IMPLICATIONS OF FOREIGN TRADE

POLICY AND
FACILITATION OF FOREIGN TRADE

A Presentation

S.R.Rao
Chief General Manager
Export-Import Bank of India
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WHERE DOES INDIA STAND GLOBALLY?

Exim India

International Trade of Select Countries in 2003

Country

Exports

Imports

GDP

(US$ bn.)

(US$ bn.)

(US$ bn.)

Korea
197.6
175.5
China
438.3
393.6
Mexico
165.4
171.0
Russia
135.9
75.4
South Africa
38.7
35.0
Argentina
29.4
13.1
Brazil
73.1
48.3
India
57.0
74.3
Source: Economist Intelligence Unit

605.0
1446.9
626.1
433.5
160.1
129.7
492.1
588.8

Trade as % of GDP
61.7
57.5
53.7
48.7
46.0
32.8
24.7
22.3

Indias share in global merchandise exports: 0.8% (2003)

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INDIAS EXPORT PERFORMANCE

Exim India

India's Export Performance (1999-2000 to 2003-04)

70000
52856

60000
US$ million

50000
40000
30000
20000

36760

44147

43976

2000-01

2001-02

63623
47742

29751

10000
0
1999-2000

All Commodities
Ores & minerals
Petroleum & crude products

Source: DGCIS, MOC&I

Years

2002-03

2003-04

Agricultural & allied products

Manufactured goods

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INDIAS IMPORT PERFORMANCE

Exim India

India's Import Performance (1999-2000 to 2003-04)

90000
80000

77237

US$ million

70000
60000
50000

61572
50056

49799

51588

56613

40000
30000

37172

20000
10000
0
1999-2000

2000-01

All Commodities

2001-02

2002-03

Years
Petroleum
crude & products

2003-04
Non-POL items

Source: DGCIS, MOC&I

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TRADE POLICIES IN INDIA

Exim India

Exim Policies
Streamlined trade procedures
Liberalised import regime
Thrust on export orientation

Medium Term Export Strategy, 2002

1% share in global exports by 2007

Foreign Trade Policy 2004-2009

To double Indias share in global merchandise trade by
2009

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ROLE OF INSTITUTIONS

Exim India

Institutions dedicated for promoting

foreign trade have played an important
role towards enhancing the process of
internationalisation of Indian companies,
viz.
Export-Import Bank of India,
Export Credit Guarantee Corporation,
Indian Institute of Foreign Trade
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EXIM BANK

Exim India

Set up by an act of parliament in

September, 1981
Wholly owned by Government of India
Commenced operations in march, 1982
Established for providing financial assistance
to exporters and importers, and for functioning
as the principal financial institution for
coordinating the working of institutions
engaged in financing export and import of goods
and services with a view to promoting the
countrys international trade
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FOREIGN TRADE POLICY 2004-09

Exim India

Quantum Jump in Merchandise Exports

Required:
Enhance exports of major export
commodities
Identify potential export commodities
Diversify export destinations
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FOREIGN TRADE POLICY 2004-09

Exim India

Exim Bank Study Strategy for Quantum Jump in Exports:

Focus on Africa, Latin America and China
India could aim to achieve:
US$ 18 billion in Africas Imports by 2007
from US$ 3.8 bn in 2003-04
US$ 4 bn in Chinas imports by 2007 (in 64
identified groups) from US$ 0.86 bn in 2000
US$ 1.8 bn in LACs imports by 2007 (in 100
identified groups) from US$ 0.6 bn in 2000
Share in Indias Exports in 2003-04: Africa (6%); Latin
America (1.8%); China (4.7)
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LINES OF CREDIT

Exim India

Overseas Governments
Parastatal Organisations/ Govt. Agencies
Commercial Banks
Regional Financial Institutions
Particularly relevant for SMEs
Eligible items all items permissible under Exim Policy
Engineering Goods
Consumer Durables
Commodities
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LOCs Extended by Exim Bank

AFRICA
ALGERIA
PTA BANK covering
GHANA
BURUNDI
KENYA
COMOROS
MALAWI
DJIBOUTI
MAURITIUS
ERITREA, EGYPT
NAMIBIA
ETHIOPIA
SEYCHELLES
KENYA
SOUTH AFRICA
MALAWI
SUDAN
MAURITIUS
TANZANIA
RWANDA
TUNISIA
SOMALIA
UGANDA
SUDAN

ASIA

BANGLADESH
INDONESIA
KAZAKHSTAN
IRAN , IRAQ
BULGARIA
SRI LANKA
RUSSIA
KOREA
ROMANIA
MALAYSIA
HUNGARY
THAILAND
POLAND
VIETNAM
PHILIPPINES

LATIN AMERICA &

CARIB.
ZAMBIA
BOAD covering
BENIN
BURKINA FASO
COTE DIVOIRE
MALI
NIGER
SENEGAL
TOGO

TANZANIA
UGANDA
ZAMBIA
ZIMBABWE
EADB covering
KENYA
TANZANIA
UGANDA

EUROPE

BRAZIL
JAMAICA

MEXICO COLOMBIA
VENEZUELA

CAF covering
BOLIVIA
COLOMBIA
ECUADOR
PERU
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VENEZUELA

BCIE covering
COSTA RICA
EL SALVADOR
GUATEMALA
HONDURAS
NICARAGUA

FOREIGN TRADE POLICY 2004-09

Exim India

Simplifying procedures and bringing down

transaction costs
Transaction costs are incurred at the pre and
post-production stages, and arise out from
several procedural complexities associated
with administrative processes, availability of
finance and transportation problems.
For enhancing the growth of exports it is
important to reduce the transaction costs
involved.
Exim Bank Study on Transaction Costs of
Indian Exports
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FOREIGN TRADE POLICY 2004-09

Exim India

Findings of Exim Banks Study

Sector

No. of
Firms

Textile/Garments

23

Transaction costs
as % of export
revenue (2003
Survey)
3-10

Engineering goods

18

<5

10

Pharmaceuticals

10

Chemicals

<5

14

Computer software

1-5

10

Agro-Industries

1-2

7-8.5

Electronic &
Electrical machinery

Plastic components

5-10

Paper Industry

5-7

Others

1-2

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Transaction
costs as % of
export revenue
(1998 Survey)

15

13

FOREIGN TRADE POLICY 2004-09

Exim India

Transaction Costs: International Experience

Simplified and less stringent bureaucratic procedures like

single window clearance and business friendly approach

Better technology due to higher levels of

investment, faster loading/unloading methods

Flexible labour laws

Cheap availability of power and raw materials,

Freight incentives by the Government,

Lower ocean freight rates due to greater availability of

vessels

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foreign

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FOREIGN TRADE POLICY 2004-09

Exim India

Special package for agriculture

Duty free imports of capital goods

Will lower production cost and hence improve

profitability
Exports of medicinal plants & herbal products facilitated
Global imports of medicinal plants: US$ 1 bn
(2001)
India second largest exporter after China
Potential to increase export to Rs. 1750 crore by
2006-07 and more than Rs. 2500 crore by 200910.
Global market for Herbal products: US$ 80 bn
Indias exports of Herbal products: US$ 280 mn
(2002-03)
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FOREIGN TRADE POLICY 2004-09

Exim India

Textile sector incentives

Duty free entitlement for garments & handicrafts

increased from 3% to 5%

Will help exporters to move up the value

chain
However, further incentives required to
consolidate Indias position in the postMFA era

Handicraft Special Economic Zone to be established

Will contribute to strong growth in

handicraft exports
Will generate employment opportunities
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FOREIGN TRADE POLICY 2004-09

Exim India

Export Promotion Schemes

Target Plus scheme introduced
Will further boost exports from the successful
exporters
Vishesh Krishi Upaj Yojana to boost horticulture
exports
Global trade in horticulture: US$ 79 bn (1999)
Indias exports: US$ Rs. 1830 cr (1999-2000)
Success of AEZs for horticulture depend on
the ability of the states to overcome existing
shortcomings in infrastructure, institutional
mechanism and policy and programme support
to achieve desired export orientation
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FOREIGN TRADE POLICY 2004-09

Exim India

Export Promotion Schemes

Services Export Promotion Council to be set up

Served from India scheme: Service providers who earn

forex of at least Rs. 5 lakhs will be eligible for duty
credit entitlement

Will help small scale service providers

Will

enhance

Indias

share

in

global

exports of services (1.4% in 2003)

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Exim Bank as a Consultant

Sharing Institutional Building Capabilities World wide

Feasibility study for establishment of an export credit and

guarantee facility for Gulf Cooperation Council countries

Regional cooperation in export finance and export credit

guarantees for ESCAP
Study on promotion of international competitiveness and
exports of manufactured goods for ESCAP

Setting up the Afrexim Bank

Designing of Export Financing Programmes - Turkey

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Exim Bank as a Consultant

Sharing Institutional Building Capabilities World wide

Setting up an Exim Bank in Malaysia

Design of Export Marketing Seminars for SMEs in Vietnam

Export Development Project : Ukraine

Enterprise Support Fund : Armenia

Establishing an Export Credit Guarantee Company in

Zimbabwe

Advisory services to Industrial Development Corporation of

South Africa for international finance products

Mauritius Study on Projecting Mauritius as an Investment

Hub for Indian Firms www.StudsPlanet.com

PROMOTING INDIAN CONSULTANCY

Exim India

Tie-up with
International Finance Corporation, Washington D.C.

Africa Project Development Facility

Africa Enterprise Fund

Mekong Project Development Facility

South-East Europe Enterprise Development Facility

Private Enterprise Partnership (CIS Countries)

China Project Development Facility

South Asia Enterprise Development Facility

Eastern & Southern African Trade & Development Bank (PTA

Bank)

African Management Services Company (AMSCO)

Exim sponsors consultants under GoI-AfDB cooperation Agreement

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Advisory Services
Multilateral Agencies Funded Projects Overseas (MFPO)
Information and support services to Indian companies to help
improve their prospects for securing business in multilateral
agencies funded projects.
Dissemination of business opportunities in funded projects
Providing detailed information on projects of interest
Information on Procurement Guidelines, Policies, Practices of
Multilateral Agencies
Assistance for Registration with Multilateral Agencies
Advising Indian companies on preparation of Expression
of Interest, Capability Profile
Bid Intervention
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FOREIGN TRADE POLICY 2004-09

Exim India

Export Oriented Units

Exemption from service tax

EOUs permitted to retain 100% of export earnings in

EEFC accounts

Income tax benefits to DTA units which convert to

EOUs

All these should considerably increase

export growth from the EOUs

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EXIM BANK:
FINANCING OF EXPORT-ORIENTED COMPANIES
Exim India

Term Loans
Project
Finance

Equipment
Finance

EOU Projects &

TUFS

Working
Capital
Short Term
< 1 year

Software Training
Institutes

Term Loans
for 1-2 years

Minor Ports

Long Term
upto 5 years

Technology Parks

Overseas
Other
Investment Finance Programmes
Loans to Indian
companies for Equity
Investment in their
ventures overseas
Loans to Indian
companies to olden to
their overseas
ventures

Export
Marketing
Finance
Export Product
Development
Finance for
R&D

Direct Equity stake

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INSTITUTIONAL LINKAGES
Multilateral Agencies

Exim India

World Bank

Asian Development Bank

African Development Bank
European Bank for Reconstruction & Development
Multilateral Investment Guarantee Agency (MIGA)
International Finance Corporation (IFC)
UNIDO - Industrial Promotion Offices
Afrexim Bank
Eastern & Southern African Trade &
Development Bank (PTA Bank)

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Institutional Linkages
Trade & Investment Promotion Agencies

Board of Investment of Sri Lanka

Hatton National Bank, Sri Lanka

China National Technical Import & Export Corporation

Polish Agency for Foreign Investment (PAIZ).

Hungarian Investment and Trade Development Agency

UNIDO Industrial Cooperation & Investment Promotion Service, Poland

Economic Development Board, Bahrain

Investment & Trade Promotion Centre, Vietnam

Centero Estero Vineto, Italywww.StudsPlanet.com

Exim India

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Institutional Linkages
Exim India

Export Credit Agencies

The Export-Import Bank of China.

Croatian Bank for Reconstruction and Development.

Czech Export Bank.

Hungarian Export-Import Bank Ltd.

Uzbekinvest National Export-Import Insurance Company.

Exim Bank of Romania.

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Institutional Linkages
Trade & Investment Promotion Agencies

Board of Investment of Sri Lanka

Hatton National Bank, Sri Lanka

China National Technical Import & Export Corporation

Polish Agency for Foreign Investment (PAIZ).

Hungarian Investment and Trade Development Agency

UNIDO Industrial Cooperation & Investment Promotion Service, Poland

Economic Development Board, Bahrain

Investment & Trade Promotion Centre, Vietnam

Centero Estero Vineto, Italywww.StudsPlanet.com

Exim India

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EXIM BANK : PARTNER IN GLOBALISATION

Exim India

Technology

EX
PO
RT

Capital (Foreign Investment)

Raw Materials
Capital Goods
M
P
O
R
T

Final Products

Capital Goods

Capital
(Overseas
Ventures)

VALUE

N
O
TI
I
D
D
A

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Product
Development

Production

Marketing

Pre shipment

Post shipment

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FOREIGN TRADE POLICY 2004-09

Exim India

Final Observations

Import of second hand capital goods allowed without

age restrictions

No outdated
imported

technology

should

be

Special Focus Initiatives

Could be extended to other sectors of high

export orientation like chemicals &
pharmaceuticals

Export orientation of FDI should be increased

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FDI AND EXPORTS

Exim India

Low share of FDI in major export sectors

Sector

Share in FDI (%)

Transportation industry

7.50

Computer software industry

6.46

Chemicals & pharmaceuticals

5.70

Textiles

1.20

Leather & leather goods

0.20

Services (incl. Hotels & Tourism)

8.37

Source: SIA, MOC&I

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