What is India’s EXIM Policy? Features, Incentives, & Key Players

The international trade landscape is extremely dynamic and constantly evolving. Ever wondered what India has done to improve the number of opportunities and economic growth? In a world where trade rules are extremely stringent, India has come up with the EXIM Policy, or simply the Export-Import Policy.

This blog explores the EXIM Policy, its functions, objectives, incentives, features, and more. 

Let us dive in!

Exploring the Meaning and Significance of India’s EXIM Policy

The EXIM policy is often called the Foreign Trade Policy (FTP). It was introduced in 1992 and regulated by the Foreign Trade Development and Regulation Act. It comprises the guidelines relevant to the import and export of products and services in and out of the country.

The EXIM policy is a collaboration between the Ministry of Finance and the Directorate General of Foreign Trade (DGFT) and is subjected to amendments and changes through these bodies. This policy contains rules and merits for different forms of imports and exports. 

Historical Background: Export-Import Policy (1997-2002)

Self-sufficiency and self-reliance were the two primary areas of focus when the trade policies were designed in the 1950s and 1960s. It was only later on in the 1970s that the policy was defined to improve the export and import relationships of the country. 

As an initial initiative, the EXIM policy was deployed for three years and its objective was to boost the export rates of the country. However, the trade policy during this time was restrictive. It was in 1991 that trade liberalisation was visible in India as it departed from its previous protectionist trade policies. This time is referred to as the ‘post-reform period.’ 

The 1991 policy enabled the export and trading houses to import different items. The authoritative bodies also allowed trading houses to set themselves up with 51% foreign equity. This enables the promotion of exports. “Super Star Trading Houses” was a new category that was deployed in the 1994-95 policy. Several benefits were provided to these houses including a membership of apex consultative bodies that focused on trade promotion and policy.  

In 2001-02, the Market Access Initiative Scheme was launched. It enables the undertaking of marketing promotion efforts in foreign nations. It provided a detailed study of the market for selected products and services in specific countries to gain data for understanding the export scenario of these products.  

Key Features of India’s EXIM Policy

The key features of the EXIM policy are listed below:

• The re-engineering and automation process: The EXIM Policy highlights export development and technology-based promotion. The promotions are based on collaborative principles that are slowly moving away from an incentive-based regime towards a facilitating-based regime. The present schemes like EPCG, Advance Authorisation, etc., will be present after taking into account their effectiveness. 
• Towns of export excellence: Mirzapur, Faridabad, Varanasi, and Moradabad are four new towns that are designated as Towns of Export Excellence (TEE). These are added to the existing list of 39 towns. These towns are given priority access to export promotion funds under the Market Access Initiative Scheme. Moreover, they can also make use of the Common Service Provider (CSP) benefits under the EPCG scheme. They can use the benefits for export fulfillment as it boosts the export sales rates for handicrafts, handlooms, and other such products.
• Exporter recognition: Export performance gives export recognition to different export firms and they can be partners in capacity-building plans and initiatives. Status holders with two stars and above are strongly encouraged to provide training and trade-related seminars to those interested.
• Promotion of exports from districts: The EXIM policy strives to build relationships and partnerships with the state governments to push the districts as hubs for exports. It accelerates the development of district-level exports and strengthens the roots of the ecosystem of the trade market.
• Optimising the SCOMET Policy: The SCOMET Policy has a wider reach. Special Chemicals, Organisms, Materials, Equipment, and Technologies Policy (SCOMET Policy) among stakeholders is being made more robust to promote international agreements and treaties. A well-defined export control system will provide Indian exporters with access to dual-use modern technologies and products; thereby, facilitating the exports under this policy from India. 
• Enabling e-commerce exports: The EXIM Policy is a guideline for establishing e-commerce hubs and their relevant matters. It takes care of returns policy, bookkeeping, payment reconciliation, and export entitlements. 
• Export Promotion Rationalisation of Capital Goods (EPCG Scheme): This scheme enables capital goods to be imported with zero customs duty for export productions. 
• Exemption from maintaining average export obligation in the dairy sector: This sector has an exemption from maintaining a daily quota to enable the upgradation of technology. Battery electric vehicles, vertical farming equipment, rainwater harvesting, recycling, etc., are technologies that are eligible to get reduced export obligations under the EPCG scheme. 
• Advance Authorisation Scheme facilitation: This progressive scheme provides duty-free raw material imports for the manufacturing of export products and is very similar to the SEZ scheme and EOUs. It allows for certain facilitations under this scheme that are defined based on interactions with industry experts and export councils. 
• The Amnesty Scheme: This is a special one-time scheme under the FTP that was introduced in 2023 to help the export obligation under the EPCG and Advance Authorisation Scheme as it is burdened by interest cost and high duty. The payable interest is 100% capped of the duties exempted.  
• Trade by merchants: Merchanting trade and trade of restricted items is prohibited under the EXIM Policy. The shipment of goods from one country to another without reaching Indian ports or without the intervention of an Indian intermediary is known as merchanting trade. It will be subjected to RBI compliance and is not valid for goods under the SCOMET and CITES schemes.

Current Status of EXIM in India

The EXIM policy lays down simple and transparent rules and procedures that are extremely easy to comply with. They are extremely useful as they administer efficient management of foreign trade in India. The EXIM Policy strives to highlight the country’s trade for employment generation and economic growth. The Tariff Act lays down how the customs duties will be levied on import and export trade. 

The overall exports of our country have exhibited immense growth in the year 2023-24. They have officially reached a target of 776.68 billion dollars in exports in the last financial year. In the merchandise export sector, about 17 of the 30 crucial sectors have shown positive growth when compared to the year 2022-23. The following sectors show the following growth percentages:

• Engineering Goods (2.13%)
• Tea (1.05%)
• Textile and handloom products (.71%)
• Miscellaneous products and cereal preparation (8.96%)
• Oil meals and seeds (7.43%)
• Tobacco (19.46%)
• Fruits and vegetables (13.86%)
• Ceramics and glass products (14.44%)
• Iron ore (117.74%)
• Electronics (23.64%)

Infrastructure for EXIM in India

Approximately 95% of India’s merchandise trade is controlled by its maritime transport. The biggest port in the country is the Jawaharlal Nehru Port Trust in Maharashtra. It handles over 55% of the container cargo across the country’s major ports. The country has a presence of about 20 container depots and freight stations for trade.  

• The Port Network: 

To efficiently manage the costs of the logistics process while also promoting port-led industrial development, the Sagarmala program was launched by the Government of India. The Sagarmala program includes six new major ports and approximately 14 coastal economic zones. Enhanced connectivity, modern port technologies, and industrialisation of ports are the prime development sectors of the program. 

• The Rail Network: 

India has a well-established network of railways. The Indian Railways transported over 1.4 Billion Tonnes of freight in 2023-24. There are over six high-capacity and speedy freight corridors in the country. The Indian Railways manage approximately 40% of the modal freight share of the economy. 

• The Road Network: 

The world’s second-largest road network in the country is striving to reach the pinnacle soon through its targeted construction of 40 kilometres. The Bharatmala Pariyojana was launched by the Government of India to develop industrial corridors and enhance connectivity via roadways. 

Establishing an EXIM Unit: Procedure Overview

To benefit from the incentives under the EXIM Policy, individuals or business units must register themselves as an EXIM unit. You must follow the steps given below to register as an EXIM unit:

• You must register a company or firm.
• You must then open a current account with an authorised bank in any foreign exchange.
• The next step is to obtain a permanent account number (PAN) from the Income Tax Department followed by your Importer Exporter Code (IEC).
• To gain benefits, the company must gain a registration and membership certificate (RCMC) from the Export Promotion Council (EPC).
• You must also get all your risks covered by the ECGC with an insurance policy.

Incentives for Export Promotion

Several incentives are advocated by the government for exports. The incentives provided include the following:

• RoDTEP Scheme (Rebate of Duties and Taxes on Exported Products): This scheme is available to all the exporters of this country. It strives to reimburse all the duties and taxes paid by manufacturers during the export process in the production sector. It concentrates on helping manufacturers to minimise costs that are linked with exporting goods and services boosting the country’s exports. 
• Service Export Incentive Scheme (SEIS): This incentive export scheme is meant to promote service exports from this country. It enhances the exchange rates and earnings of the country while also creating different employment opportunities for Indian citizens. Its merit is that it provides a reimbursement of up to 15% for their net foreign exchange earnings every financial year for all exporters.
• MEIS Export Scheme: Another incentive by the EXIM Policy is designed to give rewards to all exporters to offset all the inefficiencies and associated costs for infrastructural reasons. Moreover, the scheme also offers incentives to enable all exporters to gain credit toward future customs duties through credit duty scripts. 
• Exemption of duty and remission schemes: The industry and the government together have launched two specific schemes to allow duty-free importation of inputs for exporting goods and services. This scheme is the only exception scheme that enables the duty-free importation of inputs used in the exportation of products. 

Key Players in EXIM Policy Implementation

Mr Piyush Goyal, the Union Minister, launched India’s EXIM Policy in 2023. It is dynamic and flexible enough to accommodate the future needs of the export market. It strives to drive the exports of the nation while serving as a roadmap for the same. The four key pillars of the EXIM Policy include:

• Remission Incentive: The 2023 amendments introduced different schemes to provide incentives and remissions to various businesses to promote exports. The deployment of RoDTEP Schemes has replaced the present rebate schemes and offers a detailed and optimal approach for exporters to gain timely and adequate support.
• Collaboration through the promotion of exports: This policy highlights collaboration among stakeholders inclusive of central and state governments, export councils, and Indian Missions. 
• Business ease and reduction of transaction cost: The recent changes to the FTP concentrate on the ease of doing business for exporters. The policy now simplifies the processes, minimises the costs of transactions, and also implements IT-based systems. The policy also introduces measures that can be used once for pending authorisations and optimising export promotion schemes.
• Emerging Areas: Emerging sectors like e-commerce exports, districts as hubs for exports, optimising the SCOMET Policy, etc., are also key areas of focus. This policy strives to harmonise courier and postal exports with ICEGATE and raise the cap for consignments. 

Understanding HBP Guidelines and Regulations

The Handbook of Procedures (HBP) is an essential part of the EXIM policy of India. It provides detailed regulations and guidelines to regulate the import and export processes to and from India. The HBP also outlines various procedures to obtain authorisations, licenses, and other benefits under the Foreign Trade Policy. It is designed to implement the provisions of FTP. 

It also ensures compliance with international trade regulations by laying down detailed procedures for importers and exporters to follow. It is divided into several chapters. Each chapter focuses on a specific area. Some of these areas include:

• General provisions
• Export promotion schemes
• Duty exemption schemes
• Special economic zones (SEZs)

Let’s move on to the key provisions and procedures the HBP lists for the Importer Exporter Code (IEC).

Every importer and exporter in India is required to obtain an IEC. The HBP lists the application process for importers and exporters to obtain the IEC. These include the online submission process through the DGFT (Directorate General of Foreign Trade) portal​​, the necessary documents required, etc.

The HBP also covers various schemes, including Advance Authorization (AA), Duty-Free Import Authorization (DFIA), and Export Promotion Capital Goods (EPCG). You can find the conditions, documentation, and procedural steps required to obtain authorisations.

If you want to obtain the Electronic Bank Realization Certificate (e-BRC), you can find the process to do so in the HBP guidelines. This certificate is essential for exporters so they can claim benefits under the Foreign Trade Policy. You can also apply for the Status Holder Certificate, following the guidelines provided in the HBP. This certificate offers various benefits to exporters under the Foreign Trade Policy. In the HBP guidelines, you will find the application process, validity, and conditions to maintain the status. However, you must maintain proper records of imports and exports for inspections. You must also comply with various laws and regulations. 

The HBP guidelines are regularly updated. This ensures these guidelines reflect the changes in internal trade laws and regulations. Recent amendments made to the HBP guidelines have included updates to the SCOMET list and the inclusion of new trade agreements such as the India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA)​.

Standard Input Output Norms (SION) and ITC-HS Codes

These are predetermined benchmarks that mention the quantity and type of inputs needed to make a unit of output for a specific product or service. The characteristics of SION include the following:

• Benchmarks that are predefined: SIONs provide standardised benchmarks for different products, thus, ensuring uniformity and consistency in understanding the entitlements of exporters.
• Hefty coverage: SIONs cover a wide range of products across an array of industries like manufacturing, services, and agriculture. 
• Timely review: SIONs are reviewed promptly to make way for changes in the market dynamics, policy advancements, and technology.
• Publication: SIONs are approved in the Handbook of Procedures (HBP) issued by DGFT to enable their access to exporters and stakeholders. 

Conclusion

The EXIM Policy of India encompasses several policy measures and related decisions taken by the government for imports to and exports from the country. Moreover, it also discusses the different promotion measures deployed for exports, the policies and procedures that govern it, and more. In 1991, the EXIM policies slowly became more liberal, and a 5-year policy was introduced in the year 1992. The EXIM Policy has slowly transformed from ‘import liberalisation’ to ‘export promotion’. The focus has recently been on the strengthening of bonds between indigenous industries to take the country’s exports to greater heights.