Import Export Policy 2002-2007

International Trade

Import Export Policy of India,

 IMPORT EXPORT POLICY 2002-2007,trade policy governs exports from and imports into a country. IMPORT EXPORT POLICY 2002-2007 is one of the various policy instruments used by a country to attain her goals of economic development.  This policy is thus, formulated keeping in view, the national priorities for economic development and the international l commitments made by the country. IMPORT EXPORT POLICY 2002-2007 is essential that the entrepreneurs and the export managers understand the trade policy as it provides the vital inputs for the formulation of their business growth strategies. In India, the trade policy le., Import Export Policy is formulated by the Ministry of  commerce, Government of India in terms of section 5 of the Foreign Trade  (Development and Regulation ) Act, 1992 Besides, the Government of India also announced on January 30 , 2002 a Medium Term Export strategy, to guide the formulation the IMPORT EXPORT POLICY 2002-2007 with the, objective of achieving a share of 1 % in world trade by the end of 2006-07 from the present I share of 0.6%  (23000-01).  The text of this strategy is given as Appendix VII at the end of the book.  The present Export –Import Policy was announced on 31.3.2002 for a period of 5 years with effect from 1.4.2002 to 31.3.2007 co-terminus with Tenth Five Year Plan. It covers both the trade in merchandise and services. The present chapter explains legal framework affecting foreign trade of India particularly with reference to Import Export Policy; 2002-2007.  It also discusses the preferential trading arrangements affecting exports and imports of India.


 The foreign trade of India is guided by the Export-Import (EXIM) Policy of the Government of India arid is regulated by the Foreign Trade (Development and Regulation ) Act, 1992

 EXIM Policy contains various policy 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 prepared and announced by the Central Government (Ministry of Commerce). India’s EXIM policy, in general, aims at developing export potential, improving export performance, encouraging foreign trade and creating favourable balance of payments position.


In India, the legal framework for the regulation of foreign trade is mainly provided by the Foreign Trade ( Development and Regulation ) Act, 1992 , Garments Export  Entitlement Policy: 2000-2004, Export (Quality Control and Inspection ) Act, 1963, Customs and Central Excise Duties Drawback Rules, 1995 , Foreign Exchange Management Act, 1999-and the customs and Central Excise Regulations.  The main objective of the Foreign Trade (Development and Regulation) Act is to provide for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India.  This Ac t has replaced the earlier law namely, the imports and Ex (Control) Act 1947. A comparison of the nomenclature of the two Acts makes it very dear that there is a shift in the focus of the law from control to development of foreign trade. This shift in the focus is the outcome of the emphasis on liberalisation and globalisation as a part of the process of economic reforms initiated in India since June 1991. The application of provisions of the Foreign Trade (Development & Regulation) Act 1992 has been exempted for certain trade transactions vide Foreign Trade (Exemption from application of Rules in certain case) Order 1993.


 Government control import of non-essential items through an import policy.  At the same time, all-out efforts are made to promote exports.  Thus, there are two aspects of trade policy; the import policy which is concerned with exports not only promotion but also regulation. The main objective of the Government policy is to promote exports to the maximum extent.  Exports should be promoted in such a manner that the economy of the country is snot affected by unregulated exports of items specially needed within the country.  Export control is, therefore, exercised in respect of a limited number of items whose supply position demands that their exports should be regulated in the larger interests of the country.  In other words, the policy Aims at (i) Promoting exports and augmenting foreign exchange earnings; and (ii) Regulating exports wherever it is necessary for the purposes of either avoiding competition among the Indian exporters or ensuring domestic availability of essential items of mass consumption at reasonable prices. The government of India announced sweeping changes in the trade policy during the year 1991. As a result, the new Import Export Policy came into force from April 1, 1992. This was an important step towards the economic reforms of India. In order to bring stability and continuity, the policy was made for the duration of 5 years.  In this policy import was liberalised and export promotion measures were strengthened. The steps were also taken to boost the domestic industrial production. The more aspects of the Import Export Policy (1992-97) include: introduction of the duty-free Export Promotion Capital Goods (EPCG) scheme, strengthening of the Advance Licensing System, waiving of the condition on export proceeds realisation, rationalisation of schemes related to Export Oriented Units and units in the Export Processing Zones. The thrust area of this policy was to liberalise imports and boost exports.  The need for further liberalisation of imports and promotion of exports was felt and the Government of India announced the new Import Export Policy (1997, 2002). This policy has further simplified the procedures and reduced the interface between exporters and the.

Director General of foreign Trade (DGFT) by reducing the number of documents required for export by half. Import has been further liberalised and efforts have been made to promote exports. The new EXIM Policy 1997-2002 aims at consolidating the gains made so far, restructuring the schemes to achieve further liberalisation and increased transparency in the changed trading environment. It focuses on the strengthening the domestic industrial growth and exports and enabling higher level of employment with due recognition of the key role played by the SSI sector.  It recognises the fact that there is no substitute for growth, which creates jobs and generates income.  Such trade activities also help in stimulating expansion and Diversification of production in the country.  The policy has focussed on the need to let exporters concentrate on the manufacturing and marketing of their products globally and operate in a hassle free environment. The effort has been made to simplify and streamline the procedure. The objectives will be achieved through the coordinated efforts of all the departments of the Government in general and the Ministry of Commerce and the Directorate General of Foreign Trade and its network of Regional Offices in particular.  Further it will be achieved with a shared vision and commitment and in the, best spirit of facilitation in the interest of export.


 The principal objectives of the EXIM Policy 1997-2002 are as under:

  1. To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum, benefits from expanding global market opportunities.
  2. To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, ‘consumables and capital goods require for augmenting producing.
  3. To enhance the technological strength and efficiency of Indian agriculture, industry and services, thereby, improving their competitiveness.
  4. To generate new employment.  Opportunities and encourage the attainment of internationally accepted standards of quality.  To provide quality consumer products at reasonable prices.


 Period of the Policy

This policy is valid for five year instead of t): 1 years as in the case of earlier policies.  It is effective from 1st April 1997 to 31 March 2002.

  1. Liberalisation

A very important feature of the policy is liberalisation. It has substantially eliminated licensing, quantitative restrictions and other regulatory and discretionary controls. All good, except those coming under negative list, may be freely imported or exported.

  1. Imports Liberalisation of 542 items from the restricted list 150 items have been transferred to Special Import Licence (SIL) list and remaining 392 items have  been transferred to Open General Licence (OGL) List.
  2. Export Promotion Capital Goods (EPCG) Scheme.

The duty on imported capital goods under EPCG scheme has been reduced from 15 % to 10 % under the zero duty EPCG Scheme, the threshold limit has been reduced from Rs. 20 crore to Rs.5 crore for agricultural and allied!  Sectors.

  1. Advance Licence Scheme under Advance License Scheme, the period for export obligation has been extended from 12 months to 18 months.

A further extension for six months can be given on payment of 1 % of the value of unfulfilled exports

a.)Duty Entitlement Pass Book (DEPB) Scheme.

Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency.  Such credit can be can be utilized for import of raw materials, intermediates, components, parts, packaging materials, etc. for export purpose.

b.)Special Import Licence (SIL)

150 items from the restricted list have been transferred to SIL. SIL on exports from SSIs has been increased from 1 % to 2 %. Export houses and all forms of trading houses are eligible for additional SIL of 1 % on exports of products from SSIs from North Eastern States.  Additional SIL has been declared for exploration of new markets and for export of our products. The SIL entitlement of exporters holding ISO 9000 certification has been? From 2 % to 5 % of the FOB value exports.

Export Houses and Trading House: – The criteria for recognition of export houses and all forms of trading houses has been modified.


The major implications of the EXIM Policy 1997-2002 are:

  • Globalisation of Indian Economy: The EXIM policy 1997-02 proposed to prepare a framework for globalisation of Indian economy. Economy from low level of economic activities to – high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market   “The Indian economy has been exposed to more foreign competition. The regime of high protection is gradually‘vanishing.  It means, in order to survive, Indian companies will have to pay due attention to cost reduction, improvement in quality, delivery schedules and after sales service.  At the same time,; Indian industries  have also been given an opportunity to globalise their business by allowing them to import machineries and raw materials from abroad on liberal terms.
  • Impact on the Indian Industry: In the EXIM policy 1997-02, a series of reform measures have been introduced in order to give boost to India’s industrial growth and generate employment opportunities in non-agricultural sector.

The reduction of duty from 15 % to 10 % under SEPCG scheme will enable Indian firms to import capital goods.  This will improve the quality and productivity of the Indian industry.  However, liberalisation of imports by transferring 542’ items from restricted list to OGL and SIL list would adversely affect the growth of, consumer goods industry in India, as most of these items are consumer goods items.

  1. a) Impact on Agriculture: – many encouraging steps have been taken in order to given a boost to Indian agricultural sector. Double weight age for agro exports while calculating the eligibility for export houses and all forms of trading houses. Additional SIL of 1 % for export of agro products.  EOUs’ and units in EPZs in agriculture and allied sectors can sell 50 % of their output in the domestic tariff are (DTA) on payment of duty.  Under the zero duty EPCG scheme, the threshold level has been reduced from Rs. 20 crore to Rs. 5 crore for agriculture and allied sectors.
  2. b) Impact on Foreign Investment ….

In order to encourage foreign investment in India, the SEXIM policy 1997-02 has permitted 100 % foreign equity participation in the case of 100 % EOUs, and units set up in EPZs. Due to liberalisation of procedural formalities, foreign companies may be attracted to set up manufacturing units in India. Full Convertibility of Indian Rupee on revenue account would also give a fillip to foreign investment in India.

Impact on Quality Up gradation:

The SIL entitlement of exporters holding ISO 9000 certification has been increased from 2 % to 5 % of the FOB value of exports.  This would encourage Indian industries to undertake research and development programmers and upgrade the quality of their product.  Liberalisation of EPCG scheme would encourage Indian industries to import capital goods and improve quality and increase productivity of goods.

Impact on Self-reliance : –

One of the long-term objective of the Indian planning is to become self-reliant. This objective is well reflected in the EXIM Policy 1997-02.  The policy aims at encouraging domestic sourcing of raw materials, so as to building up strong domestic production base.  In order to achieve this the policy has also extended the benefits given to exporters to deemed exporters.  This would lead to import substitution. Oil, Power and natural gas sectors have also been brought under the purview of deemed Exports. However, the globalisation policy of the government may harm the interests of SSIs and cottage industries, as they may not be able to compete with MNCs.


The export- Import Policy: 2002-2007 deals with both the export and import of merchandise and services.  It is worth mentioning here that the Import Export Policy:  1997-2002 had accorded a status of exporter to the business firm exporting services with effect from 1.4.1999. Such business firms are known as Services Providers.

The Import Export Policy has been described in the following documents:

Import Export Policy: 2002-2007

Handbook of Procedures Volume I

Handbook of Procedures Volume II

ITC (HS) Classification of Export-Import Items.

The main policy provisions are given in the policy document entitled “Import Export Policy 2002-2007”. An exporter will l have to refer to the Handbook of Procedures Volume-I to know the procedure3s. The agencies and the documentation required to take advantage of a certain provision of the policy.

There is a para-by-para correspondence between the Policy and the Handbook of Procedures Volume-I. Thus, if an exporter finds that para 6.2 of the policy is relevant  for his business enterprise then he should also refer to the corresponding para of the  Handbook of Procedures Volume-I to know precisely what is to be done to 1ake advantage of the policy provision. The Handbook of Procedure Volume-II provides a very vital information as regards the standard input-output norms in regard to items of export from India.  Based on these norms exporters are provided the facility to make duty-free import of inputs required for manufacture of export products under the Duty Exemption Scheme /Scheme/Duty Remission Scheme.  The policy regarding import or export of a specific tem is given in the document entitled “ITC (HS) Classifications of Export-Import Items“. In addition to these policy documents, an export enterprise regulatory authorities dealing with different aspects of foreign trade. One can refer to these notice either by visiting the relevant web site of the authority concerned or buy referring to carious trade magazines which circulate them.

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