Exports Promotion and Imports Substitution

Export Promotion

Government of India has liberalized the schemes for export oriented units and export processing Zones. agriculture, Horticulture-2/”>Horticulture, Poultry, Fisheries-2/”>Fisheries and dairies have been included in the export oriented units. Export processing zones have been allowed to export through trading and star trading houses and can have equipment on lease. These units have been allowed cent percent participation in foreign equities.

Export Promotion Schemes

Foreign Trade Policy 2015-20 and other schemes provide promotional measures to boost India’s exports with the objective to offset infrastructural inefficiencies and associated costs involved to provide exporters a level playing field. Brief of these measures are as under:

  1. Exports from India Scheme
  2. Merchandise Exports from India Scheme (MEIS)

Under this scheme, exports of notified goods/ products to notified markets as listed in Appendix 3B of Handbook of Procedures, are granted freely transferable duty credit scrips on realized FOB value of exports in free Foreign Exchange at specified rate (2-5%). Such duty credit scrips can be used for payment of custom duties for import of inputs or goods, payment of excise duty on domestic procurement, payment of service tax and payment of custom duties in case of EO default.

Exports of notified goods of FOB value upto Rs 25, 000 per consignment, through courier or foreign post office using E-Commerce shall be entitled for MEIS benefit.

  1. Service Exports from India Scheme (SEIS)

Service providers of notified Services as per Appendix 3E are eligible for freely transferable duty credit scrip @ 5% of net foreign exchange earned.

  1. Export Houses, trading houses and star trading houses:

To increase the marketable efficiency of exporters, the government introduced the concept of export houses, trading house and star trading houses. Those registered exporters who have shown good performance over the past few years have been given the status of export houses and trading houses.

Since 1994n a new category of golden super star trading house was added by the government which has the highest Average annual foreign exchange earnings.

  1. Duty Exemption & Remission Schemes

These schemes enable duty free import of inputs for export production with export obligation. This scheme consists of:-

  1. Advance Authorization Scheme

Under this scheme, duty free import of inputs are allowed, that are physically incorporated in the export product (after making normal allowance for wastage) with minimum 15% value addition. Advance Authorization (AA) is issued for inputs in relation to resultant products as per SION or on the basis of self declaration, as per procedures of FTP. AA normally have a validity period of 12 months for the purpose of making imports  and a period of 18 months for fulfillment of Export Obligation (EO) from the date of issue. AA is issued either to a manufacturer exporter or merchant exporter tied to a supporting manufacturer(s).

  1. Advance Authorization for annual requirement

Exporters having past export performance (in at least preceding two financial years) shall be entitled for Advance Authorization for Annual requirement. This shall only be issued for items having SION.

iii. Duty Free Import Authorization (DFIA) Scheme

DFIA is issued to allow duty free import of inputs, with a minimum value addition requirement of 20%. DFIA shall be exempted only from the payment of basic customs duty. DFIA shall be issued on post export basis for products for which SION has been notified. Separate schemes exist for gems and jewellery sector for which FTP may be referred.

iv.Duty Drawback of Customs/Central Excise Duties/Service Tax

The scheme is administered by Department of Revenue. Under this scheme products made out of duty paid inputs are first exported and thereafter refund of duty is claimed in two ways:

  1. i) All Industry Rates      :        As per Schedule
  2. ii) Brand Rate              :       As per application on the basis of data/documents

v.Rebate of Service tax through all industry rates

Refund of service tax paid on specified output services used for export of goods is available at specified all industry rates.

  1. Export promotion Capital Goods (EPCG) Scheme
  2.  Zero duty EPCG scheme

Under this scheme import of capital goods at zero Custom Duty is allowed for producing quality goods and services to enhance India’s export competitiveness. Import under EPCG shall be subject to export obligation equivalent to six times of duty saved in six years. Scheme also allows indigenous sourcing of capital goods with 25% less export obligation.

  1. Post Export EPCG Duty Credit Scrip Scheme

A Post Export EPCG Duty Credit Scrip Scheme shall be available for exporters who intend to import capital goods on full payment of applicable duty in cash.

  1. EOU/EHTP/STP & BTP Schemes

Units undertaking to export their entire production of goods and services may be set up under this scheme for import/ procurement domestically without payment of duties. For details of the scheme and benefits available therein FTP may be required.

  1. Other Schemes
  2. Towns of Export Excellence (TEE)

Selected towns producing goods of Rs. 750 crores or more are notified as TEE on potential for Growth in exports and provide financial assistance under MAI Scheme to recognized Associations.

  1. Rebate of duty on “export goods” and “material” used in manufacture of such goods

Rebate of duty paid on excisable goods exported or duty paid on the material used in manufacture of such export goods may be claimed under Rule of 18 of Central Excise Rules, 2002.

iii. Export of goods under Bond i.e. without payment of excise duty

Rule 19 of Central Excise Rules 2002 provides clearance of excisable goods for exports without payment of central excise duty from the approved factory, warehouse and other premises.

  1. Market Access Initiative (MAI) Scheme

Under the Scheme, financial assistance is provided for export promotion activities on focus country, focus product basis to EPCs, Industry & Trade Associations, etc.  The activities are like market studies/surveys, setting up showroom/warehouse, participation in international trade fairs, publicity campaigns, brand promotion, reimbursement of registration charges for pharmaceuticals, testing charges for engineering products abroad, etc.  Details of the Scheme is available at www.commerce.nic.in

  1. Marketing Development Assistance (MDA) Scheme

Financial assistance is available for exporters having an annual export turnover upto Rs. 30 crores for trade fairs, buyer seller meets organized by EPC’s/ Trade promotion organizations. MDA guidelines available at www.commerce.nic.in

  1. Status Holder Scheme

Upon achieving prescribed export performance, status recognition as one star Export House, two Star Export House, three star export house, four star export house and five star export house is accorded to the eligible applicants as per their export performance.  Such Status Holders are eligible for various non-fiscal privileges as prescribed in the Foreign Trade Policy.

In addition to the above schemes, facilities like 24X7 customs clearance, single window in customs, self assessment of customs duty, prior filing facility of shipping bills etc are available to facilitate exports.

 

Import substitution

Import substitution is an aggressive economic policy employed by emerging economies to promote domestic production and self-sufficiency in many sector. It is also seen as a means to reduce dependency on developed nations. IS seeks to provide added protection to domestic industries via tariffs, import quotas, government loans at subsidized rates of interest. This encourages people to start new production units.  The boost to domestic manufacturing sector leads to EMPLOYMENT opportunities being created and considerably lowers the demand for foreign exchange. The economies adopt this policy to protect its budding industry from international competition that has easily attained economies of scale due to large-scale production.

Import substitution gained widespread prominence and adopted by many countries after World War II to bolster domestic industry and growth. This was also done to reduce dependence on other countries. India too had resorted to import substitution which was later reversed during 1991 currency crisis. Indian Industry could not be expanded to its full potential due to severe lack of sophisticated basic Infrastructure-2/”>INFRASTRUCTURE.

Import substitution although can prove beneficial for certain sectors of economy for some specific phases in economic conditions but if the policy is stretched over the entire Industrial Sector as a long term policy can eventually lead to less competitive production which will gradually start to decline. Thus the output will also dip and so will the job creation avenues as the incentive to produce more will fade due to absence of global competition. It is thus, different from the theory of comparative advantage in which countries engage in production of specialized goods and then enter global markets to bravely fight international competition.

The phenomenon has again gained limelight due to ‘Make in India’ campaign being promoted by the Government of India. The idea is to make India a favored Investment destination and attain a considerable level of output from 16% to 25% by 2022. It has been cautioned that India’s ‘Make in India’ campaign should not be seen as the strategy for import substitution as that will lead to reduction in domestic competition, production inefficient and thereby leading increase in commodity prices. Such increased prices shrink demand for products. Thus, over protectionism can lead to dynamic inefficiency as domestic players replace foreign producers. This often leads to poor allocation of Resources as there is no incentive for domestic producers for innovation. There is a fine line between the two phenomena and the government has to carefully walk the talk.,

Exports Promotion

Exports promotion is a government policy that aims to increase the volume of a country’s exports. This can be done through a variety of measures, such as providing subsidies to exporters, offering export credits, and establishing export promotion agencies.

Export-oriented industrialization is a development strategy that emphasizes the production of goods for export. This strategy is based on the idea that countries can achieve economic growth by selling their products to other countries.

Export-led growth is a type of economic growth that is driven by exports. This type of growth is often associated with export-oriented industrialization.

Export subsidies are payments that governments make to exporters to help them cover the costs of production or to make their products more competitive in international markets.

Export credits are loans that governments make to exporters to help them finance the production or shipment of their goods.

Export promotion agencies are government agencies that are responsible for promoting exports. These agencies typically provide information and support to exporters, and they may also offer financial assistance.

Export processing zones are special economic zones that are designed to promote exports. These zones typically offer tax breaks and other incentives to businesses that export their products.

Free trade zones are special economic zones that are designed to promote trade. These zones typically have no tariffs or other trade barriers, and they often have simplified customs procedures.

Special economic zones are special economic zones that are designed to promote Economic Development. These zones typically offer a variety of incentives to businesses, such as tax breaks, subsidies, and access to infrastructure.

Import Substitution

Import substitution is a government policy that aims to reduce a country’s reliance on imports. This can be done through a variety of measures, such as imposing import tariffs, quotas, and other trade barriers.

Import-substitution industrialization is a development strategy that emphasizes the production of goods for domestic consumption. This strategy is based on the idea that countries can achieve economic growth by producing the goods that they need themselves, rather than importing them.

Import quotas are limits on the quantity of goods that can be imported into a country.

Import tariffs are taxes that are imposed on imported goods.

Import licenses are permits that are required to import goods into a country.

Non-tariff barriers to trade are government measures that restrict trade, but that are not in the form of tariffs or quotas. These measures can include things like technical standards, sanitary and phytosanitary measures, and government procurement practices.

Local content requirements are regulations that require companies to use a certain amount of local content in their products.

Buy national policies are policies that give preference to domestic suppliers when purchasing goods and services.

Industrial Policy is a government policy that aims to promote the development of certain industries. This can be done through a variety of measures, such as providing subsidies, offering tax breaks, and regulating the market.

Strategic trade policy is a government policy that aims to promote the competitiveness of certain industries in international markets. This can be done through a variety of measures, such as providing subsidies, offering tax breaks, and regulating the market.

Comparison of Exports Promotion and Imports Substitution

Exports promotion and imports substitution are two different approaches to economic development. Exports promotion aims to increase a country’s exports, while imports substitution aims to reduce a country’s reliance on imports.

Exports promotion is often seen as a more efficient way to achieve economic growth. This is because it allows countries to specialize in the production of goods and services in which they have a comparative advantage. Imports substitution, on the other hand, can lead to inefficiencies, as it can result in the production of goods and services that are not competitive in international markets.

However, imports substitution can also be beneficial in some cases. For example, it can help to protect infant industries from foreign competition. It can also help to reduce a country’s reliance on imported goods, which can make it less vulnerable to external shocks.

The choice of whether to pursue exports promotion or imports substitution is a complex one that depends on a variety of factors, such as a country’s Natural Resources, its level of development, and its international trade Environment.

What is the difference between exports promotion and imports substitution?

Exports promotion is a strategy that aims to increase the volume of goods and services that a country exports. Imports substitution is a strategy that aims to reduce the amount of goods and services that a country imports.

What are the benefits of exports promotion?

Exports promotion can lead to increased economic growth, as it can help to create jobs and generate foreign exchange. It can also help to improve a country’s Balance of Trade.

What are the benefits of imports substitution?

Imports substitution can help to reduce a country’s reliance on foreign imports, which can make it more self-sufficient. It can also help to protect domestic industries from foreign competition.

What are the drawbacks of exports promotion?

Exports promotion can lead to increased inequality, as it can benefit certain sectors of the economy at the expense of others. It can also lead to environmental problems, as it can encourage the production of goods that are harmful to the environment.

What are the drawbacks of imports substitution?

Imports substitution can lead to higher prices for consumers, as it can reduce competition in the market. It can also lead to inefficiency, as it can protect inefficient domestic industries from foreign competition.

What are some examples of countries that have used exports promotion?

Some examples of countries that have used exports promotion include South Korea, Taiwan, and Singapore. These countries have all achieved rapid economic growth by promoting exports.

What are some examples of countries that have used imports substitution?

Some examples of countries that have used imports substitution include Argentina, Brazil, and Mexico. These countries have all experienced economic problems as a result of their reliance on imports substitution.

What is the current state of exports promotion and imports substitution?

Exports promotion is currently the more popular strategy, as it is seen as a more effective way to achieve economic growth. However, imports substitution is still used by some countries, particularly those that are trying to protect their domestic industries from foreign competition.

Question 1

Which of the following is not a type of economic development strategy?

(A) Export promotion
(B) Import substitution
(C) Import Liberalization-2/”>Liberalization
(D) Import diversification

Answer
(B) Import substitution is not a type of economic development strategy. It is a policy that aims to reduce a country’s reliance on imports by developing domestic industries that can produce the same goods or services.

Question 2

Which of the following is a benefit of export promotion?

(A) It can lead to increased economic growth.
(B) It can help to reduce POVERTY.
(C) It can improve a country’s balance of trade.
(D) All of the above.

Answer
(D) All of the above are benefits of export promotion. Export promotion can lead to increased economic growth by increasing the demand for a country’s goods and services. It can help to reduce poverty by creating jobs and increasing incomes. It can improve a country’s balance of trade by increasing the value of exports relative to imports.

Question 3

Which of the following is a challenge of export promotion?

(A) It can lead to increased inequality.
(B) It can be difficult to compete with low-cost producers in other countries.
(C) It can require significant government support.
(D) All of the above.

Answer
(D) All of the above are challenges of export promotion. Export promotion can lead to increased inequality by benefiting some businesses and workers more than others. It can be difficult to compete with low-cost producers in other countries, especially if they have access to cheap labor or natural resources. Export promotion can require significant government support, such as subsidies, tax breaks, and trade protection.

Question 4

Which of the following is a benefit of import substitution?

(A) It can help to reduce a country’s reliance on imports.
(B) It can help to protect domestic industries from foreign competition.
(C) It can lead to increased economic growth.
(D) All of the above.

Answer
(A) Import substitution can help to reduce a country’s reliance on imports by developing domestic industries that can produce the same goods or services. However, import substitution can also lead to increased costs and inefficiencies, as domestic producers may not be as competitive as foreign producers.

Question 5

Which of the following is a challenge of import substitution?

(A) It can lead to increased costs and inefficiencies.
(B) It can protect inefficient domestic industries.
(C) It can make it difficult to import essential goods and services.
(D) All of the above.

Answer
(D) All of the above are challenges of import substitution. Import substitution can lead to increased costs and inefficiencies, as domestic producers may not be as competitive as foreign producers. Import substitution can also protect inefficient domestic industries, which may not be able to survive in a competitive market. Finally, import substitution can make it difficult to import essential goods and services, which can lead to shortages and higher prices.

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