Write short notes on
a) Main items of exports of India
(a) India Policy incentives to promote exports can be broadly classified as under:
Special facilities to make the material inputs needed by exporters available, at reduced cost
Free Trade Zones and Export oriented units
Facilities for making capital equipments available, at reduced rate
Incentives for and assistance with export marketing
Profit tax and credit subsidies and
Subsidies on Domestic raw materials.
Over a period of time, the Government has steadily increased and extended these items.
Special Facilities for Material Inputs
Availability of qualitative raw materials in sufficient quantity and at the right time, at competitive prices, is crucial for export growth. In India, this was ensured through special import licenses for exporters (known as replenishment (REP) and imprest licenses) combined with duty drawback and cash compensation.
The REP and imprest licenses allow the exporter to import certain restricted raw materials and components, upto a specified percentage of specified exports. The imports pay normal customs duties, but refunds can be claimed through the duty drawback scheme.
Imprest licenses are issued on the basis of export contracts or on past export performance, and components, upto a specified percentage of specified exports. The imports pay normal customs duties, but refunds can be claimed through the duty drawback scheme.
The duty drawback scheme allows the refund of excise, sales and other indirect taxes (apart from customs duties) included in the cost of domestically purchased raw materials. This is exporter for other domestic taxes such as excise duties and sales taxes included in the cost of electricity.
Free Trade Zones and Export Oriented Units (EOU)
Free Trade Zones or Export Processing Zones (EPZs) and EOUs are the other means, which Government has adopted to promote exports.
The rationale for establishing EPZs is that export production can be initiated without adjusting or transforming the regime of protection for companies producing for the domestic market. EPZs are treated as operating outside the domestic tariff area, and hence have the right to import all their requirements, including capital goods and spare parts as well as raw materials, free of import licensing controls and import duties.
India was the first developing country to establish an EPZ. In 1965, one such zone was established in Kandla while in 1974 a second zone was set up – the Santa Cruz Electronic Export Processing Zone (SEEPZ) near Bombay. In 1983, a decision was taken to create four more EPZs, which came up subsequently: Madras, Kochi, and Noida, near New Delhi and Falta, Calcutta.
An EPZ creates a free trade environment allowing for duty free imports of capital goods and intermediate inputs and tax-free exports of manufactures. It overcomes the problem of administrative control and bureaucratic intervention. Ultimately, the objectives is to attract foreign companies to establish export units.
The Export Oriented Units (EOU) scheme was implemented in 1981 to provide duty-free access to imports of all inputs for such export-oriented companies and to create a single point clearance with regard to industrial licensing and foreign collaborations. A company is required to fulfill three conditions to be eligible as an EOU:
(a) Its output should entirely be exported,
(b) The domestic value added content of the export value should be 20 percent at least; and
(c) Export production should be under a custom bond for 10 years for products facing rapid technological change.
3. Availability of Capital Equipments at Reduced Rates
The liberalization of imports of capital goods and associated tariff reductions was introduced in 1976. The objective was to make specialized and upto-date machines available and less expensive for export oriented industries such as leather, garment, hosiery, seafood, woolen textile and diamond processing industries. In 1986, the policy was broadened to other export potential industries.
4. Export Marketing
From an early stage, Government has recognized that marketing of exports is generally a more difficult task than selling in the domestic market. Many small and medium firms and even many large firms, by Indian standards, may not be able to market their products on their own, in the international market. Therefore, the Government allowed for the first time in 1960, the coming up of export houses. In 1981, in emulation of Japan and South Korea, it encouraged the development of larger trading houses.
In 1963, an Export Inspection Council (EIC) was established whose function is to conduct pre-shipment inspection to prevent the export of inferior quality products.
Over a period of time, the Government has also promoted 18 industries specific Export Promotion Councils: Apparel Export Promotion Council – to promote garment exports, Engineering Export Promotion Council – to promote engineering goods exports, etc. The Trade Development Authority (T.D.A.) and Trade Fair Authority of India (T.F.A.I.) were the other agencies promoted by the Government for export promotion. [In 1994, T.D.A. and T.F.A.I. were merged to form Indian Trade Promotion Organization (I.T.P.O.)]. All these fall under the purview of the Ministry of commerce.
5. Profit Tax and Credit Subsidies
Exporters had received, in one form or another, profit tax concession since the early 1960s. There were also provisions for preferential pre-shipment and post-shipment credit. The formation of EXIM bank in the early 80s marked another significant development towards improved financial flow for exporters. Export credit guarantees for banks and credit insurance for exporters are available from the Export Credit Guarantee Corporation (ECGC).
6. Subsidies on Domestic Raw Materials
These are also schemes for refunding to exporters the difference between the domestic and world prices of Indian materials. The most important is the International Price Reimbursement Scheme (IPRS) for steel. The scheme was introduced in 1981. In 1986 this scheme was extended from basic steel products to alloy steels. There are also similar subsidy schemes, i.e., for other import raw materials such as aluminum and copper.
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