unit v completed

5/20/2018 Unit v Completed

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Business Environment-Unit-V FEB-2014

Unit-V-EXIM policies & FEMA:Indias new EXIM policy- legal framework- initiatives, FEMA

Multi-national companies and FDI.

Case 1:- RBI Slaped Rs. 125 Crore on Reliance Infrastructure. A Case Study on FEMA, (Dr.

VivekMittal, page no.655)Case2:- China as an Expert Base, (David W. Conklin, page no.574

EXIMPOLICIES

Exim Policyor Foreign Trade Policyis a set of guidelines and instructions established

by theDGFT- Directorate General of Foreign Trade, in matters related to the importand export of goods in India.

The Foreign Trade Policyof India is guided by the Export Import in known as in shortEXIM Policyof the Indian Goernment and is regulated by the Foreign TradeDevelopment and Regulation Act, !!".DGFT #Directorate General of Foreign Trade$is the main goerning body in mattersrelated to !xim "olicy. The main ob#ectie of the Foreign Trade $Deelopment and

%egulation& 'ct is to proide the deelopment and regulation of foreign tradebyfacilitating imports into, and expand exports from India. Foreign Trade 'ct has replacedthe earlier law known as the imports and !xports $(ontrol& 'ct )*+.

EXIM Policy

Indian EXIM Policy contains arious policy related decisions taken by the goernmentin the sphere of Foreign Trade, i.e., with respect to imports and exports from the countryand more especially export promotion mea%ure%, policies and procedures relatedthereto. Trade "olicy is prepared and announced by the (entral Goernment $inistry of(ommerce&. Indias !xport Import "olicy also know as Foreign Trade "olicy, in general,aims at deeloping export potential, improing export performance, encouraging foreigntrade and creating faorable balance of payments position.

&i%tory of Exim Policy of India

In the year )*/0, the Goernment of India appointed a special Exim Policy(ommittee toreiew the goernment preious export import policies. The committee was later onapproed by the Goernment of India. r. 1. ". 2ingh, then (ommerce inister andannounced the !xim "olicy on the )0th of 'pril, )*34. Initially the !5I "olicy wasintroduced for the period of three years with main ob#ectie to boost theexport 'u%ine%%

in india

(')ective% (f T*e EXIM Policy +

The main ob#ectie of the Goernments !5I "olicy is to promote exports to themaximum extent.

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To accelerate the economy from low leel of economic actiities to high leel ofeconomic actiities by making it a globally oriented ibrant economy and toderie maximum benefits from expanding global market opportunities.

To stimulate sustained economic growth by proiding access to essential raw

materials, intermediates, components, consumables and capital goods re6uired foraugmenting production.

To enhance the techno local strength and efficiency of Indian agriculture, industryand serices, thereby, improing their competitieness.

To generate new employment.

7pportunities and encourage the attainment of internationally accepted standards

of 6uality.

To proide 6uality consumer products at reasonable prices.

Governing -ody of EXIM Policy

The Goernment of India notifies the !xim "olicy for a period of fie years $)**-0880&under 2ection 4 of the Foreign Trade #Development and Regulation Act$, !!". Thecurrent

Export Import Policy coers the period 0880-088. The !xim "olicy is updated eeryyear on the 9)st of arch and the modifications, improements and new schemes becameeffectie from )st 'pril of eery year.

'll types of changes or modifications related to the !5I "olicy is normally announcedby the :nion inister of (ommerce and Industry who co-ordinates with the inistry ofFinance, theDirectorate General of Foreign Trade and network of DGFT Regional (ffice%.

.E/ F(REIG. TRADE P(0I12 "33!"34

The ;on


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&ig*er 5upport for Mar7et and Product Diver%ification

Incentie schemes hae been expanded by way of addition of new products and markets.0/ new markets hae been added under Focus arket 2cheme. These include )/ newmarkets in Batin 'merica and )8 in 'sia-7ceania.The incentie aailable under Focus arket 2cheme$F2& has been raised from 0.4C to9C.The incentie aailable under Focu% Product 5c*eme #FP5$has been raised from ).04Cto 0C.' large number of products from arious sectors has been included for benefits underF"2. These include, !ngineering products $agricultural machinery, parts of trailers,sewing machines, hand tools, garden tools, musical instruments, clocks and watches,railway locomoties etc.&, "lastic $alue added products&, ?ute and 2isal products,Technical Textiles, Green Technology products $wind mills, wind turbines, electricoperated ehicles etc.&, "ro#ect goods, egetable textiles and certain !lectronic items.

Mar7et 0in7ed Focu% Product 5c*eme #M0FP5$ has been greatly expanded byinclusion of products classified .BF"2 benefits also extended for export to additional new markets for certain products.These products include auto components, motor cars, bicycle and its parts, and apparels

among others.' common simplified application form has been introduced for taking benefits underFocu% Product 5c*eme #FP5$, F2, Mar7et 0in7ed Focu% Product 5c*eme#M0FP5$.;igher allocation for Mar7et Development A%%i%tance #MDA$ and Mar7et Acce%%Initiative #MAI$schemes is being proided.Tec*nological 6pgradation

To aid technological up-gradation of our export sector, Export Promotion 1apitalGood% #EP1G$ 5c*eme at ero Duty has been introduced. This 2cheme will beaailable for engineering = electronic products, basic chemicals = pharmaceuticals,apparels = textiles, plastics, handicrafts, chemicals = allied products and leather =leather products $sub#ect to exclusions of current beneficiaries under Technological:pgradation Fund 2chemes $T:F2&, administered by inistry of Textiles and



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beneficiaries of 2tatus ;older Incentie 2cheme in that particular year&. The scheme shallbe in operation till 9).9.08)).?aipur, 2rinagar and 'nantnag hae been recognised as ETowns of !xport !xcellence< forhandicrafts@ Aanpur, Dewas and 'mbur hae been recognised as ETowns of !xport!xcellence< for leather products@ and alihabad for horticultural products.EP1G 5c*eme Relaxation%

To increase the life of existing plant and machinery, export obligation on import ofspares, moulds etc. under !"(G 2cheme has been reduced to 48C of the normal specificexport obligation.

Taking into account the decline in exports, the facility of %e-fixation of 'nnual 'erage!xport 7bligation for a particular financial year in which there is decline in exports fromthe country, has been extended for the 4 year "olicy period 088*-)+.5upport for Green product% and product% from .ort* Ea%t

Focus "roduct 2cheme benefit extended for export of Egreen productsorth !ast.5ta'ility8 continuity of t*e Foreign Trade Policy

To impart stability to the "olicy regime, Duty Entitlement Pa%%'oo7 #DEP-$

2cheme is extended beyond 9)-)0-088* till 9).)0.08)8.

Interest subention of 0C for pre-shipment credit for specified sectors has been

extended till 9).9.08)8 in the udget 088*-)8.

Income Tax exemption to )88C !7:s and to 2T"I units under 2ection )8 and

)8' of Income Tax 'ct, has been extended for the financial year 08)8-)) in theudget 088*-)8.

The ad#ustment assistance scheme initiated in December, 0883 to proide

enhanced !(G( coer at *4C, to the adersely affected sectors, is continued till

arch, 08)8.

Marine %ector

Fisheries hae been included in the sectors which are exempted from maintenance

of aerage Export (riented 6nit% E(6 under Export Promotion 1apitalGood% #EP1G$!"(G 2cheme, sub#ect to the condition that Fishing Trawlers,



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boats, ships and other similar items shall not be allowed to be imported under thisproision. This would proide a fillip to the marine sector which has been affectedby the present downturn in exports.

'dditional flexibility under Target Plu% 5c*eme #TP5$Duty Free 1ertificateof

Entitlement$DF(!& 2cheme for 2tatus ;olders has been gien to arine sector.



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Gem% 9 :e;ellery 5ector

To neutraliHe duty incidence on gold ?ewellery exports, it has now been decided to

allow Duty Drawback on such exports.

In an endeaor to make India a diamond international trading hub, it is planned to

establish Diamond ourse $s&J.

' new facility to allow import on consignment basis of cut = polished diamonds

for the purpose of gradingcertification purposes has been introduced.

To promote export of Gems = ?ewellery products, the alue limits ofpersonal

carriage hae been increased from :2K 0 million to :2K 4 million in case ofparticipation in oerseas exhibitions. The limit in case of personal carriage, assamples, for export promotion tours, has also been increased from :2K 8.) millionto :2K ) million.

Agriculture 5ector

To reduce transaction and handling costs, a single window system to facilitate

export of perishable agricultural produce has been introduced. The system willinole creation of multi-functional nodal agencies to be accredited by .Aggricultural 9 Proce%%ed food Product% Export Development

Aut*ority$'"!D' &

0eat*er 5ector

Beather sector shall be allowed re-export of unsold imported raw hides and skins

and semi finished leather from public bonded ware houses, sub#ect to payment of48C of the applicable export duty.

!nhancement of F"2 rate to 0C, would also significantly benefit the leather sector.

Tea

inimum alue addition under adance authorisation scheme for export of tea has

been reduced from the existing )88C to 48C.

DT' sale limit of instant tea by !7: units has been increased from the existing

98C to 48C.

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!xport of tea has been coered under 1AG:L 2cheme benefits.

P*armaceutical 5ector

!xport 7bligation "eriod for adance authoriHations issued with /-'"' as input has beenincreased from the existing / months to 9/ months, as is aailable for other products."harma sector extensiely coered under BF"2 for countries in 'frica and Batin'merica@ some countries in 7ceania and Far !ast.&andloom 5ector

To simplify claims under F"2, re6uirement of E;andloomark< for aailing benefitsunder F"2 has been remoed.Export (riented 6nit% E(6%

!7:s hae been allowed to sell products manufactured by them in DT' upto a

limit of *8C instead of existing 4C, without changing the criteria of Esimilargoods


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D!" rate shall also include factoring of custom duty component on fuel where fuel isallowed as a consumable in 2tandard Input-7utput >orms.Flexi'ility provided to exporter%

"ayment of customs duty for !xport 7bligation $!7& shortfall under 'dance

'uthorisation DFI' !"(G 'uthorisation has been allowed by way of debit ofDuty (redit scrips. !arlier the payment was allowed in cash only.

Import of restricted items, as replenishment, shall now be allowed against

transferred DFI's, in line with the erstwhile DF%( scheme.

Time limit of /8 days for re-import of exported gems and #ewellery items,

for participation in exhibitions has been extended to *8 days in case of :2'.

MMMMMMMM

FEMAForeign Exc*ange Management Act, !!!

-ac7Ground

%eplaced F!%' N Foreign Exc*ange Regulation Act !=4

F!%' had become incompatible with the pro-liberalisation policies of the Got. of

India

This was done in order to relax the controls on foreign exchange in India, as aresult of economic liberaliHation.

F!' sered to make transactions for external trade $exports and imports& easier

N transactions inoling current account for external trade no longer re6uired%I


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(')ective% of FEMA

Facilitating external trade

For promoting the orderly deelopment and maintenance of foreign exchange

market in India.

MNCs-Multinational corporations

An enterprise operating in several countries but managed from one (home)

country.

First >( in world N!ast India (ompany, First >( in India NI, !xample

Indian >(-I>F72L2.FEAT6RE5 (F M.1

! ig siHe

! ;uge intellectual capital

! 7perates in many countries

! Barge number of customer

! Barge number of competitors

! 2tructured way of decision making

! ;uge market potential of the country

! FDI attractieness! Babor competitieness

! acro-economic stability

! 7ne billion plus populationMultinational 1orporation% #M.1%$+ -enefit% and pro'lem% to t*e &o%t 1ountry

2eeral factors hae contributed for the growth of multinational corporations during thelast 08 years.The important among them areP

i& omentum created by the process of globaliHation.ii& Financial superiorities of >(s oer >ational (ompanies.

iii& Technological capabilities of the >(s

-enefit% to &o%t 1ountry

a) The income leel and the inestment leel increases conse6uent upon the entry on>(s.

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b) The ;ost country(s.

c) The host country(s proide an efficient means of integrating national economies.f) It also helps increase competition and break domestic monopolies.g) >(s enable the host countries to increase their exports and decrease their

imports.h) ;elp to improe standard of liingi) !mployment of highly sophisticated management techni6ues.j) >(s stimulate domestic enterprise.

k) The reasons resources of >(s enable them to hae ery efficient research anddeelopment systems.Pro'lem% to &o%t country

2ince >(s are not operating within the national territory, their operations affect therule of the host country.a& 2mall edium scale domestic industries find it difficult to compete with >(sb& >(s, sometimes, withdraw their capital and shutdown their production units

suddenly, which create labour problems in the host country.c& The >(((


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The flow of direct foreign inestments to India has been comparatiely limited becauseof the type industrial deelopment strategy and the ery cautious foreign inestmentpolicy followed by nation.



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Foreign Direct Inve%tment in India i% adver%ely affected 'y t*e follo;ing factor%+

). The public sector was assigned as monopoly or dominant position in most importantindustries, and therefore, the scope of priate inestment, both domestic and foreign waslimited.0. Ohen the public sector needed foreign inestment, there was a marked preference forthe foreign got. sources.9. Foreign inestment was normally permitted only in high technology industries.4. "ayment of diidends abroad, repatriation of capital etc., as well as inward paymentwas sub#ect to stringent laws like Foreign !xchange %egistration 'ct $F!%'& )*9.These discourage foreign inestments./. (orporate taxation was high and tax laws and procedures were complex.These factorseither limited the scope of foreign inestment in India.


unit v completed

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