatised and available only to those who can pay for them. This process is currently far advanced in most countries, usually (and intentionally) without properly informing or consulting the public as to whether or not this is what they desire.

FOREIGN TRADE POLICY (2015-2020)

FOREIGN TRADE POLICY 1. Introduction

Foreign Trade has been one of the most significant determinants of economic development in a country. The foreign trade of a country consists of inward and outward movement of goods and services, which result into outflow and inflow of foreign exchange from one country to another country. During present times, International trade is a vital part of development strategy and it can be an effective instrument of economic growth, employment generation and poverty alleviation in an economy. According to Traditional Pattern of development show that resources are transferred from the agricultural to the manufacturing sector and then into services - sector in an economy. The Process of globalization has got momentum through the process of economic Integration, and in the expansion of the volume of International Trade. India has been a relatively newcomer to the process of expansion of International Trade since its opening up to world trade only began after the crisis in 1991. The opening up to International Trade should be seen as a crucial aspect of the new approach to economic Policy and as an Integral part of the process of reforms. In 1991, the government introduced some changes in its Policy on trade, foreign Investment, Tariffs and Taxes under the name of "New Economic Reforms". The main focus of these reforms has been on Liberalization, openness and export promotion activity. India's foreign Trade has export significantly changed in the Post - reforms period. In absolute terms, Trade Volume rose and the composition of exports has undergone several significant changes. In Postreform Period, the major contributor to exports growth has been the manufacturing sector.

2. The pre-reform period

2.1 Import policy trends A progressive tightening up of import policy took place in 1957. The Open General License (except for poultry, fish, vegetables, etc., from Pakistan) discontinued; instead limited quotas in respect of essential commodities were granted to importers on the basis of their actual imports during 1952-56. No fresh licenses were issued in this period to established importers and the conditions of issue of capital goods licenses on deferred payment basis were made more stringent. The licenses were given keeping in view the austerity measures and imports of consumer’s goods being cut drastically and that of raw materials and intermediate products being limited to the minimum necessary for the maintenance of production. Capital goods licensing continued to be confined to the highest priority programmes. As a result, the imports came down drastically. In the late 1950s, the government imports witnessed a continuous upward trend, which included food imports. The balance of payments position in 1959-60 was comparatively better than the previous years. There was an increase in exports as also a reduction in imports. In 1960-61, both government and private imports showed an increase. Imports of food grains, raw cotton and metals contributed significantly. During this period, the government set up 12 Export Promotion Councils to promote exports in respective areas and special export schemes were also devised and operated. In some cases, larger import licenses were issued as part of export production. The balance of payments once again came under considerable pressure in 1964-65 due to rising debt service burden, repayment to the IMF, increase in imports of food and goods for development. In the pre-devaluation period of 1966, all imports

were either subject to discretionary import licensing or were “canalized “by monopoly government trading organizations, with some flexibility provided by changing OGL lists. The products on OGL lists could only be imported by actual users and could not be resold: they were entirely raw materials, components or machines which were not domestically produced and required by domestic producers. In this system tariffs lost most of their relevance for regulating the quantity of imports and for protecting local industries: their main function was to raise revenue and to transfer quota rents from or to the recipients of import licenses. After 1956, import licensing was regularly tightened in response to steadily worsening foreign exchange situation, and tariffs were increased very high levels by early 1966. In the late 1970s and early 1980s, the trade regime was based on a complex system of licensing. India’s trade policy heavily relied on quotas rather than on tariffs. Imports were regulated through a licensing system without any policy prescriptions. However, import licenses allocated reflect two major criteria: 1) the principle of ‘essentiality’, and 2) the principle of ‘indigenous non-availability’. Thus, the imports, in terms of both magnitude and composition, were to be permitted only if the firm in question certified to the government that they were ‘essential’ (as inputs or equipment for production). 2.2 Export policy trends Exports were largely neglected during the first and the second five-year plans, which was justified on the ground that demand for Indian exports was inelastic. Whilst the world merchandise export was growing at 6.3 per cent per annum during the 1950s, exports from India stagnated. As the world merchandise exports expanded relatively faster during the 1960s at 8.8 per cent per annum, the growth rate of India’s exports improved somewhat to 3.6 per cent per annum.

Clearly, the country failed to make the best use of the trade possibilities available during the 1950s and 1960s. The share of India’s exports in world exports declined sharply from 1.4 per cent during the 1950s to 0.9 per cent during the 1960s. In order to offset the detrimental effects of overvalued exchange rates and other government policies on exports, various implicit and explicit measures of export subsidisation have been adopted. World exports registered a hefty growth rate of 20.4 per cent per annum during the 1970s. Buoyancy of world demand and a relatively favourable domestic policy provided an atmosphere conducive to a rapid growth of exports from India. Thus, India’s exports of merchandise and services grew at the annual rate of about 18 per cent and 27 per cent respectively during the 1970s. Joshi and Little (1994), while recognising the importance of world demand, attributed the export growth of the 1970s mainly to the depreciation of the real effective exchange rate (REER), provision of export subsidy and a relatively liberal import policy for export production. Despite the high growth, India’s share in world merchandise exports declined to 0.5 per cent during the 1970s from 0.9 per cent during the 1960s. This is not surprising since the growth rate of world exports remained higher than that of India during the 1970s. The export boom of the 1970s, however, could not be maintained during the first half of the 1980s. As the growth rate of world exports turned negative in the aftermath of the second oil price hike, India’s exports decelerated sharply. During the second half of the 1980s, however, the world economy recovered and India’s exports grew at a healthy pace (17.8 per cent). According to Joshi and Little (1994), there was a genuine improvement in the export competitiveness of India during this period due to a major depreciation of the REER and increased

export subsidies. This period also witnessed some doses of industrial deregulation and liberalisation of capital goods imports. 3. THE POST REFORM-PERIOD

The massive trade liberalisation measures adopted after 1991 mark a major departure from the relatively protectionist trade policies pursued in earlier years. The current trade policy reforms seem to have been guided mainly by the concerns over globalisation of the Indian economy, improving competitiveness of its industry, and adverse balance of payments situation. Main features of trade policies (trade reforms) since 1991 are as follows: 3.1. Freer Imports and Exports Substantial simplification and liberalisation has been carried out in the reform period. The tariff line wise import policy was first announced on March 31, 1996 and at that time itself 6,161 tariff lines were made free. Till March 2000, this total had gone up to 8,066. The Exim Policy 2000-01 removed quantitative restrictions on 714 items and the Exim Policy 2001- 02 removed quantitative restrictions on the balance 715 items. Thus, in line with India’s commitment to the WTO, quantitative restrictions on all import items have been withdrawn. 3.2. Rationalisation of Tariff Structure Acting on the recommendations of the Chelliah Committee, the government has, over the years, reduced the maximum rate of duty. The 1993-94, Budget had reduced it from 110 per cent to 85 per cent. The successive Budgets have reduced it further in stages. The peak import duty on non-agricultural goods is now only 12.5 per cent.

3.3. Decanalisation A large number of exports and imports used to be canalised through the public sector agencies in India. The supplementary trade policy announced on August 13, 1991 reviewed these canalised items and decanalised 16 export items and 20 import items. The 1992-97 policy decanalised imports of a number of items including newsprint, non-ferrous metals, natural rubber, intermediates and raw materials for fertilisers. However, 8 items (petroleum products, fertilisers, edible oils, cereals, etc.) were to remain canalised. The Exim Policy, 200102 put 6 items under special list — rice, wheat, maize, petrol, diesel and urea. Imports of these items were to be allowed only through State trading agencies. 3.4. Devaluation and Convertibility of Rupee on Current Account The government made a two- step downward adjustment of 1819 per cent in the exchange rate of the rupee on July 1 and July 3, 1991. This was followed by the introduction of LERMS i.e., partial convertibility of rupee in 1992-93, full convertibility on the trade account in 1993-94 and full convertibility on the current account in August 1994. Substantial capital account liberalisation measures have also been announced. The exchange rate of the rupee is now market-determined. Thus, exchange rate policy in India has evolved from the rupee being pegged to a market related system (since March 1993). 3.5. Trading Houses The 1991 policy allowed export houses and trading houses to import a wide range of items. The government also permitted the setting up of trading houses with 51 per cent foreign equity for the purpose of promoting exports.

The 1994-95 policy introduced a new category of trading houses called Super Star Trading Houses. These houses are entitled to membership of apex consultative bodies concerned with trade policy and promotion, representation in important business delegations, special permission for overseas trading and special import licences at enhanced rate. 3.6. Special Economic Zones A scheme for setting up Special Economic Zones (SEZs) in the country to promote exports was announced by the government in the Export and Import Policy of March 31, 2000. The SEZs are to provide an internationally competitive and hassle-free environment for exports and are expected to give a boost to the country’s exports. The Policy has provided provisions for setting up SEZs in the public sector, joint sector or by State governments. It was also announced that some of the existing Export Processing Zones (EPZs) would be converted into Special Economic Zones. Some of the distinctive features of SEZ scheme are: (i) A designated duty-free enclave to be treated as foreign territory for trade operations and duties and tariffs; (ii) SEZ units could be for manufacturing services; (iii) No routine examination of export and import cargo by customs; (iv) Sale in domestic market on full duty and import policy in force; (v) SEZ units to be positive net foreign exchange earners in three years; (vi) No fixed wastage norms;

(vii) Duty-free goods to be utilised within the approval period of 5 years; (viii) Subcontracting of part of production and production process allowed for all sectors, including jewellery units; (ix) 100 per cent foreign direct investment through automatic route in the manufacturing sector; (x) 100 per cent income tax exemption for 5 years and 50 per cent for 2 years thereafter and 50 per cent of the ploughed back profit for the next 3 years; (xi) External commercial borrowing through automatic route, etc. 3.7. EOU Scheme The Export Oriented Units (EOUs) scheme introduced in early 1981 is complementary to the SEZ scheme. It offers a wide option in locations with reference to factors like source of raw materials, ports of export, hinterland facilities, and availability of technological skills, existence of an industrial base and the need for a larger area of land for the project. The EOUs have put up their own infrastructure. 3.8. Agriculture Export Zones The Exim Policy 2001 introduced the concept of Agri- Export Zones (AEZs) to give primacy to promotion of agricultural exports and effect a reorganisation of our export efforts on the basis of specific products and specific geographical areas. The scheme is centered on the cluster approach of identifying the potential products, the geographical region in which these products are grown and adopting an end-to-end approach of integrating the entire process right from the stage of production till it reaches the market.

The AEZs would have the state-of-the-art services such as prepost harvest treatment and operations, plant protection, processing, packaging, storage and related research and development. The exporters in these zones can avail of the various export promotion schemes under the Exim Policy including recognition as a status holder. 3.9. Market Access Initiative Scheme Market Access Initiative Scheme was launched in 2001- 02 for undertaking marketing promotion efforts abroad. The key features of the scheme are in- depth market studies for select products in chosen countries to generate data for promotion of exports from India, assist in promotion of India, Indian products and Indian brands in the international market by display through showrooms and warehouses set up in rental premises by identified exporters, display in identified leading departmental stores total exhibitions trade fairs, etc. The scheme shall also assist quality up gradation of products as per requirements of overseas markets, intensive publicity campaigns, etc. 3.10. Focus on Service Exports The amended Export-Import Policy, 2002-07, announced on March 31, 2003, specifically emphasized service exports as an engine of growth. It, accordingly, announced a number of measures for the promotion of exports of services. For instance, import of consumables, office and professional equipment, spares and furniture upto 10 per cent of the average foreign exchange export earning has been allowed. The advance licence system has been extended to the tourism sector. Under this, firms will be allowed duty-free import of consumables and spares upto 5 per cent of their average

foreign exchange earnings of the previous three years, subject to actual user condition. 3.11. Concessions and Exemptions A large number of tax benefits and exemptions have been granted during the 1990s to liberalise imports and promote exports with the five year Exim Policy 1992-97 and Exim Policy 1997-2002 serving as the basis for such concessions. These policies, in turn, have been reviewed and modified on an annual basis in the Exim policies announced every year. Successive annual Union Budgets have also extended a number of tax benefits and exemptions to the exporters. These include reduction in the peak rate of customs duty to 15 per cent; significant reduction in duty rates for critical inputs for the Information Technology sector, which is an important export sector; grant of concessions for building infrastructure by way of 10-years tax holiday to the developers of SEZs; Facilities and tax benefits to exporters of goods and merchandise; reduction in the customs duty on specified equipment for ports and airports to 10 per cent to encourage the development of world class infrastructure facilities, etc. A number of tax benefits have also been announced for the three integral parts of the ‘convergence revolution’ the Information Technology sector, the Telecommunication sector, and the Entertainment industry.

4. FOREIGN TRADE POLICY 2015-2020 4.1 Highlights of the foreign trade policy 2015-2020

Digital incentives  For reward schemes, facility of uploading digitally signed documents by CA/CS/CoA being developed.  Uploading of documents for Chapter 4 and Chapter 5 of FTP in the next phase.  Facility to upload documents in Exporter/Importer Profile. No need to submit permanent records/ documents repeatedly once uploaded.  Landing documents of export consignment as proofs for notified market can be digitally uploaded.  Online inter-ministerial consultations for approval of export of SCOMET items, Norms fixation, Import/ Export authorisation. Trade facilitation  Facility of 24*7 customs clearance for specified imports/exports has been made available at 17 airports and 18 sea ports across the country.  Time release Study by CBEC for measuring actual performance.  3 mandatory documents for exports and imports.  Online complaint Registration and Monitoring.  Online filling for exports from EDI ports: Hard copy of application/documents dispensed with.  Single window at customs.

Merchandise exports from india scheme (meis)  Schemes such as FPS/MLFPS/FMS/AIIS/IEIS and VKGUY have been merged into a single scheme viz., MEIS with no conditions attached thereof.  MEIS Entitlement: 2%/3%/5% of FOB value of notified goods exported to notified markets.  FOB value of exports in free foreign exchange or FOB value of exports given in the Shipping Bills in free foreign exchange, whichever is less, shall be considered.  Supplies made from DTA units to SEZ units which were eligible for FPS benefit hitherto have now been specifically included in the ineligible categories.  The ineligible categories of sectors have been expanded. E-Commerce:  Exports of notified goods using e-commerce upto Rs. 25,000 eligible for MEIS.  Can be exported in manual mode from FPO at Delhi, Mumbai and Chennai.  Also through courier terminal at Delhi, Mumbai and Chennai airports.  Required to submit express operator landing certificate/ online web tracking reports for MEIS.  Categories need to be expanded with inclusion of all garments. Service export from India scheme (seis)  Only Mode 1 and Mode 2 services eligible.  Under SFIS, the benefit was to ‘Indian Service Providers’ while SEIS applies to ‘Service Providers located in India’.  Service provider to have active IEC when rendering services.  Export turnover of services unit under SEZ ineligible.  Scrip to be used for imports of goods, service tax payment, EO default, Composition fee and fee.

 The entitlement rates under SEIS are substantially lower than to the entitlement of 10% under SFIS scheme.  The list of notified services is largely the same as in case of the SFIS scheme. However, the list of notified services and the rates of rewards will be reviewed after 30.09.2015. Status holder  Change in name: New name to be reflected at all places.  Criteria in USD One Star Export house : US$ 3 Million Two Star Export house : US$ 25 Million Three Star Export house : US$ 100 Million Four Star Export house : US$ 500 Million Five Star Export house : US$ 2000 Million  Two star and above export houses shall be permitted to establish Export Warehouses.  Three star and above export houses shall be entitled to get benefit of Accredited Clients Programme as per the guidelines of CBEC.  The status holders would be entitled to preferential treatment and priority in handling of their consignments by the concerned agencies. Advance authorisation scheme  Imports under Advance Authorisation exempted from Transition Product Specific Safeguard Duty also.  Eligibility for Authorisation on self declared norms reduced from 500% to 300% for status holders.  Non status holder to be eligible for 300% or Rs 10 Cr whichever more.  A detailed list of items issued which are in-eligible for importation on self declaration basis.

Export promotion capital goods scheme  For indigenous sourcing of Capital Goods, the specific Export Obligation reduced by 25% of the EO stipulated.  The limit on value of spares imported has now been relaxed.  EO to be fulfilled through goods manufactured from EPCG machine.  Export of restricted goods under the authorization now allowed, subject to the approval from Exim Facilitation Committee.  Validity of the authorization is now limited to 18 months from the date of issue of such authorization. Export oriented unit scheme  FTP permits an EOU, to export a prohibited item on a case to case basis, provided raw materials are imported and there is no procurement of raw material from DTA.  EOU units to achieve Positive NEE cumulatively in 5 years.  EOUs, EHTPs, STPs have been allowed to share infrastructural facilities among themselves after getting approval from Inter-Ministerial standing Committee.  Inter unit transfer of goods/services have been allowed among EOUs, EHTPs, STPs and BTPs to facilitate group of those units to source inputs centrally in order to obtain bulk discounts.  EOUs have been allowed facility to set up warehouses near the port of export. Quality complaints and trade disputes  Anew chapter on “Quality Complaints and Trade Disputes” introduced.  For resolving such disputes at a faster pace, a Committee on Quality Complaints and Trade Disputes is being constituted in22 offices with members from EPCs/FIEO/APEDA/EICs.

 Quality Complaints and Trade Disputes proceedings will only be reconciliatory in nature. Aggrieved part is free to pursue any legal recourse.

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