What do We Understand about Export Trade Promotions?
Many countries and regions utilise export promotion to promote their companies products and services in foreign markets. This will benefit the trade balance and the overall economy of the country. Export incentive programmes may also be utilised to encourage more enterprises to export. Governments support marketing, product development, payment guarantee programmes, pre- and post-shipment finance, trade missions, training, trade displays, and international representation.
International trade has played a vital role in boosting global living standards, and it has risen dramatically over time. Most countries have their own currency. Currency valuation and exchange rates are critical considerations in financial markets.
Regulation and Promotion of Foreign Trade
An act to facilitate imports into India, increase exports from India, and address issues related to or incidental to such imports and exports in order to develop and regulate international trade. The Director of Exhibitions manages showrooms in other countries and establishes Trade Centres outside of India, in addition to organising Indian shows abroad.
In line with Section 19 of the Foreign Trade (Development and Regulation) Act of 1992, the Central Government hereby promulgates the following rules (22 of 1992).
1. A Short Title and Introduction
These regulations may be referred to by the Foreign Trade (Regulation) Rules, 1993.
They become effective on the day they are published in the Official Gazette.
2. Defined Terms
Unless otherwise specified, "Act" in these rules refers to the 1992 Foreign Trade (Development and Regulation) Act (22 of 1992);
A "charitable purpose" includes assisting the impoverished, advancing education, providing medical assistance, and advancing any other broad public benefit objective.
An "importer" or "exporter" is someone who imports or exports commodities and has a current Importer-Exporter Code Number issued under Section 7.
"licencing authority" refers to a body that has been granted authorisation by the Director General under paragraph (2) of section 9 to grant or renew a licence in accordance with these regulations.
"Policy" refers to the central government's export and import policy, which is developed and made public in accordance with Section 5;
"Schedule" refers to the Schedule annexe to these rules;
"section" refers to an Act section; and
"Special licence" refers to a licence issued in accordance with Section 8's Subsection (2).
Section 2 provides a definition of "value."
Export Trade Promotions Initiatives
Some of the export promotion measures/initiatives are listed below.
Duty-Free Replenishment Certificate (DFRC): A DFRC allows a merchant exporter or manufacturer exporter to import duty-free inputs such as raw materials, components, intermediates, consumables, spare parts, and packing materials for use in export manufacturing. A licence of this type is only granted if the export responsibilities are met on time.
The Duty Entitlement Passbook Scheme (DEPB): DEPB allows exporters to request credit based on a percentage of the FOB value of freely convertible currency exports. The credit must be used for export products and at the rates specified by the Director-General of Foreign Trade (DGFT) in the public notice.
The Export Promotion Capital Goods Scheme (EPCG): EPCG was established under the EXIM policy of 1992-1997 to allow manufacturer exporters to import machinery and other capital goods for export production at reduced or no customs taxes. This facility is subject to an export obligation, which requires the exporter to guarantee minimum exports equal to the total value of imported capital goods.
Duty Drawback (DBK): The Duty Drawback Scheme is overseen by the Ministry of Finance's Directorate of Drawback. A claim under this programme may be submitted by an exporter.
Customs duty paid on components, consumables, and raw materials imported.
Having to pay central excise duty on domestic raw materials and components.
Consumables used in the manufacture of export-oriented goods.
Excise Duty Refund: Excise duty is a tax imposed by the Indian government's central government on goods manufactured in India. This duty is collected at the point of origin or before the goods are removed from the production grounds. Export items are completely exempt from central excise duty.
Other than these, IIFT is looking after the country's foreign trade. IIFT is an autonomous body registered under the Ministry of Commerce & Industry.
Organisation to Promote International Trade
The government has established the following organisations to promote international trade:
Indian Trade Promotion Organisation (ITPO)
On January 1, 1992, the Indian Trade Promotion Organisation (ITPO) was established under the Companies Act of 1956. Its primary goal is to keep close ties between business, industry, and government. In order to achieve this goal, the ITPO organises trade shows and exhibitions both within and outside of the country, facilitating interactions between export companies and international trade organisations.
Department of Commerce
The Department of Commerce is the highest-ranking division within the Ministry of Commerce of the Government of India, in charge of developing import and export regulations as well as foreign trade policy for the country. It is in charge of all aspects of the country's foreign trade.
Foreign Trade Institute of India (IIFT): An Overview
IIFT is an autonomous body registered under the Ministry of Commerce & Industry, a self-governing organisation established under the Societies Registration Act in 1963, is in charge of overseeing the country's foreign trade. Furthermore, it is a recognised university that teaches students about international trade, conducts research on global business topics, and disseminates information about global trade and investments.
Its establishment was largely designed to help professionalise the nation's Foreign Commerce Management skills and to provide civil servants with training in international commerce.
Over the years, the institute has worked with a variety of organisations, including the World Trade Organisation (WTO), the World Bank, UNCTAD, and the Government of India's Ministry of Commerce and Industry. As a result, the institute has grown into a full-fledged business school, offering Management Programs in a wide range of international business disciplines. It offers part-time management programmes in addition to full-time management programmes for working professionals.
So far, the institute has graduated over 40,000 business specialists from 30 different countries. The institute has also signed memorandums of understanding (MoU) with a number of institutions for a research and exchange programme.
Trade Promotion Council of India
The council of trade development and promotion was established on July 3, 2015, to ensure a continuous dialogue with State Governments and UTs on measures to provide an international trade enabling environment in the States, as well as to develop a framework for making the States active partners in increasing India's exports. The Council for Trade Development and Promotion's mandate would be as follows:
To provide a forum for state governments and UTs to express their views on trade policy;
To provide a platform for the Indian government to inform state and local governments about global developments affecting India's trade potential and possibilities, as well as to equip them to deal with changing circumstances;
To provide a forum for discussion on the need for infrastructure relevant to trade promotion, as well as to identify barriers and infrastructure gaps that impede India's exports;
To assist state governments in developing and implementing export strategies that are consistent with the national Foreign Trade Policy;
To provide a forum for discussion on the operationalisation of trade infrastructure.
Case Study
Foreign Trade, Foreign Investment, and Related Issues: An Analysis of China and India
Following the repayment of more than US＄2 billion in debt by the Reserve Bank of India (RBI), India's foreign exchange reserves reached an all-time high of US＄120 billion on August 1, 2004, which is viewed as a sign of economic success. In the early 1990s, India had a balance of payment (BOP) crisis, with its foreign exchange reserves averaging around US＄ 5.5 billion. According to the RBI's balance of payments figures, roughly US＄1.3 billion of these reserves were brought in as a result of FDI inflows in 2002-2003.
India's relatively low share of FDI inflows cannot be masked by a healthy increase in FDI inflows during a global downturn. India receives only 5.5% of Asia's FDI inflows, whereas China receives 80%. This difference is expected to widen as a result of China's November 2001 admission to the World Trade Organisation (WTO).
Conclusion
International trade results in global specialisation and the division of labour. There is an abundance of labour in India. Because of this, the Indian government encourages policies and programmes to increase foreign trade. The Indian government devises various schemes and incentives to assist businesses in increasing the competitiveness of their exports. The government has also established a number of entities to assist firms engaged in international trade with infrastructure and marketing needs.
FAQs on Export Trade Promotions: A Comprehensive Guide
1. What is the fundamental concept of export promotion?
Export promotion refers to the set of policies, incentives, and support measures implemented by a government to encourage domestic businesses to sell their goods and services in foreign markets. The primary goal is to boost the country's exports, thereby improving its balance of trade, earning foreign exchange, and stimulating economic growth. It involves creating a favourable environment for exporters through various schemes and institutional support.
2. Why is promoting exports crucial for a country's economic development?
Promoting exports is crucial for several economic reasons:
- Foreign Exchange Earnings: Exports are a primary source of foreign currency, which is essential for paying for imports and strengthening the national currency.
- Market Expansion: It allows domestic companies to access a larger global market, reducing dependence on the local market and achieving economies of scale.
- Employment Generation: Increased production for export leads to the creation of more jobs in manufacturing, services, and logistics sectors.
- Economic Growth: A strong export sector contributes significantly to the country's Gross Domestic Product (GDP) and fosters a more competitive and efficient domestic industry.
3. What are the key government schemes and incentives for export promotion in India?
The Government of India offers several schemes and incentives to promote exports, including:
- Duty Drawback Scheme: This scheme provides a refund of customs and excise duties paid on inputs that are used in the manufacturing of exported goods.
- Export Promotion Capital Goods (EPCG) Scheme: It allows exporters to import capital goods for pre-production, production, and post-production at zero customs duty, subject to fulfilling an export obligation.
- Advance Authorisation Scheme: This allows duty-free import of inputs that are physically incorporated into the export product.
- Marketing Development Assistance (MDA): Financial assistance is provided to exporters for specific promotional activities abroad, such as participating in trade fairs and exhibitions.
4. What is the difference between an Export Processing Zone (EPZ) and a Special Economic Zone (SEZ)?
While both are designed to boost trade, there is a key difference between EPZs and SEZs. Export Processing Zones (EPZs) were primarily industrial estates focused solely on promoting exports by providing essential infrastructure and services. In contrast, Special Economic Zones (SEZs) are much broader in scope. An SEZ is a designated geographical region treated as a foreign territory for trade, duties, and tariffs. It aims to promote not just exports but also foreign investment, employment, and overall economic activity, covering a wider range of sectors including services.
5. How does the Duty Drawback scheme work? Explain with an example.
The Duty Drawback scheme is an incentive where duties paid on imported inputs for goods that are later exported are refunded to the exporter. This prevents the taxation of goods that are not consumed domestically.
Example: A garment company in India imports high-quality zippers from Japan to manufacture jackets. It pays a 10% import duty on these zippers. Once the jackets are manufactured and exported to the USA, the company can file a claim to get a refund of the 10% duty it paid on the imported zippers, as per the rates specified under the scheme. This reduces their production cost and makes their jackets more price-competitive internationally.
6. What is the role of Export Promotion Councils (EPCs) in India?
Export Promotion Councils (EPCs) are non-profit organisations registered under the Companies Act or Societies Registration Act. Their primary role is to promote and develop the exports of specific products or services from India. They act as a bridge between the government and exporters by providing industry-specific information, organising trade delegations, helping members participate in international trade fairs, and advising the government on policies related to their respective industries.
7. How do government incentives like tax exemptions actually benefit the wider national economy?
While tax exemptions directly benefit exporters, their impact extends to the entire economy. By lowering the cost of production, these incentives make Indian products more competitive in the global market. This leads to higher export volumes, which in turn increases the inflow of foreign exchange. A stable reserve of foreign currency strengthens the national currency and improves the country's Balance of Payments (BOP) position. Furthermore, increased export activity stimulates domestic industrial production, creating more jobs and fostering technological advancement.
8. Is a Registration-cum-Membership Certificate (RCMC) mandatory for every exporter in India?
No, an RCMC is not universally mandatory for every exporter. However, it is essential for any exporter who wishes to avail benefits or concessions under India's Foreign Trade Policy (FTP). This includes claiming benefits under schemes like EPCG or Advance Authorisation. The RCMC is issued by the relevant Export Promotion Council or Commodity Board and serves as proof that the exporter is registered with the appropriate authority for their product line. An exporter not claiming any such benefits may not need it.
9. What are the key stages involved in a typical export procedure?
The export procedure can be broadly divided into three main stages:
- Pre-shipment Stage: This includes receiving the export order, assessing the importer's creditworthiness, obtaining the necessary export license and IEC (Importer-Exporter Code), arranging for pre-shipment finance, and procuring or manufacturing the goods.
- Shipment Stage: This stage involves pre-shipment inspection, obtaining excise clearance, reserving shipping space, packing and marking the goods, arranging insurance, and completing customs formalities to get the 'Let Export' order.
- Post-shipment Stage: After the goods are shipped, the exporter submits the necessary documents to their bank to claim payment from the importer, as per the agreed payment terms. This stage also includes claiming any applicable export incentives like duty drawback.
