Understanding India’s Foreign Trade Policy

The agenda of this course is very, very important. We are talking of the foreign policy of India. Everything we do in export as well as imports, the reasons of exports and the transactions, the smoothness, even the cost of our exports is very much dependent on different policy initiatives by government of any country. Same is true for India, especially in terms of the foreign trade policy, which is formulated by the Ministry of Commerce, Government of India.

A particular wing is there in Ministry of Commerce. That is the Department of Commerce. In short, it is called DOC. So in this agenda we will be talking about all the different aspects of the different past and present foreign trade policies of India and a little analysis of the forthcoming foreign trade policy, that is foreign trade policy 2021-26, which is on the anvil. Very soon it is going to be ratified, it will be available in public domain and we will have a cryptic look at the expectations of different stakeholders. So we will look at those expectations from foreign policy 2021-26.

Friends, the foreign trade policy entails some organisations for formulation, some organisations for the implementation and some organisations to govern the policy because it is a very serious exercise, since, it has a lot of bearing on the economic growth of the country. Also a lot of bearing on the employment generation in the country. It also has lot of bearing on the overall ecosystem of trade in the country. And it is very, very important to be able to make the country able to import things, Other objective is import development.

So if you talk of the foreign policy of India in the period which was before liberalization, that is 1991, you will see that the policy was the part of the so-called Export Import Control Act. Basically the idea was regulation at that time. The idea was a sort of control on overseas transactions. It was the strict attitude of the government towards the activities which are involved, maybe mainly in imports but also in export. So it was a period of the country which actually went not as was visioned by the founders of our country after the independence. What had happened was that till 1991, the FT policies which were made and which were part of the Export Import Control Act, they did not deliver what was expected out of these policies and what was expected by the exporters as well as the importers at large.

However, the attitude changed. After 1991 we adopted LPG, that is the liberation, privatization and globalization. The approach changed in the sense that instead of the Export Import Control Act now we were talking of the Foreign Trade Development Act. So when we say foreign trade development act which includes both exports as well as imports, it was acknowledged that the approach is not to control. The approach is towards the optimized development of both export as well as imports.

So without import, export cannot take place. If we talk of the world global value chains and we look at the initiatives of the OECD, where this organisation, which has documented the data of different countries, what they export, what they import, it is very, very clear that the more you import, the possibility of export is higher. So any country without imports cannot really export sustainably. To give you an example, if you talk of China, the electronics sector, the value addition percent, aggregate value addition in electronic sector, which includes your mobile phones or laptops or what not, the value addition is just 15%. Which means China is world’s largest exporter of electronic goods, but it is only adding 15% to the value, rest of the value is coming from imports into China from different countries. So this kind of global value chain which exists and it clearly indicates that the co- growth of both exports and imports is very, very important. Present foreign trade policies of any country, including India, acknowledges that fact. And they are all trying to promote exports as well as develop imports.

Without this approach, the overall result isn’t possible. So this is all done by the different types of import trade governing bodies, which I’ll be talking about in this course.

I will be talking about both import as well as the export, incentives, provisions in the policy.

So the focus of any foreign trade policy besides the main objectives is to see that these governing bodies are able to function smoothly. And there is the classification and licensing which is required, which is necessary, and the promotion of exports and the development of import is taken care of.

So that is the main objective of any foreign trade policy of any country, actually. So, you know, this kind of concerns will remain for any foreign trade policy in recent past, the current policy and the future policies. So this is my idea of the course. So what we are trying to do, the policies are looking at the guidelines and the rules and every country has these guidelines and rules framed.

For example, for product categories and commodities. For example, their classifications which are normally for the border control purpose, are based on the international trade classification – Harmonized system, ITC HS code. And the process of categorizing the different types of exporters and importers. In order to decide that what kind of importers are there and what kind of tariffs can be there for different categories of importers like actual users or merchant importers. Similarly, in the categories of exporters, the different types of incentives and facilities can be given to these exporters by identifying their nature of business and what is their status. So these guidelines and rules look into these considerations.

These guidelines and rules are typically given by following types of local publications in any country, which is also true for India. So as I had just mentioned, the main policy document, which is called the Foreign Trade Policy Document, for example, Foreign Trade Policy of India, which is formulated by the Ministry of Commerce under DOC. i.e. Department of Commerce. Or it can be, for example, the US trade policy, the provisions of which are very easily available online. And you can check the comparison between our policy and U.S. trade policy. So many similarities you would find and the Handbook of Procedures in India or Foreign Trade Regulation documents of U.S. So there are a lot of similarities out there in this.

And very importantly, the standard input output norms which are there in India. These standard input output norms really help very much, especially for exporters to, for example, find out that what inputs have been used for the exports and to establish, for example, duty drawback rates or to frame the duty exemption and remission schemes, different import refund schemes which without these standard input output norms is very, very difficult.

A lot of countries also have similar standards and the norms. The classification, which is used in India as well as in many of the countries for the border control purposes, is ITC HS code, which have been in use for many, many years. I just want to tell you that this can be done in many other ways and some of the organizations are doing it in their own way.

So all these aspects and many more are covered in this course

About the instructor

Dr. Vijesh Jain is having more than 34 years of exports business operations and international trade training experience, having trained thousands of industry employees and B School students in the areas of exporting and importing. Also, he is a Harvard University, USA, IIFT, New Delhi, BITS, Pilani, BIMTECH, India, and University of Mysore alumnus. In addition, he is the first-ever Indian to be certified as Global Business Professional by NASBITE, USA. Interestingly, he is the first recipient of the Best International Trade Research Award by BIMTECH, Delhi NCR. Also, he has written several books/research papers on the above subjects. Additionally, he also runs successfully his exports company dealing with overseas clients worldwide. Almost a quarter million students are already enrolled in the 21 courses in the VJ Exports Mastery Series on Udemy.