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Indian Economy / External Sector

Impact of Foreign Trade on Indian Economy


    Foreign Trade Policy of India also known as EXIM Policy or Export Import Policy, frames rules and regulations for imports and exports of India. It aims at improving export potential and export performance, regulating imports, encouraging foreign trade and developing a favorable balance of payments situation.

    Foreign Trade Policy

    Ministry of Commerce, Government of India announces Foreign Trade Policy for a period of five years. The main objectives this Policy are

    • To quicken the growth of Indian economy by making economic activities from low level to high level so as to make India a global oriented economy and to squeeze the benefits by grabbing the global market opportunities.
    • To induce sustained economic growth by giving access to requisite intermediate goods, raw materials, accessories and capital goods that are needed for expanding production.
    • To create or make new employment opportunities and to maintain good standards of quality that are accepted internationally.
    • To enhance agriculture, industry and services sectors technologically so as to improve their competitiveness.
    • To offer quality goods and services to the consumers on par with international prices.

    The policy measures that are taken for achieving the above objectives include

    • Procedural rationalization
    • Fiscal incentives
    • Institutional changes
    • Enhanced market access around the world and diversifying the export markets
    • Bringing down the transaction charges
    • Improvement in infrastructure related exports
    • Providing full refund of all the indirect taxes and levies

  • India's exports include Primary products like Tea, Coffee, Petroleum products, oil products, rice, Manufactured goods, etc. Among the manufactured goods, engineering goods are predominant followed by textile products and gems and jewelry.
  • India's imports include Bulk imports and Non-Bulk imports. Among the bulk imports petroleum and petroleum products are predominant. Among non–bulk imports, capital goods account for the maximum percentage.
  • The Balance of Trade ( BoT ) which is nothing but the difference between the exports and imports continues to be adverse for India even after undertaking so many measures.
  • To encourage exports, India started the Export Processing Zones ( EPZs ) as well as the Special Economic Zones ( SEZs ).
  • Under EPZs, all the industrial units under one zone will get concession particular to that zone similar to SEZs. All the units have to serve their products in domestic circuit and then to exports.
  • The minimum size of SEZ should not be less than 1000 Hectares and not more than 10% of the land should be double cropped. Any Private / Public / Joint Venture can setup an SEZ. An SEZ is meant for providing an internationally competitive as well as a hassle free environment for the export promotion.