Composition & Direction of Foreign Trade, Foreign Trade Policy, India’s Foreign Trade Policy, Foreign Trade Policy 2015 – 2020

1. India’s Foreign Trade Policy
© Harshit Ahuja

2. OVER VIEW
 Composition & Direction of Foreign Trade
 Foreign Trade Policy
 India’s Foreign Trade Policy
 Foreign Trade Policy 2015 – 2020

3. Composition Of
Foreign Trade
► Composition of foreign trade means major commodity or
sectors in which India is doing export and import.
► India is a very old participant in world trade.
► Its participation have been promoted by the opening of Suez
Canal and speedy development of the ship building industry
supplemented by the spread of industrial revolution in
Europe and fast expansion of Indian railways.

4. Export Import
Fuels
Chemicals
food grains
Petroleum products
Iron and steel
Fertilizers
Edible Oil
Manufactured goods
Textiles
Gems and Jewellery
Handicraft
Light machinery etc.

5. IMPORTS
 It refers to goods that we buy from other countries.
 At times of independence India was an agrarian economy.
 Partition of our country has brought food shortage because wheat
growing regions vested with Pakistan.
 Hence India need to import in large quantities, food , cotton jute. etc
 With development of economy over these years, there occurred
changes in composition of imports.
 Now, Capital goods like machinery, chemicals, fertilizers, metals,
minerals, petroleum products etc. are imported.

6. exPORTS
 Exports means that we are selling commodities to other countries.
 At the time of independence our exports comprise of agricultural
products like tobacco, spices, raw materials of cotton and jute etc.
 Due to industrialization the proportion of raw materials in our
exports declined.

7. DIRECTION OF
INDIA’S FOREIGN TRADE
 Direction means countries to which India exports its goods
and countries from which it imports.
 Direction of trade also helps to understand the diplomatic
relationship maintained by India with other countries of trade.
 West Europe (28.1 per cent), America (25.4 per cent), Africa
(6.3 per cent) and East Europe (3.1 per cent).
 Direction of foreign trade consists of destination of exports
and sources of our imports.

8. DIRECTION OF
INDIA’S FOREIGN TRADE
 Prior to our Independence when India was under British rule,
much of our trade was done with Britain. Therefore, UK used to
hold the first position in India’s foreign trade.
 However, after Independence, new trade relationships were
established. Now USA has emerged as the most important trading
partner followed by Germany, Japan and UK. India is also
making efforts to increase the exports to other countries also the
direction of India’s exports and imports.

9. Group of countries to which India Exports
OECD OPEC
EASTERN
EUROPE
ASEAN

10. Organization for
Economic Co-operation &
Development (OECD).
USA
Canada
European
Union (EU)
Australia
Japan
Organization of
Petroleum Exporting
Countries (OPEC)
Kuwait
Iran
Iraq
Saudi
Arabia
Eastern
Europe
Romania
Russia
Developing
Nations
China
Hong Kong
South Korea
Singapore
Malaysia

12. Trade Policy
Trade policy refers to the complete framework of laws, regulations,
international agreements, and, negotiating stances adopted by a government
to achieve legally binding market access for domestic firms.
-Walter Goode
The Government has set a long-term vision of making India a major player
in world trade.
Foreign Trade Policy (FTP) provides the basic policy framework of
translating this vision into specific strategies, goals and targets.

13. STRTEGIC OPTIONS FOR TRADE POLICY
► Free Trade Policy
ӝ It does not impose any restriction on the exchange of goods and
services between different countries.
ӝ It involves complete absence of tariffs, quotas, exchange
restrictions, taxes and subsidies on production, factor use and
consumption.
► Protective Trade Policy
ӝ It is pursued by a country seeks to maintain a system of
trade restrictions with the objective of protecting the
domestic economy from the competition of foreign
products.

14. STRTEGIC OPTIONS FOR TRADE POLICY
► Inward looking trade policy(import substitution)
ӝ It stresses the need for a country to evolve its own style of
development and to be the master of its own fate, with restrictions
on the movement of goods, services and people in and out of the
country.
ӝ An inward looking trade policy encourages the development of
indigenous technologies appropriate to a country’s resource
endowment.
► Outward looking trade policy (export-led growth)
ӝ It encourages not only free trade but also the free movement of
capital, workers, enterprises and students, a welcome to the
multinational enterprise, and an open system of communications.

15. INDIA’S
FOREIGN TRADE POLICY
► The foreign Trade of India is guided by the Export-Import (EXIM) policy of the
Government of India and is regulated by the Foreign Trade (Development and
Regulation) Act,1992.
► The Foreign Trade Policy contains various decisions taken by the government in the
sphere of Foreign Trade, i.e., with respect to imports and exports from the country
and more especially export promotion measures, policies and procedures related
thereto.
► It is the set of guidelines and instructions established by DGFT (Directorate General
of Foreign Trade) in matters related to the import and export of goods in India.

16. INDIA’S
FOREIGN TRADE POLICY
► The present foreign trade policy is for the period of 5 years i.e. from 2015 to 2020.
► The Union Commerce Ministry, Government of India announces the
integrated Foreign Trade Policy FTP in every five year. This policy is
updated every year on the 31st of March with some modifications and new
schemes. New schemes come into effect on the first day of financial year i.e.
April 1, every year.
► The Foreign trade Policy which was announced on April 1,2015 is an
integrated policy for the period 2015-2020.

17. Legal Framework for Foreign Trade of
India
ӝ Foreign Trade (Development and Regulation) Act, 1992,
ӝ Foreign Trade (Regulation) Rules 1993
ӝ Foreign Trade (Exemption) Order 1993
ӝ Garments Export Entitlement Policy: 2000-2004,
ӝ Export (Quality Control and Inspection) Act, 1963,
ӝ Customs and Central Excise Duties Drawback Rules, 1995,
ӝ Foreign Exchange Management Act, 1999
ӝ Customs and Central Excise Regulations
ӝ Export and Import Policy - now called Foreign Trade Policy

19. Pre 1991 Trade Policy
Inward Looking
Development
Strategy- Import
Substitution
Strategy
Second Year
Plan- Highly
Restrictive
Policy.
In 1960’s and
70’s, imports were
partly liberalised
with several
conditions.
In eighties, Export
promotion
schemes were
implemented-
Export Promotion
Council, The trade
Fair Authority of
India, cash
compensatory
schemes etc.

20. 1991 Crisis
National Income
growing at 0.8 %.
Inflation reached the
height of 16.8 %.
BoP crisis to the
extent of 10,000
crores.
India was paying
30,000 crores interest
charges.
Fiscal deficit more
than 7.5 %.
Deficit Financing was
3 %

21. Objectives of
India’s ForeignTrade Policy
2015-2020
ӝ FTP 2015-20 provides a framework for increasing exports of goods and
services as well as generation of employment and increasing value
addition in the country, in line with the ‘Make in India’ programme.
ӝ The Policy aims to enable India to respond to the challenges of the
external environment, keeping in step with a rapidly evolving
international trading architecture and make trade a major contributor to
the country’s economic growth and development.
ӝ Simplification of the application procedure for availing various benefits.

22. Objectives of
India’s ForeignTrade Policy
2015-2020
ӝ To arrest and reverse declining trend of exports is the main aim of
the policy. This aim will be reviewed after two and half years.
ӝ To set in motion the strategies and policy measures which catalyze
the growth of exports.
ӝ To encourage exports through a mix of measures including fiscal
incentives, institutional changes, procedural rationalization and
efforts for enhance market access across the world and
diversification of export markets.

23. Highlights of
India’s Foreign Trade policy
2015 - 2020
ӝ Increase exports to $900 billion by 2019-20, from $466 billion in 2013-14.
ӝ Raise India's share in world exports from 2% to 3.5%.
ӝ Merchandise Export from India Scheme (MEIS) and Service Exports from
India Scheme (SEIS) launched.
ӝ FTP to be aligned to Make in India, Digital India and Skills India
initiatives.
ӝ Higher level of support for export of defence, farm Produce and eco-
friendly products.

24. Highlights of
India’s Foreign Trade policy
2015 - 2020
ӝ Online procedure to upload digitally signed document by Chartered
Accountant/Company Secretary/Cost Accountant to be developed.
ӝ E-Commerce exports of handloom products, books/periodicals,
leather footwear, toys and customised fashion garments through
courier or foreign post office would also be able to get benefit of
MEIS (for values up to INR 25,000).
ӝ Unlike annual reviews, FTP will be reviewed after two-and-Half years.

25. Policy measures to manage Unfavourable
Balance of payment
Import
Reduction And
Substitution
Export
Promotion
Tapping
Invisibles
Increasing
Efficiency
Encouragement
of Tourist Traffic
Bilateral
Agreements
Exchange
Inflow of
Foreign Capital
Effective
Implementation
of FEMA 2000

26. CONCLUSION
After the implementation foreign trade policy , the import and export among
foreign countries have increased and have become more secured.
Setting up of EPZ and SEZ have also increased foreign investors .
Trading Housing have given a platform to both manufacturers and
consumers to freely and easily trade between different countries.
A thorough understanding of the country’s trade policy and incentives are
crucial for the development of a successful international business strategy.

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