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Describe the major features of India’s import regime till the 90s and their consequences.

Describe the major features of India’s import regime till the 90s and their consequences.

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Major Features of India’s Import Regime Till the 90s:

The export controls are also used to implement canalization of some exports, to regulate exports of products subject to quotation importing countries, to ensure minimum export prices, etc. Indian Policy incentives to promote exports can be classified as:

Special Facilities for Material Inputs:

For export growth, availability of qualitative raw materials in sufficient quantity and at the right time, at competitive prices, is crucial. In India, combined with duty draw back and cash compensation this was ensured through special import licenses for exporters known as replenishment (REP) and imprest licenses. The REP and imprest licenses allow the exporter to import certain restricted raw materials and component upto a specified. percentage of specified exports. The duty drawback scheme allows the refund of excise, sales and other indirect taxes included in the cost of domestically purchased raw materials. This is supplemented by the Cash Compensatory support (CCS) scheme, which compensates the exporter for other domestic taxes.

Import-Export Pass Book: The aim of this scheme was to streamline the import procedure for exporters by providing duty-free access to imported inputs for exporters of manufacturers. This scheme was more flexible than the previous advance licensing scheme and wider in scope. Imports used for export production were exempted from customs duty as well as from additional duties on imports for an exporter holding Import-Export Pass Book including import. license. This pass book is applicable only to registered manufactured exporters.

Free Trade Zones and Export Oriented Units (EOU):

These are the other means to promote exporters, adopted by the Government. Free Trade Zones or Export Processing Zones (EPZ) creates a free trade environment allowing for duty free imports of capital goods and intermediate inputs and tax free exports of manufacturers. The Export Oriented Unit (EOU) scheme was to provide duty-free access to imports of all inputs. A company is required to fulfill three conditions to be eligible as an EOU.

  • Its output should entirely be exported.
  • The domestic value added content of the export value should be 20 percent at least.
  • Export production should be under a custom bond for 10 years for products facing rapid technological change.
The contribution of EFZs and EOUs is only limited to India’s exports and has not made any significant progress.

Availability of Capital Equipment’s at Reduced Rates:

Its objectives was to make specialized and upto date machines available and less expensive for exports oriented industries like leather, garment, hosiery, seafood, woolen textile and diamond processing industries.

Export Marketing:

Government has recognized that marketing of exports is generally a more difficult task than selling in the domestic market. In the international market, many small and medium firms and even many large firms, by Indian standards may not be able to market their products on their own.

Profit Tax and Credit Subsidies:

The formation of EXIM Bank in the early 80’s marked another significant development towards improved financial flow for exporters. The Export Credit Guarantee Corporation (ECGC) provides the Export Credit guarantees for banks and credits insurance for exporters.

Subsidies on Domestic Raw Materials:

There are schemes for refunding to exporters the difference between the domestic and world prices of Indian materials. The important one is International Price Reimbursement Scheme (IPRS) for steel. The performance of EXIM policies (1950-1989) shows that in course of time, the exim policies have undergone fluctuations in terms of stringency for import control, and become comprehensive for export promotion.

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November 5, 2019
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