EXIM Policy of India: Meaning, Objectives, Functions, Features, Benefits

The EXIM Policy, also known as the Foreign Trade Policy (FTP), is regulated by the Foreign Trade Development and Regulation Act, 1992. The DGFT (Directorate General of Foreign Trade) is the governing body concerning the EXIM Policy of India. 

What is EXIM Policy?

The EXIM (Export-Import) Policy contains guidelines governing the imports and exports of products and services in and out of India. EXIM Policy’s primary objective is to regulate and develop foreign trade by facilitating imports into and exports from India. 

The Foreign Trade Development and Regulation Act, 1992, provides for the Indian government to announce the EXIM Policy every five years. Each EXIM Policy announced by the Indian Government is valid for five years, and they can amend, enhance or add new provisions to the policy every year on 31 March, taking effect from 1 April. 

The Ministry of Finance, in collaboration with the DGFT, its network of regional offices and the Union Minister of Commerce and Industry, announces amendments or changes to the EXIM Policy of India.

In 2004, the EXIM Policy was renamed the Foreign Trade Policy to provide a comprehensive approach to foreign trade in India. The Ministry of Commerce announced the recent FTP, which came into effect on 1 April 2023. FTP 2023-2028 seeks to make India an export hub and to integrate India further into global value chains. It creates an enabling ecosystem for exporters, which aligns with India’s vision of becoming ‘Atmanirbhar’. 

Objectives of EXIM Policy

• To increase growth in exports and imports in India.
• To stimulate long-term economic growth by expanding access to components, intermediates, essential raw materials, consumables and capital goods.
• To improve agriculture service and industry competitiveness, create new employment opportunities and encourage attaining internationally accepted quality standards.
• To supply high-quality goods and services at an affordable cost. 
• To encourage economic expansion by providing access to necessary raw materials, capital goods, installations, consumables, intermediate products and essential elements for expanding production and providing services.
• To improve the technological productivity and potency of Indian agriculture, services and companies, thus enhancing competitive power while creating employment possibilities, and to accomplish globally acknowledged quality norms.
• To supply consumers with fine-condition services and goods at globally competitive rates.

Features of EXIM Policy

The features of EXIM Policy 2023, effective from 1 April 2023 to 31 March 2028, are as follows:

Process Re-Engineering and Automation

The FTP emphasises export development and promotion based on technology interface and principles of collaboration, moving away from an incentive regime to a facilitating regime. The ongoing schemes like EPCG, Advance Authorisation, etc., under the FTP 2015-20 will be continued considering their effectiveness along with technology enablement and substantial process re-engineering for facilitating the exporters. 

Towns of Export Excellence 

Four new towns, i.e. Mirzapur, Faridabad, Varanasi, and Moradabad, are designated as Towns of Export Excellence (TEE) along with the existing 39 towns. The TEEs have priority access to export promotion funds under the MAI (Market Access Initiative) scheme. They can avail of the Common Service Provider (CSP) benefits under the EPCG scheme for export fulfilment, which boosts the exports of handicrafts, handlooms, and carpets.

Recognition of Exporters 

Exporter firms that are recognised based on export performance can be partners in capacity-building initiatives on a best-endeavor basis. Two-star and above status holders are encouraged to give trade-related training to interested individuals based on a model curriculum. 

Promoting Export From the Districts 

The FTP aims to build partnerships with State Governments and take forward the DEH (Districts as Export Hubs) initiative for promoting district-level exports and accelerating the development of the grassroots trade ecosystem. 

Streamlining SCOMET Policy 

There is a broader outreach and understanding of the SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) among stakeholders. The FTP is being made more robust to implement international agreements and treaties entered into by India. A robust export control system would provide access to dual-use high-end technologies and goods to Indian exporters while facilitating exports of controlled technologies or items under SCOMET from India.

Facilitating e-Commerce Exports 

FTP outlines the roadmap for establishing e-commerce hubs and related matters, such as bookkeeping, returns policy, payment reconciliation and export entitlements. 

Rationalisation of the Export Promotion of Capital Goods (EPCG) Scheme

The EPCG scheme, which allows capital goods imports at zero customs duty for export productions, are being further rationalised. PM MITRA (Prime Minister Mega Integrated Textile Region and Apparel Parks) scheme is added as an additional scheme to claim benefits under the CSP (Common Service Provider) scheme of EPCG.

Dairy Sector Exempted From Maintaining Average Export Obligation

Dairy sectors are exempted from maintaining the average export obligation to support them in upgrading technology. Vertical farming equipment, Battery Electric Vehicles (BEV) of all types, rainwater harvesting systems and rainwater filters, wastewater treatment and recycling, and green hydrogen are added to green technology products and are eligible for reduced export obligation requirements under the EPCG scheme.

Facilitation Under the Advance Authorisation Scheme

The advance authorisation scheme provides duty-free raw material imports for manufacturing export items and is similar to the EOU and SEZ schemes. The FTP contains certain facilitation provisions under the Advance Authorisation scheme based on interactions with industry and Export Promotion Councils.

Merchanting Trade

Under the FTP, merchanting trade of prohibited and restricted items is possible. Merchanting trade involves the shipment of goods from a foreign country to another foreign country without touching Indian ports by involving an Indian intermediary. However, it will be subject to compliance with the RBI guidelines and will not be applicable for items or goods classified in the SCOMET and CITES list. This will allow Indian entrepreneurs to convert places like GIFT City into major merchanting hubs, like certain places in Singapore, Dubai and Hong Kong.

Amnesty Scheme

The government introduced a special one-time Amnesty scheme under the FTP 2023 to address export obligation defaults. This scheme provides relief to exporters who are not able to meet their obligations under the EPCG and Advance Authorisation scheme and are burdened by interest costs and high duty associated with pending cases. The interest payable is capped at 100% of the exempted duties.  

Importance of EXIM Policy

• It emphasises trade facilitation through digitisation and technology, promotes e-commerce, and facilitates exports through various measures and schemes.
• It plays a significant role in accelerating the economic flow of trade activities from a country to India by making the Indian economy globally oriented.
• It plays a critical role in expanding global market opportunities.
• It helps to increase the gross domestic product of India.
• It facilitates the flow of the economy from a country to India and increases foreign exchange in India.
• It aids in facilitating liberalisation and free trade and improves the overall market for domestic consumers.
• It plays a role in supplying quality goods at cost-effective prices to domestic consumers and diversifying the market.

EXIM Bank of India 

The EXIM Bank, effective from 1 January 1982, was established to be responsible for the business of the IDBI (Industrial Development Bank of India) global finance branch and to deliver monetary support to exporters and importers. It serves as a chief financial foundation for collaborating with the functioning of other organisations involved in the financing of exports and imports of services and products.

The EXIM Bank is a growth engine for a range of services and products of Indian businesses. This includes export production, import of technology and export product development, pre-shipment and post-shipment, export marketing and overseas investment. It is a catalyst and key player in promoting cross-border investment and trade. 

Functions of EXIM Bank

• The EXIM bank offers immediate monetary assistance to exporters of equipment, plant and corresponding services through medium-term credit.
• It provides a guarantee to the issuance of bonds, stocks, debentures and shares of export organisations.
• It puts forward a rediscount of export bills for a period not more than 90 days against the short-period usage export invoices depreciated by commercial banks.
• It provides foreign buyers credit to overseas importers for the import of Indian industrial products and related services.
• It creates and funds export-oriented enterprises.
• It accumulates and assembles the credit and market particulars about foreign trade.

Benefits of EXIM Policy

• Promotes international trade.
• Facilitates technology transfer.
• Improves balance of payments.
• Enhances competitiveness.
• Boosts economic development and growth.
• Creates employment opportunities.
• Helps in enforcing liberalisation policy. 
• Increases foreign investment value. 
• Increases healthy competition between domestic traders and the international market.
• Creates diversified market development for consumers and manufacturers. 
• Availability of commodities at a lower cost.

India’s EXIM Policy or Foreign Trade Policy aids in enhancing the performance of the manufacturing industry and trading system to compete in the international market, leading to an increase in foreign exchange and capital flow in India through Foreign Direct Investment (FDI). It aims at increasing the country’s trade for employment generation and economic growth.